Trillium Lobbies Berkshire Hathaway Shareholders in Support of Sustainability Reporting Proposal
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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
Trillium Files Resolutions on Sudan Genocide
Trillium Asset Management Corporation Files Resolutions on the Sudan Genocide
In December 2007, Trillium Asset Management Corporation (“Trillium”), working in coalition with human rights organizations and other socially responsible investment firms, filed shareholder resolutions with major banks and financial firms with the goal of engaging Wall Street to push Sudan to end the violence in Darfur and accept full deployment of U.N. peacekeepers. Trillium filed resolutions at JP Morgan, Morgan Stanley and Merrill Lynch.
These Wall Street powerhouses are among the largest shareholders in the “Big 4″ petroleum companies doing business in Sudan, whose royalties to the government have financed the massacres in Darfur. In total, the coalition is calling on more than 40 top firms with holdings in these companies to use their influence as major investors to pressure the Sudanese government to stop obstructing the deployment of the 26,000-member U.N. peacekeeping force. The oil industry in Sudan is dominated by four foreign companies: China National Petroleum Corporation of China, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec Corporation of China. While these are all state-owned enterprises, U.S. investors have significant funds invested through various publicly-held affiliates and subsidiaries.
The conflict has left more than 200,000 civilians dead since 2003.
Shelley Alpern, Vice President at Trillium Asset Management, said: “Ideally, we hope to see action from these firms over the next few months, which would allow us to withdraw these resolutions before annual meetings in the spring. The situation in Darfur merits extraordinary and urgent action on all our parts, as individuals, as investors, and as business leaders.”
“Sudan doesn’t need the United States to keep its economy going, but it does need foreign oil companies,” said Denise Bell, Sudan country specialist for Amnesty International USA (AIUSA). “Major financial firms need to engage these oil companies aggressively and push them to use their unique influence with the Sudanese government.”
Ninety percent of Sudan’s export income is derived from oil, with Khartoum funneling the majority of this revenue into military expenditures. Sudan lacks the capital and expertise to efficiently extract its own oil, and relies almost entirely on foreign companies to operate this lucrative industry, which provided the government with over $4 billion in export revenue last year.
The coalition has filed shareholder resolutions with six firms so far: Citigroup, Morgan Stanley, Merrill Lynch, T. Rowe Price, Wells Fargo and JP Morgan Chase. Trillium has also taken part in meetings with Citigroup.
So far, the responses from investment firms to letters and meetings on Darfur have been wide-ranging. Twenty-eight firms–almost half of them American–have not responded at all. Five U.S. firms — JP Morgan Chase, Merrill Lynch, Citigroup, T. Rowe Price and Morgan Stanley — agreed to meet with the coalition. A full status report of firms’ responses and the text of the shareholder resolutions is available at www.amnestyusa.org/progress.
Other coalition members filing resolutions include Amnesty International USA, Calvert Group, Ltd., Marianist Province of the United States, Northstar Asset Management, Needmor Fund, Sisters of Saint Joseph of Brighton MA, Unitarian Universalist Service Committee, the Vermont State Treasury and Walden Asset Management.
For more information about Trillium’s work on Sudan:
“Putting China on the Spot for Sudan”
“Trillium Asset Management Corporation Adopts Sudan Divestment Policy”
“When do you divest from a Company“
“Sudan Divestment Campaign Begins to Bear Fruit“
Proxy Voting Guidelines (see PetroChina)
Shareholders Protect Right to File Resolutions, Lose on Rights for Director Nominations
Late last month, the Securities and Exchange Commission (SEC) closed an opening that had given investors a little more power to nominate directors at publicly traded companies. At issue is whether investors can nominate directors to appear on the company’s proxy ballots mailed out to all shareholders. Shareholders have the right to send out nominations on their own competing proxy ballots, but the costs and logistics of doing so are so onerous that this almost never happens, so advocates for shareholder rights have long sought rules granting them access to nominate directors on the company proxy.
Those advocates won a victory last year when a federal appeals court struck down the SEC’s past rules denying shareholders access to nominate directors on companies’ proxies. In response, the SEC proposed two different changes to its proxy access rules. One option would have granted proxy access for director nominations to shareholders holding more than 5 percent of a company’s shares. The other would restore the rules that deny shareholders proxy access to nominate directors. Sadly, the SEC denied shareholder rights and adopted the second option, although the chairman of the SEC has promised to revisit the issue in the year to come.
