Trillium Wins Significant Victory in Net Neutrality Fight
Trillium Asset Management and other socially responsible investors have won a significant victory in the fight for net neutrality. After years of denial, the Securities and Exchange Commission (SEC) ruled that investors will have the opportunity to press Internet Service Providers (ISPs) AT&T, Verizon and Sprint to adopt policies that would insure their neutral handling of all Internet content regardless of the sender, recipient or nature of the content.
The companies had sought to block shareholders from voting on the proposals by arguing, among other things, that network neutrality was not a “significant public policy issue.”
The SEC rejected that argument in view of “the sustained public debate over the last several years concerning net neutrality and the Internet and the increasing recognition that the issue raises significant policy considerations.” Shareholder proposals regarding net neutrality had been successfully blocked in three prior years.
“Wireless networks in many ways represent the future of the Internet and the digital economy – which is why it’s so important that these principles be considered by the companies and their investors” said Farnum Brown, Chief Investment Strategist for Trillium Asset Management.
To read the press release and the SEC’s letter, click here.
“Chevron chiefs face shareholders after huge $18bn Ecuador fine”
Shelley Alpern, Trillium’s Director of ESG Research and Shareholder Advocacy, was quoted in guardian.co.uk on May 25, 2011: ”The Ecuadorian courts are but one step away from seizing Chevron’s assets to pay for the record $18bn judgment. It doesn’t seem unreasonable to hope that a settlement agreement might be brokered that comes in below this extraordinary amount, puts funds to work immediately restoring the polluted areas, and helps Chevron put this reputational disaster behind it.”
Click here to read the article.
Click here to read Trillium’s press release about the request made to the SEC to review Chevron’s shareholder disclosures.
SEC Passes Proxy Access Rule
August 25, 2010 — This just in from the Social Investment Forum:
Dear members,
In a widely anticipated three-two vote along party lines, the Securities and Exchange Commission (SEC) today enacted a new rule 14a-11 granting shareholder access to the proxy, following more than three decades of debate. The new rule, however, includes some significant changes from the draft rule the SEC posted on June 10, 2009, which received more than 600 comments. The biggest change is on ownership thresholds and holding requirements. The ownership thresholds, originally 1 percent for large-cap, 3 percent for mid-cap, and 5 percent for the smallest issuers, have been changed to a uniform 3 percent ownership requirement across the board. In addition, holding requirements have been increased from one to three years. For the smallest companies, the rule will not come into effect for three years. The delay for the smallest issuers is to allow them and the commission to see how the rule plays out at larger companies to see if the rule needs to be changed.
Shareholders will be limited to a total number of nominees not to exceed 25 percent of the board at any given company and cannot be nominating with intent to take over the company or control of the board. Shareholders will be able to pool assets and can include securities loaned to a third party as long as they can be called back. Securities sold, shorted or not held through the company’s annual meeting would need to be deducted from the qualifying ownership threshold. The shareholder or shareowner group will need to file a Schedule 14-N on Edgar to notify the issuer of its or their intent to use the proxy access rule not earlier than 150 but no later than 120 days before the anniversary of the filing of the company’s last year’s proxy statement. The nominee’s statement is restricted to 500 words. There will be a no-action process for companies to challenge whether they need to include a director nominee in their proxy statement.
The new rule creates a federal proxy access rule that sets a minimum threshold right of access for state law and deems proxy access a fundamental shareholder right. States and companies with more liberal proxy access rules are permitted to keep these requirements. The SEC was granted clear authority to proceed with a proxy access rule by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Chairman Mary L. Schapiro said, enactment of the rule is essential because, “As a matter of fairness and accountability, long-term significant shareholders should have a means of nominating candidates to the boards of the companies that they own—candidates that all shareholder-voters may then consider alongside those who are nominated by the incumbent board.” She added, “Nominating a director candidate is not the same as electing a candidate to the board. I have great faith in the collective wisdom of shareholders to determine which competing candidates will best fulfill the responsibilities of serving as a director. To me, the critical point is that shareholders have the ability to make this choice.”
Commissioner Elisse B. Walter says it reflects “a balanced approach to the comments received” and “sound judgment.” Walter also said, “The financial crisis has taught us that the status quo is not good enough,” and that proxy access “is a necessary step to restore confidence to markets” and to “bring fair corporate suffrage into the 21st century.”
