Research & Engagement in Action

By Marcela Pinilla and Timothy Smith
From the Summer 2011 Edition of Values


As company annual meetings wind down, another phase of the shareholder engagement cycle is completed and we can take stock of our actions and impacts on corporate ESG performance this year. Numerous letters, phone calls, and emails later, Walden has, to date, led 18 shareholder proposals. Ten of these have been withdrawn after successful negotiations. We also co-filed six resolutions with other investors and assisted clients in filing resolutions using their shares with 11 companies on many ESG topics of concern. (See Summary of Walden’s 2011 Shareholder Resolutions.)


Recent Resolution Highlights

Constructive dialogue led to the withdrawal of our proposal to St. Jude Medical as the company produced a first-time report outlining its new “Sustainability Framework.” In a surprising reversal from silence into action by Layne Christensen, we were pleased to learn that an inaugural report was released in advance of the annual meeting. Additionally, management recommended a vote in favor of Walden’s proposal, which passed overwhelmingly. Both company reports are informed by the Global Reporting Initiative guidelines. High votes were received in support of the sustainability reporting proposals that went to a vote at C.R. Bard, Emerson Electric, and Gentex, ranging from 28 to 38 percent in favor, sending a strong message to management for greater ESG transparency.

For investors considering companies with extensive agricultural supply chains, information about exposure to and management of water risk is essential to the evaluative process. An inadequate response from Sysco, the largest U.S.-based food distributor, resulted in the filing of a new shareholder proposal asking the company to evaluate its exposure to supply chain water scarcity.

Continuing our legacy work on container recycling and recovery practices among beverage manufacturers, Walden co-filed resolutions with General Mills and Procter & Gamble, asking them to study the feasibility of an extended producer responsibility (EPR) policy. Already adopted in several European countries, EPR is a corporate and public policy that shifts accountability for collection and recycling from taxpayers and governments to producers. EPR would augment already ambitious company recycling goals and continue to raise the bar in the United States for life-cycle assessments of product packaging.


Voices from the Floor

This year Walden conceptualized and led a new strategy of introducing “floor resolutions,” a novel way to challenge companies to evaluate their role on the Board of the U.S. Chamber of Commerce (the Chamber) in light of conflicts between their own policies and positions advocated by that trade organization. Presented by approximately one dozen investors, floor resolutions are not placed in company proxy statements but are moved and debated at annual shareholder meetings. These resolutions are unfamiliar territory for companies; only a handful has experienced them in the past.

A resolution from the floor is filed under company bylaws, as opposed to the Securities & Exchange Commission rules that apply to proxy resolutions, which allows for more direct and specific requests of companies. While the resolution itself is not included in the written proxy statement, a company must include notification that an investor(s) plans to present a floor resolution.


The results of this new initiative are encouraging. Even though shareholder support was negligible because only meeting attendees can vote, in virtually every case, floor resolutions prompted companies to engage in dialogue with the filers. Pfizer agreed to put its chief environment officer on the Chamber’s Environment Committee. Others said they would try to play a constructive role on the Chamber Board. Additional companies receiving the floor resolution included 3M, ConocoPhillips, CVS, Eastman Kodak, and JPMorgan Chase.


Pressing On: Company Dialogues

As we continue to engage companies regarding the diversity of their management and boards, some are showing signs of progress. Watts Water Technologies recently hired a female director, after having amended its director nomination policy last year to address explicitly gender and racial diversity in the director selection process. CommVault hired a woman VP of human resources and Dime Community Bancshares added a woman to its board of directors. Additionally, the bank’s board level corporate governance committee will be considering amending its nominating guidelines to include the explicit consideration of gender and racial diversity.

ConocoPhillips announced its withdrawal and sale of oil interests in the controversial Block 39 in the remote northern Peruvian Amazon. Walden is part of a multi-year investor and stakeholder dialogue on indigenous peoples’ rights that addressed the risks of forced displacement and unintentional introduction of deadly diseases to populations living in voluntary isolation. ConocoPhillips’ decision is a positive example of forgoing exploration and drilling in part due to concerns for those living in voluntary isolation. Unfortunately, the future of exploration and drilling in Block 39 remains uncertain.