More ESG shareholder proposals this proxy season, but investor support declined.

More ESG shareholder proposals this proxy season, but investor support declined.

Investors Becoming Choosier about ESG Issues

Investor sentiment

With this year’s proxy season coming to a close, shareholder voting trends among Fortune 100 companies have revealed interesting insights into investor sentiment towards environmental, social, and governance (ESG) issues. The analysis conducted by EY’s Center for Board Matters shows that investors are becoming more selective in the ESG proposals they support, despite an overall increase in the number of such proposals. This shift in investor behavior highlights the growing importance of ESG matters in corporate decision-making.

During this proxy season, there were 296 ESG proposals submitted by shareholders, slightly higher than the 289 proposals submitted last year. However, the approval rates for these proposals significantly declined. While 36% of ESG recommendations received approval from a majority of voters in 2022, this year, only 7% reached the same level of support. The proportion of proposals endorsed by at least 30% of voters, a key threshold for measuring investor approval, also dropped.

The anti-ESG movement has been speculated as a possible factor contributing to these voting outcomes. However, EY’s analysts believe it only had a limited impact, with only 2% of anti-ESG proposals receiving majority approval. The report suggests that companies and investors are facing opposing pressures and increased scrutiny from various stakeholders regarding ESG matters. In a politically polarized environment, investors are carefully assessing which causes to champion, considering the potential backlash they may face.

Even climate-focused proposals, which represented around one-third of ESG topics, experienced a decline in support. Despite the ongoing global climate crisis, only 22% of this year’s environment-related proposals were approved, compared to 34% last year. Kris Pederson, the leader of EY’s Center for Board Matters, notes that investors still consider sustainability critical for a company’s long-term survival. However, they now expect clear alignment between ESG targets and a firm’s business strategy. For example, beverage companies should prioritize water protection, demonstrating that they are prioritizing matters directly related to their business.

Investors also seem to be withholding support for climate proposals due to the perception that companies are already making progress towards their stated goals. Overprescriptive proposals faced greater rejection, while those focusing on cutting emissions across a company’s supply chain had a better reception than those mandating specific deadlines for phasing out fossil fuel projects. Shareholders are scrutinizing the intentions of proposal sponsors, ensuring that they genuinely have the best interests of long-term shareholders in mind.

The full report by EY’s Center for Board Matters provides detailed insights into voting patterns for executive pay packages and director reappointments, in addition to ESG proposals. The analysis sheds light on the evolving landscape of investor sentiment and the complex factors influencing shareholder voting decisions.

Larry Summers Disappointed by New Merger Guidelines

Larry Summers

Larry Summers, former Treasury Secretary, expressed his disappointment with the Justice Department and Federal Trade Commission’s proposed merger guidelines. Summers believes these guidelines are overly stringent and part of what he sees as the FTC’s “war on business.” While Summers’ comment provides a glimpse into the ongoing debate surrounding mergers and antitrust regulations, it underscores the differing perspectives and the challenges policymakers face in striking the right balance.

Noteworthy Boardroom Insights and Updates

Google’s A.I. Catch-Up Game

Google’s renowned A.I. team, once the envy of the tech community, is now playing catch-up in the era of generative A.I. This highlights the importance for boards to remain vigilant and avoid complacency, even when they seemingly have a reliable “money-printing machine” like Google’s Ads business. Fortune’s Jeremy Kahn explores this fascinating dynamic in a feature, providing valuable lessons for corporate boards.

Cynthia Jamison, a retired “turnaround CFO” and current board member of several public companies, shares her insights on ESG trends and offers advice for boards concerned about an economic downturn in a recent appearance on Evan Epstein’s Boardroom Governance podcast. Jamison emphasizes the need to balance environmental and social goals, even during market volatility, and provides intelligent guidance for boards navigating uncertain economic conditions.

Merger Guidelines for U.S. Companies

Corporate directors should familiarize themselves with the draft of merger guidelines for U.S. companies recently published by the Federal Trade Commission and Justice Department. These guidelines address important considerations related to mergers and acquisitions, shaping the landscape for business deals and antitrust regulations. Access the full text of the guidelines here.

The Rise and Challenges of Chief Diversity Officers

Chief Diversity Officer

The Wall Street Journal examines the role of chief diversity officers (CDOs) in companies and questions whether the golden era of CDOs is coming to an end. The article delves into the factors that made CDOs more vulnerable to layoffs compared to their counterparts in human resources over the past year. This analysis sheds light on the complexities of diversity and inclusion efforts within organizations.

Activist Investor Targets Luxury Conglomerate

London-based activist investor Bluebell Capital Partners has taken a stake in Kering, a conglomerate that owns luxury fashion brands such as Gucci and Alexander McQueen. Bluebell is reportedly pushing for a merger between Kering and luxury-goods holding company Richemont, which owns Cartier. This development highlights the influence and strategies of activist investors in shaping the corporate landscape.

BlackRock’s Controversial Appointment

BlackRock, the world’s largest asset manager, recently appointed Amin Nasser, CEO of Saudi Aramco, as an independent director. This move drew criticism from New York City Comptroller Brad Lander, who raised concerns about BlackRock’s alignment with the head of the world’s largest oil producer. The appointment sparked a debate around BlackRock’s stance on climate change and its commitment to taking aggressive action in curbing carbon emissions.

Understanding Employee Stress Responses during Corporate Upheavals

During times of corporate upheaval, leaders must be aware of employees’ stress responses. Anxious employees may react differently, either relying on trusted managers, seeking new job opportunities, or even causing harm to the company. Recognizing the “five Fs” of employee stress responses can help leaders navigate challenging situations and ensure a healthy and productive work environment.

SEC Utilizes A.I. for Productivity and Market Impact Assessment

In a recent speech, SEC Chair Gary Gensler revealed the agency’s plans to not only examine the impact of A.I. on markets but also leverage A.I. to enhance the agency’s productivity. This forward-thinking approach emphasizes the importance of embracing technological advancements to drive efficiency in regulatory processes.

The Lincoln Electric Success Story

Lincoln Electric

Fortune’s Geoff Colvin presents an in-depth feature on Lincoln Electric, an Ohio-based welding equipment manufacturer that has not laid off any employees in the past 70 years. The article explores Lincoln’s unique approach to talent management, built on mutual trust and promises between the company and its employees. Lincoln’s unconventional strategy provides lessons for firms seeking resilient workforce strategies, demonstrating the potential benefits during both prosperous and challenging times.

In conclusion, the recent proxy season indicates a shift in investor sentiment towards ESG proposals. Shareholders are becoming more discerning, and companies and investors must navigate the complexities and opposing pressures related to ESG matters. Additionally, noteworthy insights into merger guidelines, the challenges faced by chief diversity officers, and activist investor moves provide valuable perspectives on the evolving corporate landscape. Meanwhile, understanding employee stress responses, the utilization of A.I. by the SEC, and the success story of Lincoln Electric offer lessons for effective management in times of disruption.