Commissioner Luis A. Aguilar said the new rule reflects “extensive research on appropriate ownership thresholds” and an exhaustive process that included three public roundtables since the last proxy access rule was proposed in 2003.
Commissioner Kathleen L. Casey believes the rule will lie in the “pantheon of SEC’s poor decisions” next to, among other decisions, “recent interpretive guidance related to climate change disclosure.” Casey views the rule as “fundamentally flawed” and “will have difficulty surviving judicial scrutiny.” If it does, she says, it will end up overburdening the SEC with complaints and inquiries and inflict “significant harm to our economy and capital markets.” She added that the SEC should have dealt with proxy access first.
Commissioner Paredes says his vote against the rule reflects his belief that it “forces a universal governance scheme on all companies…a one size fits all mandate…that prevents companies to tailor rules to the individual attributes and qualities” of the company. He says the move is “ill advised.”
The new rule is effective 60 days after publication in the federal register.
My best,
Peter DeSimone
Director of Programs
Social Investment Forum
Visit http://www.socialinvest.org.
Shareholder Activists Win Important Victory at SEC
Jonas Kron
What a difference a change in Administration makes. Champagne corks popped in the offices of socially concerned shareholders all throughout the land in October, when, with a few strokes of the pen, the Security and Exchange Commission (SEC) restored a necessary dose of common sense to the shareholder resolution process that lacking in the Bush years.
To appreciate the change, a little background is necessary. When filers of shareholder resolutions send off a resolution to a company, said company will typically scrutinize it to see if it conforms to rules governing such proposals, rules that are enforced by the SEC. If it believes that it does not conform those rules, it can appeal to the SEC for permission to exclude the resolution from its proxy statement (the annual ballot sent to shareholders that allows them to vote on both shareholder and management resolutions). The SEC then weighs the company’s and the shareholders’ arguments and makes a decision in advance of the annual stockholder meeting.
You don’t need a law degree to see that everything depends on how the SEC interprets the rules. It may come as no surprise that under the previous administration, the agency took a sweeping view that the risks associated with such topics as climate change, subprime lending, toxic chemicals, rising healthcare costs and other pressing issues were not a suitable subject for shareholder proposals.
This so-called “risk evaluation exclusion” severely cramped the ability of shareholders to hold corporations fully accountable for the financial, environmental and social implications of their policies in these high profile issue areas. Socially concerned shareholders universally saw it as a major impediment to meaningful activism.
For example, two years ago the SEC gave Lehman Brothers and Washington Mutual permission to exclude proposals that asked for “a report discussing the company’s potential financial exposure as a result of the mortgage securities crisis,” because they did not raise a “significant public policy issue.” This was just months before Washington Mutual went into receivership and Lehman had to file for bankruptcy because of their mortgage related risk exposure.
A year later, the SEC gave the thumbs-down to proposals filed with several coal companies that requested reports on greenhouse gas emissions. All three proposals were excluded because they focused on the “day-to-day affairs” of the company. However, identical proposals went to a vote at a couple of other companies that declined to challenge them, where they received over 40% of the vote. Clearly in the opinion of the shareholders, the issue of greenhouse gas emissions was anything but a “day-to-day affair” for coal companies. It should also have been abundantly clear to the SEC that climate change was a significant policy issue, given the legislation before Congress and vigorous public debate on how best to reduce greenhouse gases.
The SEC explained that these proposals were inappropriate for shareholder consideration because they sought an “evaluation of risk.” This was the reasoning formalized in an SEC legal bulletin in 2005 that laid the foundation for what became an ever expanding barrier to effective shareholder engagement with management, directors and fellow shareholders.
Shareholder advocates like ourselves found that explanation untenable. Understanding risk is a critical component to any investment strategy. So prohibiting questions about risk, at best, seemed inconsistent with the SEC’s mandate to protect investors and at least lacking in common sense. The timing of these new policies also smelled of politics, emerging after the 2004 Presidential election and the further entrenchment of Bush era staff appointments.
