On the right, a rising passion for shareholder activism
If imitation is the sincerest form of flattery, then conservatives have begun paying tribute to the success of liberals and environmentalists in putting pressure on America’s corporations.
Some on the right are now embracing shareholder activism, using tactics pioneered on the left that have turned America’s corporate boardrooms and annual meetings into battlegrounds over causes ranging from climate change and gay rights to universal health care and campaign spending reform.
Labor unions, civil rights and environmental groups for years have waged proxy battles at annual shareholder meetings to try to force companies to adopt more “clean” and “progressive” policies — or risk being slapped with labels like “dirty,” “greedy” and “racist.” These campaigns have often been successful in prompting the targeted corporations to at least try to appease the groups through token changes and public relations efforts, while some of the boardroom assaults have resulted in significant corporate initiatives, such as a recent decision by Bank of America to devote $70 billion toward financing “green energy” projects.
Liberals have backed up their noisy boardroom appearances with the quieter but far more effective tactic of investing only in companies that toe the line, a trend that has gone global. A study this year found that more than a fifth of global-investment funds — a total of $13.6 trillion — are directed toward companies deemed “socially responsible” by liberal groups.
After having ignored the burgeoning social investment movement for years, conservatives are starting to react.
Led by the National Center for Public Policy Research, a free-market conservative think tank, they are starting to imitate the liberals’ tactics by sponsoring initiatives at corporate board meetings, partly to act as a counterweight on liberal issues, but also to push conservative causes such as lower taxes and smaller government.
The conservative research group, for example, recently lectured Bank of America executives — a favorite target of the left — for “cowering to left-wing radicals” who label conservative initiatives requiring voters to obtain identity cards as “racist.”
“Bending to the twisted will of radical left organizations is not a solid business strategy,” said Justin Danhof, said the center’s free enterprise project director, adding that the bank will find its efforts to mollify environmental critics to be “a never-ending endeavor” because “environmental zealots are never satisfied.”
In fact, Mr. Danhof said he got drowned out at BofA’s spring meeting in Charlotte, N.C., by a small army of environmentalists who monopolized more than 90 percent of the time allotted for questions and answers with a series of tirades from activists denouncing the bank’s funding of coal-fired power plants.
“Bank of America’s leadership touted their $70 billion commitment to green programs, yet scores of environmental activists were at the meeting and protesting outside demanding ever more. And if history is an indicator, they will likely get their way,” Mr. Danhof said.
Although badly outgunned by left-leaning groups, the center’s activists had more success at ExxonMobil’s recent meeting in Dallas. Shareholders there voted down a union-sponsored resolution that would have forced the company to disclose details of how much it spends on political campaigns, lobbying and funding for the American Legislative Exchange Council, a conservative group that has been influential in writing bills passed by state legislatures around the country.
Exxon, another perennial target of the left, has mostly stood up to their pressure over the years, unlike other big oil companies like BP and Shell, which have carefully cultivated “green” images to counter their critics. Arguably, BP’s success at mollifying environmentalists is one reason it handily survived the fallout from its role in causing the worst environmental disaster in U.S. history — the Gulf of Mexico well blow-out in 2010. Exxon, by contrast, continues to be censured for its Exxon Valdez oil tanker spill in Alaska’s Prince William Sound in 1989, though that disaster, in retrospect, looks minor by comparison.
Despite many defeats, liberal groups seem drawn to Exxon meetings like moths to a flame. They brought up a cornucopia of controversial issues last month, ranging from campaign spending reform to gay rights and the risks of hydraulic fracturing, to little avail. GetEqual, a group fighting for gay rights, excoriated the oil giant’s shareholders for overwhelmingly defeating for the 14th straight year a bid to reinstate rules prohibiting discrimination against homosexuals that Mobil had in place before its merger with Exxon.
“Even among its Big Oil peers, ExxonMobil has an abysmal record,” the group complained, vowing to take another tack and pressure President Obama to bar Exxon from getting federal contracts until it changes its ways.
