SOCIAL TOPICS (Archive): WORKPLACE

Published, November 1993

       This year has been a roller coaster of highs and lows for shareholder activists. What began as an SEC trend to increasingly restrict the universe of issues shareholders could address on a ballot is ending in an extraordinary expansion of shareholder rights allowing investors to communicate with one another and participate in the management of their companies.

       The following overview of the 1993 proxy season highlights shareholder resolutions that received the most attention, and our voting patterns on behalf of activist clients.

       The most controversial issue on which we voted again this year was the election of directors. Board diversity has become a priority for many shareholders due to increasingly diverse customer and employee bases that companies must serve. Thus, we withheld votes from slates of director nominees that did not include both women and minorities, and sent a follow-up letter to the chairman or CEO of each company indicating how we voted on their board nominations, and why. An encouraging development this season was that 26 companies in our portfolios (approximately 12% of those we follow) increased the diversity of their boards. Only two companies did so last year.

       Resolutions requiring disclosure on affirmative action received our support and unprecedented attention from other investors this year. Although Wal-Mart was initially successful in challenging such a proposal, Judge Kimba Wood overturned the SEC decision and required the company to include the resolution on its ballot. We expect to see many more affirmative action proposals in the future, pending the outcome of our suit against the SEC for allowing Cracker Barrel to omit one. (See Suit Against SEC Seeks to Reassert Shareholder Rights, July 1993 and USTC Suit Against SEC: Victory for Social Investors, March 1994)

       The environment continued to be a major issue for investors concerned about toxic emissions and hazardous waste problems, as well as increasing financial implications of poor environmental performance. Proposals either requested that companies endorse the CERES Principles (previously the Valdez Principles), or report on their environmental policies and programs. Endorsing the principles requires a company to conduct extensive audits of its facilities; commit to waste reduction, reuse and recycling; and complete an annual report. We voted in favor of both types of resolutions.

       Until recently, South Africa’s National Party and the African National Congress had made limited progress in negotiations for the establishment of an interim government, even though a date for democratic elections was set. As a result, we saw some changes in the way shareholders addressed the issue. New resolutions called for an end to further expansion of current South African operations, while a few traditional proposals requested that companies cut ties with the country altogether. We voted in favor of these resolutions in concert with other social investors to maintain pressure on Pretoria throughout the negotiations.

       Executive compensation plans (i.e., stock option awards) continued to appear in large numbers. We voted against many compensation packages again during 1993 because they were highly diluting and/or previous awards were found to be excessive.

       An issue that continues to receive a great deal of shareholder attention, but did not appear in the form of a resolution on our clients’ ballots, is the growing number of Maquiladora operations in Mexico. Again this year, shareholders successfully persuaded companies to report on their Mexican operations as an initial step toward convincing them to adhere to a code of conduct on workplace and environmental issues.