Following years of organizing to push the SEC and Congress to address our concerns, Trillium took a leadership role to fix the situation. In November 2008, Trillium helped draft a letter from 60 prominent shareholders to then president-elect Obama calling for the retraction of the 2005 legal bulletin. With pressure growing on the SEC, in September 2009, the agency held an invitational meeting at the Commission’s headquarters to discuss these issues. At the meeting, I argued vigorously for a rational approach that respected shareholder legitimate concerns about both the economic, social and environmental performance of companies and how these issues impact portfolio company performance.
Hence our profound relief and gratification when the SEC quickly responded and reversed the previous policy just in time for the 2010 shareholder season. This change is compelling confirmation that the SEC is taking positive steps to bring its actions in line with its mission to protect investors and serve the public good. Over the next year we will continue our advocacy at the SEC so that it facilitates meaningful shareholder engagement on the important social and environmental issues confronting companies.
SEC Issues Ground-Breaking Guidance on Climate Change Risk Disclosure
[We're pleased to excerpt this press release from Ceres, the Investor Network on Climate Risk and the Environmental Defense Fund. Trillium Asset Management Corporation participated heavily in the lobbying efforts that lead to this breakthrough.]
Contact:
Peyton Fleming, Ceres, 617-733-6660 or fleming@ceres.org
Steve Tripoli, Ceres, 617-247-0700 x155 or tripoli@ceres.org
Sharyn Stein, EDF, 202-572-3396 or sstein@edf.org
Download the Ceres/EDF Fact Sheet – SEC: Companies Must Disclose Climate Risks & Opportunities
Leading Investors Hail Today’s Landmark Decision
WASHINGTON, D.C. (January 27, 2010) – The U.S. Securities and Exchange Commission today issued new interpretive guidance that clarifies what publicly-traded companies need to disclose to investors in terms of climate-related ‘material’ effects on business operations, whether from new emissions management policies, the physical impacts of changing weather or business opportunities associated with the growing clean energy economy.
The guidance, the first economy-wide climate risk disclosure requirement in the world, was approved in a formal vote at today’s SEC Commissioners meeting in Washington. The lack of specific guidance until now has resulted in weak and inconsistent climate-related disclosure by public companies.
Today’s decision comes after formal requests by leading investors for the SEC to require full corporate disclosure of wide-ranging climate-related business impacts – and strategies for addressing those impacts – in their financial filings. More than a dozen investors managing over $1 trillion in assets, plus Ceres and the Environmental Defense Fund, requested formal guidance in a petition filed with the Commission in 2007, and supported by supplemental petitions filed in 2008 and 2009.
Investors hailed today’s new guidance and said it goes a long way to meeting disclosure needs outlined in their petition.
“We’re glad the SEC is stepping up to the plate to protect investors,” said Anne Stausboll, chief executive officer of the California Public Employees Retirement System (CalPERS), the nation’s largest public pension fund with more than $205 billion in assets under management. “Ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential. Investors have a fundamental right to know which companies are well positioned for the future and which are not.”
“Today’s vote is a clarion call about the vast risks and opportunities climate change poses for US companies and the urgency for integrating them into investment decision making,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, a network of 80 institutional investors with $8 trillion in collective assets. “The business risks of climate change cannot be ignored. With this guidance investors can make more sound decisions based on better information – and businesses will have a level-playing field with clear standards and expectations for disclosure.”
“Companies across America are poised to prosper and create new jobs in the clean energy economy,” added Environmental Defense Fund President Fred Krupp. “Investors have a right to know which companies are planning to be part of the clean energy future and which are lagging behind.”
Today’s decision is the latest in a series of major policy actions over the past year requiring more robust climate risk disclosure across various industry sectors. Those actions include:
- The Environmental Protection Agency’s new mandatory greenhouse gas (GHG) reporting rule, requiring some 10,000 facilities that are large sources of GHGs to report those emissions to EPA, beginning data collection on January 1, 2010.
- The National Association of Insurance Commissioners’ (NAIC), the organization of insurance regulators for the 50 states, unanimously approved a mandatory requirement for insurers with annual premiums of $500 million or more to disclose climate risks to regulators, shareholders and the public beginning in May 2010.