David Ridenour, president of the National Center for Public Policy Research, meanwhile, trumpeted the center’s success at helping Exxon stand up to the liberals. The group also scored a few points at a Harley-Davidson meeting earlier this spring, but he conceded that the group’s first season attending 32 corporate shareholder meetings did not produce any breakthroughs in persuading other big-name corporations such as Home Depot, Merck and Kraft to back off stances they have taken in favor of progressive causes.
Conservatives admit that they are badly outnumbered by the cottage industry of liberal groups and activists who have been lobbying corporate America to kowtow to their social goals since the 1960s. The liberal penchant for rewarding or punishing corporations for the stands they take on social issues has turned what was once a rag-tag effort decades ago into a multitrillion-dollar social investment industry today.
The center was the only conservative group that had an active campaign in corporate boardrooms this year, though groups like the Competitive Enterprise Institute and Americans for Tax Reform also have voiced support for shareholder activism as a way to try to counteract the liberal influence in corporate boardrooms.
Conservative groups sponsored four shareholder resolutions during the 2013 proxy season, a figure swamped by the 365 initiatives submitted by liberal groups, according to the Sustainable Investments Institute. Mr. Ridenour said some of the resolutions he proposed were struck down by the Securities and Exchange Commission, while he agreed to withdraw some others after getting an audience with corporate executives.
Money drives behavior
Complementing the hundreds of liberal groups around the country that send activists to create a vociferous presence at corporate meetings each spring, hundreds of U.S. and European social investment funds with names like Domini, Calvert, Trillium and Green Century — along with funds set up by Wall Street investment firms — control trillions of dollars of investments that are directed only to companies that they deem to have supported progressive causes. A study by the Global Sustainable Investment Alliance this year found $13.6 trillion of such investment funds operating worldwide — more than a fifth of total global investment assets.
A global boycott of South African companies and investments in the 1970s is credited with having helped end apartheid and providing the model for the modern social investment movement. While civil rights and the environment remain popular causes, liberals have mobilized in large numbers in the past three years to try to defeat or counteract the Supreme Court’s Citizen United decision in 2010, which spurred a deluge of corporate spending on political issues and elections — mostly in support of conservative causes.
The institute said a majority of the record number of activist resolutions this year dealt with corporate political spending in reaction to Citizens United. Labor unions and the powerful pension funds they control sponsored resolutions requiring corporations to disclose their political spending to shareholders, with liberal activists pointedly questioning corporate directors on how such spending benefits shareholders. The groups are making some headway, with some 77 top corporations pledging not to spend money on politics and hundreds of others agreeing to disclose what they do spend.
The liberal campaigns also have prompted all but one of the corporations included in the prestigious Standard & Poor’s 500 index to provide information about their “sustainable” practices, the institute found in a study this spring.
In a testament to their growing influence, the “sustainable” investment movement opened a new chapter in the past decade or so with the advent of a generation of companies like Starbucks, Costco, Amazon and Apple that have adopted socially and environmentally conscious policies without any pressure on the premise that it’s good business and helps to attract and retain customers.
Apple, while already a leading company promoting green causes, recently bowed to pressure from liberals to make more of its popular iPhones and tablets in the U.S. rather than China. Even a regularly demonized corporate leviathan like Wal-Mart, while maintaining its much-vilified connections with cheap suppliers in China, has adopted some of the lingo of the green movement and other liberal causes to soften its image.
A study this spring by the Investor Responsibility Research Center Institute documents the growing clout of liberals in corporate boardrooms. It found that support from shareholders for environmental and social resolutions introduced by activists multiplied from 2005 to 2011. In 2005, only 3 percent of such initiatives garnered the votes of more than 30 percent of shareholders; that share jumped to 31 percent in 2011.
While it’s still rare for activist resolutions to pass, liberal activists say they now often get enough votes to force corporate management to act — which is their ultimate goal.
Jon Lukomnik, the institute’s executive director, sees a “sea change” in the attitudes of mainstream investors, with many now viewing social issues as important to the corporate bottom line as well as litmus tests of a company’s ability to survive challenges in the global economy.
“Shareholder resolutions are canaries in the coal mine, highlighting problems companies must face, sooner or later,” said Michael Passoff, chief executive of Proxy Impact, a social investing group.
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