ISS Discusses Shareholder Resolutions on Lobbying

Shareholder resolutions filed in the 2022 proxy season reflect continuing investor concern over lobbying activities and whether they are consistent with a company’s public positions and aligned with shareholder interests. However, the passage of only two such resolutions indicates that the majority of shareholders are satisfied with company efforts to address these concerns.

In this series of snapshots, ISS Corporate Solutions examines the key corporate issues raised by this season’s shareholder resolutions. This time, we look at resolutions on lobbying, including activities focused on climate. Voting results are based on filings by companies up to June 13, 2022.

More shareholder resolutions were filed during the 2022 proxy season than the previous year, with 586 environmental and social shareholder proposals submitted at U.S. companies so far, compared to 561 in 2021. Though many have since been withdrawn, many have been or will be voted on. According to data from ISS Corporate Solutions, 569 shareholder resolutions on ESG issues have either been voted on or are pending in annual meetings through November this year.

Some 31 proposals on lobbying were filed during this year’s proxy season, including three focused on climate, 27 of which have been voted on. Of those, just two received majority support, at Netflix and The Travelers Companies, Inc. A proposal at Gilead Sciences received 49.9% support. Overall, average support was at 31.8%. While many shareholders remain concerned about companies’ lobbying activities, both direct and indirect, the failure rate of such proposals indicates that the majority of investors are convinced that additional disclosures made by companies that have long been targeted by such proposals mark a sufficient improvement over past practices.

Climate Lobbying

Climate lobbying proposals are relatively new. They reflect shareholder concerns that the lobbying positions of companies and/or their trade associations do not match the companies’ public positions and/or their alignment with the goals of the Paris Agreement. Most of the resolutions that were filed on this issue were withdrawn after companies agreed to increase disclosures regarding the Paris alignment of their direct and indirect lobbying.

Third-party Reviews

In addition to the standard request for “full disclosure of a company’s direct and indirect lobbying activities and expenditures to assess whether its lobbying is consistent with its expressed goals and in the best interests of shareholders,” three companies faced resolutions requesting a third-party review of their lobbying activities. Those were Eli Lilly, Gilead Sciences and Johnson & Johnson, all part of a U.S. pharmaceutical industry that spends more on lobbying than almost any other sector. Indeed, Eli Lilly received both types of resolutions. The third-party review resolution requests an independent report into whether a company’s lobbying activities, directly and through its trade associations, align with its public policy positions and public statements. These resolutions typically received above average support from shareholders.

Late 2021 Proxy Season Votes

To expand coverage of these issues, the series also examines shareholder resolutions that were voted on between October and December last year, as several large companies hold annual meetings during this period and are often excluded from analyses. There were two votes on lobbying resolutions during this period, at Fox Corporation and Microsoft. These received very similar levels of support from shareholders as the average of those that were voted on during the 2022 season. However, as the Murdoch Family Trust owns two-fifths of the company’s voting shares, excluding these shares would show that a majority of public shareholders supported the resolution at Fox Corporation.

This post comest to us from Institutional Shareholder Services. It is based on the firm’s article, “Shareholder Resolutions in
Review: Lobbying Disclosures,” dated June 21, 2022, and available here. 

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