- A growing spate of climate disclosure related litigation, as well as subpoenas by New York’s Attorney General to five of the nation’s largest power companies regarding their climate disclosure in SEC filings. Three of those cases have been settled, including a major settlement in November, after the companies agreed to boost their disclosure.
- A record number of shareholder resolutions seeking information on companies’ contribution and responses to climate change.
The Congress has also advanced major comprehensive climate protection legislation, including first-ever House passage of strong climate and energy legislation in June that caps greenhouse gas emissions; similar legislation is under consideration in the Senate.
Under SEC Chairman Mary Schapiro’s leadership, the SEC has also been active on disclosure issues. In October, the commission decided to allow shareholder resolutions that seek information from companies on the financial risks they face from social and environmental issues, including climate change. The decision reversed a rule that prevented investors from directly asking companies about the impacts of climate change and other pressing concerns on their bottom line.
The SEC is also evaluating a formal request from investors last June that companies be required to disclose material ESG (environmental, social and governance) risks. Schapiro has asked the new SEC Investor Advisory Committee to consider the request and make recommendations to the Commission.
To Maryland State Treasurer Nancy Kopp, who attended today’s meeting, the importance of the SEC’s decision is simple.
“State Treasurers invest vital taxpayer funds. We oversee public retirement and pension systems, college savings plans and more,” she said. “As investors safeguarding the economic welfare of so many state citizens, we have to be informed about the risks of companies we invest in. Easy and understandable access to accurate, comparable information regarding these very real risks – and climate change is certainly one of them – is essential to protect the investments our states depend on.”
Last June, Ceres, EDF and The Corporate Library issued a report showing that S&P 500 companies – including those with the most at stake in responding to the risks and opportunities from climate change – are providing scant climate-related information to investors. The study was based on an analysis of 10-K and 20-F filings by 100 global companies in 2008.
….
About Ceres
Ceres is a leading coalition of investors, environmental groups and other public interest groups working with companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk, a network of 80 institutional investors with collective assets totaling $8 trillion. For more information, visit http://www.ceres.org
About EDF
Environmental Defense Fund, a leading national nonprofit organization, represents more than 500,000 members. Since 1967, Environmental Defense Fund has linked science, economics, law and innovative private-sector partnerships to create breakthrough solutions to the most serious environmental problems. For more information, visit http://www.edf.org
SEC: Companies Can No Longer Bury the Lede on Shareholder Votes
December 2009 – The Securities and Exchange Commission moved to finalize a new rule that requires companies to disclose annual meeting voting results within four business days after the annual meeting. Trillium argued vigorously in support of this rule change because we believe the value of vote totals is greatest immediately after the annual meeting. This is when media interest is usually highest and delays only put the issue farther from shareholders’ minds. In fact we have witnessed occasions when it appears that companies are dragging their feet in an effort to minimize or marginalize strong expressions of support for shareholder proposals on environmental and social issues. We applaud the Commission for this simple, but very important improvement to the shareholder resolution process.
“RISK: SEC reverses Bush-era policy on climate disclosures”[eenews.net]
“In a policy reversal long sought by shareholder advocates, the U.S. Securities and Exchange Commission ruled yesterday that investors can directly call on public companies to describe the financial risks they face from global warming,” according to E&E News ClimateWire.
Trillium has been a leader in pushing the SEC on this issue, and Senior Social Research Analyst Jonas Kron is mentioned in the article. More on Trillium’s involvement can be found here: http://trilliuminvest.com/news-articles-category/big-victory-for-shareholder-rights/
Big Victory for Shareholder Rights!
October 27, 2009 - This morning the Securities and Exchange Commission (SEC) announced a reversal in policy that will allow shareholders to resume filing resolutions that ask companies to discuss the risks associated with climate change, toxic chemicals, rising health care costs and other significant social and environmental policies issues. Under the Bush Administration, the “risk evaluation” exclusion severely cramped the ability of shareholders to hold corporations fully accountable for the financial, environmental and social implications of their policies in these high profile issue areas.
