Markets Brief: Investors Pushing for More Proxy Wins
Banks and pharmaceutical companies face a wave of shareholder proposals. Netflix shares plunge as United, Delta, and American rise.
Corporate America’s proxy season is under way, and companies are facing votes on a variety of measures that they have in many cases urged shareholders to reject. Their typical success in beating back those proposals may be more difficult than ever to achieve this year as ever-more-assertive investors are demanding action on everything from climate change to corporate governance.
Citibank (C), Bank of America (BAC), Johnson & Johnson (JNJ), and Pfizer (PFE) are among the companies expected to hold proxy votes next week. Berkshire Hathaway (BRK.B) faces a proposal to remove Warren Buffett as chairman.
Last year, 33 environmental, social, and governance resolutions received a majority of votes from shareholders, up from 18 in 2020.
“We can think of 2021 as an inflection point and 2022 as really strengthening the gains we saw in 2021,” says Jackie Cook, a director on Sustainalytics’ (a Morningstar company) stewardship services team.
It has gotten to the point where many companies are responding to shareholder demands by adopting proposals without having them to come up for a vote. Just two years ago, there was still a lot of pushback from companies to investor proposals, says Conrad MacKerron, senior vice president at As You Sow, an investor advocacy firm.
"But, in the last year, things have really sped up,'' MacKerron says. “Companies are now making these decisions to agree to what we're asking within a period of months.”
For those issues that do make it onto the ballot, shareholder successes are easy to explain, Green Century Funds chief executive Leslie Samuelrich said in a webinar on April 19. Her firm worked with 130 companies last year during proxy season and saw 25 measures it supported pass, a number they expect to top this year.
Investors are voting with the view that climate change is now recognized by the U.S. Treasury, the Federal Reserve, and the SEC as a potential material risk faced by companies, Samuelrich says.
There is also pressure being put on big shareholders like Vanguard, which was ranked the worst of 30 major asset managers in tackling climate commitments.
There “is not a single policy in sight from Vanguard to restrict investments in fossil fuel expansion or even use its shareholder voting power to hold the world’s biggest polluters accountable,” Lara Cuvelier of Reclaim Finance, which scored the asset managers, said in a statement.
Finally, there are plenty of asset managers new to ESG that are rushing to meet “exploding demand” for sustainable investments from their clients, Samuelrich says.
“As they try to gain credibility, they have started to vote their proxies so that they also can tout their proxy voting record,” she said.
Airline stocks rose higher after United Airlines joined Delta Air Lines (DAL) in forecasting a profit for 2022, the first since 2019, during their earnings call. United, American Airlines (AAL), and Delta closed the week higher in response.
Netflix shares crashed after management forecasted a loss of about 2 million subscribers for the second quarter. The streaming service provider saw its number of paying users fall by about 200,000 in the first quarter, raising concerns about slowing growth.
Jakir Hossain does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.