There was one bright note in a disappointing decision. In its proposals on proxy access, the SEC posed a series of questions about whether to limit the types of shareholder resolutions that Trillium Asset Management Corporation and our allies rely on every day to prod companies towards greater corporate responsibility. The Social Investment Forum, the Interfaith Center on Corporate Responsibility, labor pension funds, and Trillium and other leaders in the socially responsible investment world banded together to oppose any new limits on the shareholder proposal process. Our efforts and the efforts of other shareholder rights’ advocates generated over 34,000 comments to the SEC opposing any weakening of shareholder proposals. We joined these groups in lobbying key Congressional leaders and SEC members and in sponsoring a national poll which found broad investor opposition to weakening shareholder proposals. As a result of this groundswell of support for shareholder advocacy tools, the SEC did not pursue any of the options it was considering to limit shareholder proposals.
SEC Proposals Threaten Shareholders Rights To File Resolutions
2007
By Shelley Alpern
The cicada is a locust-like insect that emerges from a long hibernation every umpteen years to create an incessant buzzing on some areas of the East Coast. Equally annoying in death as in life, when spent, cicadas drop from trees en masse, littering once-pleasant lawns and parks with piles of crunchy carcasses.Ten years ago, the Securities and Exchange Commission (SEC) floated proposals for public comment that, if implemented, would have drastically curtailed shareholder rights. Like a cicada, the critics of the shareholder resolution process have resurfaced with different but equally dismaying ideas. In 1997, the story had a happy ending; after a barrage of support for the extant system, the SEC shelved its proposals. This time around, we cannot take another success for granted because the stakes are too high. If successful, advocates for change will eliminate the federal government’s role in protecting the rights of investors to file shareholder resolutions and all companies to create their own weak, or even nonexistent, mechanisms to govern the process. Investors will not be able to file resolutions to change the bylaws to permit director nominations. Accordingly, the socially responsible investment community is mobilizing vigorously to fight any rollback of investor rights.
Heads I Win, Tails You Lose
In August, the SEC floated two proposals for public comment.1 Both deal with proxy access very differently, reflecting deep division among the five commissioners.2 The Republican-supported proposal [PDF] would disallow any resolutions regarding the election of corporate board directors (or “proxy access” resolutions). The alternative [PDF], reluctantly supported by the Democratic commissioners, would allow shareholders to nominate directors, but only if they collectively represent at least 5% of a company’s stock. In an unusual move, Chairman Chris Cox voted in favor of both to prompt public debate on a range of options, while also indicating that he supported some form of proxy access.
Neither alternative is acceptable. Democratic Commissioner Ann Nazareth called the second a “non-access” proposal because of the practical impossibility – for reasons to lengthy to discuss here — of organizing a coalition representing 5% to file a shareholder resolution. Both would stymie for good the growing support among shareholders for proxy access proposals, which received over 40% on the ballots of HP and UnitedHealth Group last spring.
This second proposal also requests comment on whether companies should be able to opt out entirely from receiving any non-binding resolutions – posing a potentially devastating threat to socially concerned investors.
Non-binding resolutions constitute 95% of all resolutions filed, according to the Investor Responsibility Research Center – and 100% of the resolutions resolutions filed by Trillium Asset Management Corporation and our peers in the socially responsible investment field. Without them, we wouldn’t have had the high-impact campaigns of South Africa, sustainability reporting, diversity, political contributions and hundreds of lesser known resolutions that spurred corporate change, many of which we have written about in these pages. Unsurprisingly, many on the other side of the table would like to be rid of them once and for all. SEC Commissioner Paul Atkins said “advisory resolutions detract from operating companies’ ” primary business and that their proponents use “their nominal economic interest to hijack the agenda of all investors.”
Lowlights of the SEC’s Proposals
The opt-out option. The SEC is seeking comment on whether a company should be allowed, with shareholder approval, to opt out of the resolution process, or even, if their state of incorporation allows it, to have the board vote to opt out (and most state corporation laws do permit directors to alter their bylaws without a shareholder vote). In theory, this would create two universes of companies for investors – those respectful of shareholder input, and those with better things to do than listen to their owners. In reality, the latter would surely dwarf the former, forcing investors to turn to more confrontational methods to raise their issues.
The chat room proposal. The Commission puts out for comment the idea that the inclusion of shareholder resolutions on proxy ballots could be replaced by companies by “electronic petition model.” Everything is wrong with this suggestion. To start, companies would not have to respond to the proposal, so voting shareholders would have no clues as to a company’s view on a particular issue, and neither management nor board is obligated to give it the slightest bit of attention. Second, except for the requirement that the web resolutions contain no “false or misleading” material, any subject could be addressed, guaranteeing a flood of resolutions that investors would find impossible to wade through, thus depressing voter turnout. Third, voter turnout is likely to be low anyway; who besides John Mackey3 frequents company chat rooms?
Chat rooms are a non-starter unless they become an addition to the current mechanism, not a substitute.
Resubmission thresholds. Also up for grabs: raising resolution resubmission thresholds from 3% in the first year, 6% in the second year, and 10% every succeeding year to 10, 15 and 20% respectively. These higher thresholds would have squelched numerous resolutions took time to gain support because shareholders needed time to study them. For example, climate change resolutions garnered only single-digit support when introduced ten years ago, but which now receive 20-30% routinely.