Trillium Asset Management Corporation (“Trillium”) has been a leader in pushing the SEC on this issue. In September, Jonas Kron, Esq. of Trillium spoke directly with the SEC about this issue in his capacity as a member of Social Investment Forum’s Advocacy & Public Policy Working Group. Trillium welcomes the expanded opportunities provided by this policy reversal to advocate for greater corporate transparency and responsible corporate behavior. We commend the SEC for continuing to empower shareholders and see this as an important step in its efforts to strengthen the proxy process. Trillium looks forward working with the SEC on further improvements to the process.
For further information, contact Jonas Kron at 503-592-0864.
Trillium Lobbies Berkshire Hathaway Shareholders in Support of Sustainability Reporting Proposal
Click here to read the press release.
Boston, MA (April 27, 2009) Trillium Asset Management Corporation (“Trillium”) is joining two nonprofit advocacy organizations, the International Labor Rights Forum and the International Rivers Network, in calling on fellow Berkshire Hathaway investors to back a proposal on the agenda for the company’s upcoming May 2, 2009 annual meeting which requests that Berkshire prepare a Sustainability Report on its performance on environmental and social issues. Boston-based Trillium today released a letter filed last week with the Securities and Exchange Commission and sent to Berkshire’s nearly 2,000 institutional shareholders, who own more than $26 billion in its preferred and common stock. The letter urges a vote in favor of the proposal, which was submitted by Berkshire shareholder Joseph G. Petrofsky. The letter comes in the wake of a report recently issued by leading shareholder advisory firm PROXY Governance that recommends a vote in favor of the resolution, calling Berkshires disclosure of environmental and social issues affecting its portfolio relatively poor, and concluding that additional disclosure in this area would help shareholders. Read more.
Putting China on the Spot for Sudan
Yes, We Can, Too
Everyone, from the progressive Left to “Obamican” crossovers, has high hopes for the new administration. Social investors are no exception. We share the expectation that the Obama administration will take a hands-on approach to many of the problems we’ve addressed for years, including climate change and other environmental priorities, predatory lending, inadequate regulation of the financial markets and much more. There’s a subset of policy reforms, however, that are being championed more or less exclusively by the social investing community, and those are the subject of this article. What follows is a brief summary of some of the policy reforms we’re audaciously hoping (and lobbying) for to remove specific barriers to the advancement of social investing.
Risky Business
On December 11, more than 60 social investors (including Trillium Asset Management Corporation) wrote to President-elect Barack Obama seeking the restoration of the right of investors “to propose and vote upon resolutions asking a company to evaluate how specific risks may affect the company’s business…. These include the kind of credit risks associated with the mortgage crisis, as well as an array of environmental and social issues which we believe may have large financial implications, e.g., climate change and product toxicity.” The appeal stems from the Securities and Exchange Commission’s Bush-era stand against shareholder resolutions requesting that a company evaluate the risk related to a line of business or an emerging social or environmental trend. (The SEC arbitrates between companies and shareholder resolution filers when companies challenge the submission of resolutions based on any of 14 technical and substantive rules. Corporations have been arguing that proposals that address risk violate the “ordinary business” exclusion.)
For example, in 2006 the SEC disallowed, on “evaluation of risk” grounds, a resolution at Ryland Group that was virtually identical to a proposal that had passed muster at Ryland the year before. Another example of the use of the head scratch-inducing “evaluation of risk” exclusion was the dismissal of a proposal at Washington Mutual earlier this year asking the company to discuss its potential financial exposure as a result of the mortgage securities crisis. The number of such exclusions as violations of the “ordinary business” rule has increased significantly in the last several years, as have inconsistent applications of the rule.
Making the World Safe for Pension Fund Activism
In October, the Department of Labor (DoL) issued two interpretive bulletins at the prodding of the U.S. Chamber of Commerce. One modified its longstanding view that pension plans may engage in shareholder advocacy without violating their fiduciary duties as defined by the Employment Retirement Income Security Act. Because the letter is confusingly written, the extent to which the DoL is seeking to impose stricter constraints on shareholder advocacy by pension funds is unclear. One thing is clear, though: the bulletin is inconsistent with prior DoL regulations. The Social Investment Forum is calling upon the new administration to discard the bulletin and clarify that existing practice has not changed.
