Proxy season brings new shareholder battles

Support for the issue is growing according to Mindy Lubber, president of the Coalition for Environmentally Responsible Economies or CERES, an environmentally oriented shareholder group. She points to the power of the Investor Network on Climate Risk, a coalition that includes several large pension funds, which has collective assets worth $1.3 trillion.

“These investors are not tree-huggers; they are not environmentalists or activists with a political agenda,” Lubber said. “They are state treasurers, they are comptrollers and they are pension fund managers who are carrying out their fiduciary duty to follow the long-term whishes of their shareholders.”

This year, 41 global warming resolutions have been slapped on a handful of companies in sectors as diverse as oil and gas, electric power, manufacturing and financial services. The list of companies affected includes well-known names like General Motors, ChevronTexaco, Newell Rubbermaid, J.P. Morgan Chase and Wells Fargo, according to CERES.

Majority voting issue
Another hot shareholder issue for 2005 is a resolution asking for a majority vote to elect corporate directors.

At present, most candidates standing for re-election to a company’s board face no competition. A single “yes” vote normally will get them chosen, no matter how many shareholders oppose their candidacy. In fact, in many companies do not even offer shareholders the option to vote against a candidate.

Now shareholder groups want to change that and establish a system that more closely resembles standard elections, where a candidate must receive a majority of votes cast to win.

The issue gained some heavyweight support, including Institutional Shareholder Services, a proxy advisory firm, and the giant California Public Employees' Retirement System pension fund. It is likely to see its first showdown when industrial giant Caterpillar’s annual shareholder meeting, scheduled for Wednesday.

“This is not a new issue, but it’s an issue with legs,” said Smith. “We’ve seen a dozen or more ballots withdrawn because companies have agreed to set up a working group with shareholders and come to a resolution on the issue, but there are about 65 ballots still out there, and the issue has a very strong logical case.”

Improved dialogue
Although shareholder activists are gearing up for a busy proxy season, not all of the announced resolutions will make their way into company proxy statements.

In a post-Enron push for more boardroom accountability, shareholder advocacy groups are using the occasion of the company annual meeting to urge corporate leaders to adopt new policies along religious, socially responsible or environmental lines.

But in an encouraging sign for activist groups, analysts say sponsors are withdrawing their resolutions, having convinced a company to at least consider their proposal, thus averting a potentially acrimonious proxy fight.

In response to complaints from shareholders, for example, Ford Motor recently said it will write a report about global warming, including details on emissions from Ford vehicles and factories.

“I think companies are more willing to talk [to shareholders] this year,” Smith said.

“It’s not like this year is very different; there have always been numerous companies willing to go for a settlement situation,” Smith added. “So we’re not seeing a sea change here, but this is not insignificant and by the end of this year’s proxy season I wouldn’t be surprised to see a quarter or a third of shareholder resolutions withdrawn.”

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