If the resolution process is gutted, management and directors will turn a deaf ear to all but their biggest shareholders. Of the 1,400 resolutions filed each year, one-quarter to one-third are withdrawn, mostly due to successful agreements between investors. These agreements range from strong substantive commitments that produce real changes in policy or practices, the disclosure previously hidden information, commitments to further dialogue, and sometimes simply agreement to disagree. In any of these circumstances, much is learned by both sides. In our twenty-odd years of shareholder advocacy, the staff at Trillium Asset Management can personally testify to dozens of positive relationships with companies that were jumpstarted by shareholder resolutions. Shareholder resolutions are responsible for the Ceres memberships of General Electric, Sunoco, Baxter, and Bank of America, to name a few. They have produced enhanced nondiscrimination policies at over fifty companies. These are commitments that corporations routinely boast about in their public relations material. Yet it remains a sad reflection of some corporations’ insularity that it too often requires a resolution to get in the door.
The SEC needs to hear from all of us who have ever filed, voted in favor of, or benefited from a shareholder resolution. We must vociferously object to these misguided proposals, and insist that no rule changes be voted upon until the seat vacated this summer by Democratic Commissioner Roel Campos is filled.
Please take action now! (The deadline for comments is October 2, 2007.)
For model letters to the SEC and Congress, visit www.SaveShareholderRights.org. To view comments already submitted to the SEC, visit http://sec.gov/comments/s7-16-07/s71607.shtml.
Footnotes
1. In 2006, the American Federation of State, County, and Municipal Employees (AFSCME) sued American International Group (AIG), the insurance giant, for access to the proxy ballot after AIG omitted its resolution seeking a bylaw change to allow proxy access to nominate directors. The court ruled in favor of AFSCME, and challenged the SEC to either start allowing such resolutions or provide a rationale for omitting them.
2. By statute, the three commissioners are appointed from the majority party, and two from the minority.
3. John Mackey is the CEO of Whole Foods, who made headlines this summer when his online alter-ego was exposed making highly questionable statements in a Yahoo! chat room.
URGENT ACTION ALERT! Shareholders’ Right to File Proxy Resolutions in Jeopardy
The Securities and Exchange Commission (SEC) has floated for public comment two proposals with dire ramifications for socially concerned investors.
2007
The Securities and Exchange Commission (SEC) has floated for public comment two proposals with dire ramifications for socially concerned investors.
Our very right to file non-binding shareholder resolutions may be handed off to the discretion of individual companies, instead of being protected by federal rules as it is now.
WHAT’S AT STAKE:
Shareholders could lose their unique rights to place resolutions on the proxy ballot.
Shareholder resolutions made a key contribution to the high-impact campaigns to end apartheid in South Africa, expand corporate environmental reporting, improve workforce diversity, disclose political contributions and many more improvements. We’ve written about many of these efforts in the pages of Investing For A Better World over the years.
Please take action immediately by visiting www.SaveShareholderRights.org.
SaveShareholderRights.org contains more information, and direct links to the SEC and Congress with sample language. The deadline for submitting comments is October 2, 2007.
Additional resources:
“SEC Threats Shareholders’ Rights To File Resolutions,” September 2007 edition of Investing For A Better World
The text of Trillium Asset Management’s letter to the SEC can be found below.
The SEC’s proposals can be found at:
[PDF] Shareholder Proposals (Release No. 34-56160)
[PDF] Shareholder Proposals Relating to the Election of Directors Release No. 34-56161)
To view the comments of other respondents, visit:
Comments on Release No. 34-56161
Comments on Release No. 34-56160
Trillium Asset Management’s letter to the SEC
September 13, 2007
Nancy M. Morris
Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Re: Comment on Release Nos. 34-56160 (File No. S7-16-07) and 34-56161 (File No. S7-17-07).
Dear Secretary Morris:
Trillium Asset Management Corporation is a Boston-based investment firm specializing exclusively in socially responsible asset management. We currently manage about $1 billion for institutional and individual clients.
Since our founding in 1982, Trillium has been deeply involved in the process of shareholder advocacy through letters and dialogue with companies, sponsorship of shareholder resolutions and by voting proxies. It is integral to our mission as a company — and is a critical piece of the value we provide to our investment clients — to use our influence as shareholders to encourage corporations to act in an environmentally, socially and fiscally responsible manner. We view this as an essential part of our fiduciary duty.
We write today to express our views on Release Nos. 34-56160 and 34-56161.
The Commission has stated its desire to have rules adopted in time for the 2008 proxy season. However, it would be highly inappropriate for the Commission to hold a vote on these proposed rules until Commissioner Campos’s replacement is sworn in due to the radical and far-reaching nature of the proposals.