The second bulletin declared that DoL would not, from now on, consider environmental or “so-called ‘green’ companies” to be acceptable economically targeted investments (ETIs). But why? In a letter to the DoL sent in December, the Social Investment Forum asks, “Why did the Department include an example that seems so out of place, arguably irrelevant, in a discussion of ETIs? Is it, as contemplated by one commentator, a suggestion of a broader intent behind the ETI bulletin? Or is it so far afield that it should be regarded as an error?” The bulletins are a parting shot from an administration beholden to business interests whose ideology recognizes no value in the consideration of extra-financial factors.
Not Too Much Information
Last summer, the SEC announced the “21st Century Disclosure Initiative,” inviting investors’ comments on the creation of “a comprehensive high-level plan for overhauling the Commission’s current forms-based disclosure system.” A report is due by year-end. While the Initiative is mostly concerned with modernizing the technology of disclosure, Trillium took the opportunity to respond to the SEC’s invitation to comment on any other types of information it should be seeking from companies. We put in a plug for requiring corporate reporting on sustainability issues such as the environment (e.g., risks to business from water scarcity and climate change) and political contributions. Rather than reinvent the wheel, we suggested, the SEC should look at integrating Global Reporting Initiative reports into its filing requirements. (The French, Danish and British governments, as well as the South African stock exchange, already require sustainability reporting from major companies.)
This is consistent with positions we have supported as a member of the $7 trillion Investor Network on Climate Risk (INCR), which promotes better understanding of the financial risks and opportunities posed by climate change. In September 2007, the INCR petitioned the SEC to address the obligations of publicly-traded companies to assess and fully disclose the material economic opportunities and risks from climate change. Senate Banking Committee leaders, Senators Christopher Dodd (D-CT) and Jack Reed (D-RI) also supported the petition in a letter sent to the SEC in December 2007, and language urging the SEC to require companies to disclose their climate risks is included in the Senate Committee on Appropriations report accompanying the 2009 Financial Services and General Government Appropriations Bill.
Along these lines, as we wrote about in the Fall 2008 issue of Investing For A Better World, Trillium has also lobbied the Financial Accounting Standards Board (FASB)to enhance disclosures about loss contingencies by expanding the population of potential liabilities that must be disclosed, requiring more specific information about those potential liabilities, and mandating clear and transparent disclosure formats. (While FASB is not a governmental body, the SEC has designated it as the organization responsible for setting accounting standards for public companies.)
Why Vote? It Only Encourages Them
Why can’t shareholders nominate the board directors who nominally represent them in the governance structure of the corporation? If you answered, “because only the Red Queen could defend the logic of corporate board elections,” that is partially correct. But the root cause is that the SEC says we can’t.
At the end of 2007, in a vote described by former SEC Chairman Arthur Levitt as “probably the most important vote the commission has taken in nearly 15 years,” the SEC Commissioners voted 3 to 1 against allowing shareholders access to management’s proxy statement to nominate corporate directors, the most recent defeat for an idea with strong support from shareholders but fierce opposition from the corporate community. But with such strong backing and a friendlier administration in place, the issue is not dead yet. If the SEC doesn’t reconsider, Congress may do it for them. Richard Ferlauto, director of corporate governance and pension investment at the American Federation of State, County, and Municipal Employees, told RiskMetrics recently that a proxy access provision may be included in compensation legislation or a broader bill to overhaul the SEC.
Yes, We Can Provide Mutual Fund Products
And finally, what does one have to do to get a good set of socially responsible mutual fund options around here? Some federal workers have been asking that question for years because the Thrift Savings Plan, the retirement plan for all federal civilian and armed services employees, currently contains no socially responsible investing options. Thankfully, Congressman Jim Langevin (D-RI) introduced the Federal Employees Responsible Investment Act at the urging of these workers. Now to pry it out of committee.
A Shareholder Bill of Rights?
With new leadership in Washington, the conditions may be right for shareholders to win, and in some cases win back, their rights. Prior to this fall’s stock market meltdown, some were even predicting the passage of a “shareholder bill of rights” – covering executive pay and the right to nominate directors – within the first 100 days of the new Administration. Given the ongoing financial and economic crisis, this is less likely but not out of the realm of possibility. After all, as an investor who personally divested his stock in a company doing business in the Sudan, our new president is certainly sympathetic to at least some of the fundamental ideals of social investing. It’s a new day.
