Working Together to Protect
Our Common Resources
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Greetings, TSC readers, and welcome to our May newsletter. Proxy season has been in full swing these past several weeks, and we have been busy attending meetings and sharing our perspective on systems-first investing. In the sections below, you can read up on our proxy season activities, as well as some of the noteworthy mentions we've garnered (awards, anyone?!), and even
meet our newest teammate.
As always, please reach out if you would like to further discuss any of the below or to get more involved with our work.
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PROXY SEASON UPDATE
May 13 marked our ninth shareholder vote and the midpoint of the first proxy season for The Shareholder Commons. We could not be more pleased with our progress. We wanted to give you an update and let you know what is left on the docket—there are some very important votes coming up!
Gap Analyses. As you may remember, we helped shareholders submit a number of proposals asking corporations to report on their efforts to address an important matter of public interest. Specifically, the proposals asked each company to (1) address the limitation on those efforts created by the imperative to prioritize financial returns and (2) contemplate the additional efforts they would be able to make without that constraint.
Antimicrobial Resistance. Early in the process, Yum! Brands, the owner of Pizza Hut, KFC and Taco Bell, agreed to produce such a report with respect to antibiotics in their supply chain.
McDonald’s declined to issue a report on the same issue, and there will be a vote on the proposal at their meeting on May 20. This resolution has the support of Trinity College,
Cambridge, Amundi Asset Management and ShareAction.
As we explain in our exempt solicitation filed with the Securities and Exchange Commission, antimicrobial resistance (AMR) is a serious systemic threat to the global economy: the increase in AMR caused by the overuse of antimicrobials may cause up to 10,000,000 deaths annually and decrease global GDP by
almost 4% by 2050. For diversified shareholders, a healthy economy is of far greater value than the profits of any one company within those portfolios. Yet McDonald’s provides shareholders no information on the costs it externalizes or the risks it creates for the global economy through the use of animals treated with antibiotics. We urge all investors to ensure that shares voted in their name be voted FOR Proposal 5 at the meeting.
Public Health. We are pleased to report that a second proposal for a gap analysis received over 12% of the vote at the PepsiCo annual meeting on May 5. This is a very significant vote for a first time shareholder proposal: until the last year of the Trump administration, the threshold required to allow re-submission of a first-time proposal the following year was 3%, in recognition of the fact that it takes time to familiarize shareholders with new concepts. (In 2020, the Trump
administration raised the threshold to 5%, and there is currently a bill pending in Congress to repeal the change under the Congressional Review Act.)
The PepsiCo resolution asked the Board to report on the public health costs that PepsiCo’s food and beverage products impose on society, and how those costs affect the Company’s diversified shareholders. The unhealthy food and beverages that constitute 81% of PepsiCo’s product portfolio are among the top culprits in the growing global obesity epidemic; as one foundation reported, “Poor diets lead to chronic illnesses such as heart disease, type 2 diabetes, and obesity.” With 12% of its
shareholders expressing support for such a report, we look forward to constructive dialogue with PepsiCo on this critical issue.
Public Benefit Corporations (PBCs). The remaining 15 proposals that The Shareholder Commons assisted with request the company in question to become a PBC (or to adopt a similar structure). The PBC model rejects the conventional corporate rule that prioritizes financial returns to shareholders; the directors of a PBC can make decisions that promote the interests of stakeholders, such as employees and communities, without having to justify those decisions as simultaneously advancing
shareholders’ interest in financial returns from the corporation.
The shareholder proposals ask that companies begin the conversion process in order to allow the prioritization of the interests of stakeholders, who can be affected by the costs that companies can externalize in seeking profits (including the costs of pollution, inequality and biodiversity loss). We believe that this change in focus will permit PBCs to reduce their negative impacts on society and the environment, leading to healthier systems and better financial returns for diversified
shareholders.
These proposals have now been voted on at eight companies and exceeded the 3% threshold at four of the seven where results are available. Given the unprecedented nature of this proposal, we believe this is a propitious beginning. Still to come are PBC votes at Chevron, BlackRock, Facebook, Alphabet, Yelp, Caterpillar and Salesforce.
For more details about each of these matters, please take a look at our beta stewardship platform and the latest weekly
digest. Thanks to all of you for your support to date. This proxy season represents a major step in our work toward a financial industry that protects the social and environmental systems we all rely upon to support our investments, careers, lives and communities.
IN THE NEWS
We are grateful to have been named by Fast Company as a Finalist in the Politics and Policy category for their World Changing Ideas Awards. The awards recognize engagement and
commitment to pursuit of innovation when it comes to solving health and climate crises, social injustice, or economic inequality. We shared the honor with B Lab for our joint White Paper, From Shareholder Primacy to Stakeholder Capitalism: A Policy
Agenda for Systems Change. The white paper proposes that the U.S. Congress adopt new laws that will ensure that companies and investors do not seek financial gain from business activities that threaten the social and environmental systems that support all businesses and the lives and careers of investors themselves. Coalitions are forming to move these ideas along within the new administration. Please contact us if you are interested in more information.
We also welcome coverage from a major business network. In this Bloomberg TV Take the Lead segment, Rick Alexander explains how 15 of the 181 major U.S. companies that signed onto the Business Roundtable Statement of the Purpose of a Corporation are failing to live up to the
commitment they made to stakeholders by opposing conversion to PBC status. (For more on this question, see the report on beta stewardship above.) The interview begins at 17:48. In addition, Bloomberg Radio interviewed Rick more generally about the PBC movement here.
In this webinar, we caught up with Tejal Patel, Corporate Governance Director at CtW Investment Group to discuss its shareholder proposal platform for racial equity audits. CtW has requested systemically important financial institutions to
conduct a racial equity audit that identifies, prioritizes, and remedies the adverse impacts of the bank’s policies and practices on non-white stakeholders and communities of color. They have requested that boards engage a variety of key stakeholders in undergoing this audit and evaluating the specific topics to be addressed. After our discussion, the proposal went to shareholders at the following companies: Bank of America, Wells Fargo, Citi. Goldman Sachs, JP Morgan, and State Street. It has
received resounding shareholder support at the polls, and these results should lead to real change at these corporations.
A NEW TEAMMATE
TSC is thrilled to announce the addition of our newest team member, Sophie Faris, who is stepping into the role of COO. She is taking the reins from Jenn Warden, TSC's co-founding partner who has been overseeing operations on a part time basis and is now moving on to the position of strategic advisor (and who is very grateful to Sophie for her willingness to bring her wisdom and
expertise to a new idea!)
Sophie joins The Shareholder Commons after 8+ years at B Lab, where she held multiple leadership positions in fundraising, community engagement, and policy. Sophie is an Arizona native who now calls Connecticut home (when she is not traveling the country in her camper van). She brings a wealth of experience in social impact program strategy and development to her new position
at TSC, and we are delighted to have her in our corner.
THAT'S ALL FOR NOW
Thanks for reading. We hope that you found this material insightful and engaging. Please reach out if you would like to discuss or support our work - TSC exists to advance these ideas, so conversations with interested individuals are precisely what we are here to do!
Wishing you all a happy, safe, and healthy season - don't forget to vote your proxies, get vaccinated and . . . breathe.
Fondly,
Team TSC
Rick, Jenn, Sara and Sophie
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