Director nominations
We wish to go on record in opposition to the restrictions that have been posed in both proposals on the rights of investors to nominate board directors (save reasonable ownership thresholds, which we comment upon below). Recent proxy access proposals have received majority and near-majority votes, demonstrating strong investor demand for this right.
Investors should have the right to nominate their own directors, whose alleged purpose is to represent our interests. That the right to merely nominate directors is regarded as threatening starkly highlights the lock on corporate governance enjoyed by entrenched boards and managements; shareholders, after all, would still face the uphill battle of getting their nominees elected.
The 5% ownership requirement that has been floated begs credibility as a serious alternative, given the practical obstacles in amassing a group of shareholders of that size.
As another commentator has noted, the competing proposals to either eliminate proxy access or limit it to 5%-plus investors amount to a “heads I win, tails you lose” proposition. Neither alternative is acceptable. Commissioner Ann Nazareth has rightly dubbed the 5% alternative as the “non-access” proposal because of the practical obstacles preventing the organization of a coalition representing that great a percentage of owners to file a shareholder resolution.
Nonbinding resolutions
For decades, the relatively low thresholds embodied in Rule 14a(8) have, on balance, greatly benefited corporations and large and small shareholders. Without the catalyst of shareholder resolutions, corporations might well have ignored a wealth of shareholder-instigated reforms such as expanded requirements for executive pay disclosoure; enhanced environmental management and reporting systems; codes of conduct to guard against foreign labor abuses and human rights risks; enhanced equal employment programs and policies; and increased attention to the business impact of climate change. By driving voluntary corporate reform, this dynamic process has educated both managers and investors; enhanced companies’ corporate governance, risk management, and operational excellence; and surely forestalled much legislation in these issue areas.
According to the Investor Responsibility Research Center, non-binding resolutions constitute 95% of all resolutions filed. Of the 1,400 resolutions filed each year, one-quarter to one-third are withdrawn, mostly due to successful agreements between investors. In these discussions, both sides learn a great deal. In our twenty-plusodd years of shareholder advocacy, the staff at Trillium Asset Management can personally testify to dozens of positive relationships with companies that were jumpstarted by shareholder resolutions. Shareholder resolutions are responsible for the Ceres memberships of General Electric, Sunoco, Baxter, and Bank of America, to name just a few. They have enhanced nondiscrimination policies at over fifty companies. These are commitments that corporations routinely boast about in their public relations material. Yet it remains a sad reflection of some corporations’ insularity that it too often requires the exercise of the right to file to get in the door. If the resolution process is gutted, many corporations may turn a deaf ear to all but their biggest shareholders, which could drive smaller investors to resort to more adversarial actions and reduce opportunities for mutually beneficial collaboration.
Three possibilities that have been suggested stand out to us as particularly problematic.
The opt-out option. This would create two universes of companies for investors with perverse consequences. Those companies that provided a formalized means of shareholder input would bear an associated administrative burden not borne by the others. These would likely be companies with superior stakeholder management and governance skills; those who opt out, ironically, would likely be the very companies in greatest need of shareholder input.
The electronic petition model. This scenario would effectively keep shareholder resolutions out of sight and out of mind. Companies would not have to respond to the proposal, so voting shareholders would have no idea of where a company stood on the issue raised.
Except for the requirement that such web-based resolutions contain no “false or misleading” material, any subject could be addressed. Removing the gatekeeper function could result in the submission of many more than are now currently filed, which would encourage the submission of proposals irrelevant to corporations’ well-being. This “chat room” model is a non-starter unless it is used as an addition to the current mechanism, not as a substitute.
Resubmission thresholds. The Commission has proposed raising resolution resubmission thresholds from 3% in the first year, 6% in the second year, and 10% every succeeding year to 10, 15 and 20% respectively. These higher thresholds would have squelched numerous resolutions that took time to gain support because shareholders needed time to study them. The 3-6-10% thresholds already provide requirements that proponents demonstrate sufficient investor interest to maintain the opportunity to bring forward proposals.
Acceptable reforms
In order to meet its objectives of facilitating annual board elections, encouraging new uses of technology in management-shareholder communication, and easing the burden upon staff, we encourage the following:
Affirm the right to nominate directors. In place of a 5% threshold, an acceptable compromise would involve setting forth, for example, a staggered threshold based on market cap, wherein large companies require a lower threshold.
Reduce the burden on staff by eliminating the “ordinary business” exclusion. The level of support a resolution receives is the best and most objective indicator of what shareholders consider the ordinary business of corporations.
Retain the 3-6-10% resubmissions thresholds for reasons stated above.
We thank you for considering our input.
Sincerely,
Joan Bavaria
President & Chief Executive Officer
