Shareholders Have a Tool for That
The Exxon Mobil refinery in
Torrance, Calif. The topic of climate change and its effects
will again appear on shareholder proxies this year at companies
like Exxon Mobil.
Jamie Rector/Bloomberg News
an investor who usually junks the voluminous corporate proxy
statements that arrive each spring, declining to take part in director
elections and other governance matters because you think your vote
you are not alone. With millions of shares outstanding at large
companies, it’s hard to believe that an individual investor’s vote can
make a difference.
But the stakes are
higher this year. If, for example, you’re concerned about the Trump
administration’s plans to roll back regulations throughout corporate America,
you may want to take a more active approach to proxy voting.
column from Gretchen Morgenson examining the world of finance
and its impact on investors, workers and families
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Say that the new leaders at the
Securities and Exchange Commission
Environmental Protection Agency
relax their agencies’ oversight, as anticipated. That would mean
shareholder votes in favor of holding executives accountable on
executive pay, climate change issues and other governance matters are
never been a better time to address these issues, whether as an
institutional investor or an individual,” said Nell Minow, vice
ValueEdge Advisors, a firm that
guides institutional shareholders on how to reduce risk in their
portfolios. “If you are worried that your company is lobbying to
weaken environmental rules, for example, then it’s really a fabulous
opportunity for you to join in with the institutions and other
economic forces making it clear to companies that they can’t get away
As was the case
last year, the topic of climate change will again appear on shareholder proxies
this year. One proposal that gained a lot of traction among investors in 2016
asked energy companies to publish an analysis of how their holdings would be
affected in the long term by measures limiting the global increase in
temperature to 2 degrees Celsius — a goal
agreed to by nations in the 2015 Paris
That kind of
analysis may force a company to alert shareholders that its assets would not be
worth as much under those conditions. (BHP Billiton, the Australia-based mining
undertook such a study in 2015 and concluded
that while its asset value would be affected, it would continue to create value
Management at the
companies whose proxies included these proposals generally urged investors to
vote against them. Still, they received substantial support at some companies —
38.1 percent of votes cast at Exxon Mobil favored the proposals, as did 40.8
percent at Chevron, and almost half the votes at Occidental Petroleum.
None of these
companies have published a proxy statement yet, but similar proposals are likely
again this year at those and other energy companies, governance experts said.
Fresh support from investors could put the proposals over the top.
should realize that they can no longer rely on the government to urge companies
to recognize the risks that climate change poses to their operations. That is
the view of Edward Kamonjoh, executive director of the
50/50 Climate Project, a nonprofit
organization that helps institutional investors work with corporate boards on
climate change issues. “Investors have to become more involved to exercise their
collective power as owners of these corporations so that they run their
businesses in the best long-term economic interests,” he said in a telephone
shareholder proposals are typically not binding, so companies are not required
to abide by them. Still, managers are usually loath to ignore the wishes of a
majority of their shareholders.
investors can effect change this year on another topic: company policies
governing when it should act to recover an executive’s compensation because of
The idea of
recouping executive pay took hold in the early 2000s after the Enron and
WorldCom accounting fiascos. The Sarbanes-Oxley
law of 2002 gave the S.E.C. the ability to
go after incentive pay earned improperly by an executive in connection with an
have been few, however. So the Dodd-Frank legislation of 2010 required the S.E.C.
to write new rules expanding the potential for recoveries.
In July 2015, the S.E.C. proposed a
rule requiring companies to adopt clawback
policies on executive compensation. But it did not go into effect before the
Trump administration took over. That rule is probably dead. Nevertheless,
shareholders may be able to improve clawback policies at two big companies this
year: Verizon and Caterpillar.
whole concept of executive compensation is pay for performance,” said
Cornish F. Hitchcock, a lawyer in Washington
who is advising the group of Verizon shareholders proposing the policy change at
the company. “If executives’ behavior costs the company money or damages its
reputation, shouldn’t there be consequences?”
shareholders agitating for change are a group of 205,000 former telecom
employees known as the
Association of BellTel Retirees. Since 1997,
10 proposals put forward by the retirees have been voted on by Verizon
shareholders; in eight of the measures, the company responded by changing its
policies, according to the retirees’
This year, the
retirees’ organization wants the company to expand its clawback policy;
policy limits pay recoveries to executives
who engaged in “willful misconduct” that causes significant financial or
reputational harm to the company.
Far too narrow,
the retirees say. First of all, the term “willful misconduct” is ill defined,
Mr. Hitchcock said, and may limit pay recoveries to egregious cases only. In
addition, Verizon’s policy should also cover wrongdoing that arose because of
negligence or a supervisory failure.
Verizon is urging
its shareholders to vote against the retirees’ proposal at the annual meeting in
early May. James Gerace, a Verizon spokesman, explained why in a phone
be really broad and open to interpretation,” he said. “We were trying not to
make it so broadly applicable that it was going to paralyze our people in making
In their proposal,
the retirees detailed why Verizon’s current policy is problematic, citing a 2015
regulatory settlement Verizon struck with the Federal Communications Commission.
The agency contended that Verizon placed unauthorized third-party charges on
customers’ cellular phone bills; the company paid $90 million to settle the
Under the policy,
it’s unclear whether the company scrutinized the actions of any executives
relating to this settlement, the retirees’ proposal said. So they urged Verizon
to change its policy so that it must disclose details of any clawbacks to
shareholders as well as decisions not to pursue recoveries.
Caterpillar, the heavy-equipment maker whose offshore tax practices are under
investigation by federal authorities, will
vote on clawbacks this year.
corporate governance director at
Change to Win Investment Group, said her
group put forward a shareholder proposal on clawbacks for this year’s annual
meeting. “If something goes wrong,” she said, “you want executives to be held
accountable and know what the company is doing about it.”
spokeswoman confirmed that the proposal would be on the proxy this year.
Of course, many
individual investors — those who own shares in mutual funds — can’t speak their
minds through proxy votes. Their funds vote their shares for them and all too
often follow corporate boards’ recommendations to reject shareholder proposals.
If you own shares
in a mutual fund and feel strongly about these issues, write to the fund’s
executives and tell them how you want them to vote your shares. They may not do
as you say, but at least they’ll know where you stand.
A version of this article appears in print on March 26, 2017, on Page
BU1 of the New York edition with the headline: Want Change?
Shareholders Have a Tool.
© 2017 The
New York Times Company