Saturday, May 29, 2021

Back to Back They Faced Each Other

The biggest corporate news this week is about sustainability.  A Dutch court ordered Shell Oil to reduce its carbon emissions by 45% by 2030; 61% of Chevron shareholders voted to ask the company to substantially reduce its Scope 3 greenhouse gas emissions, while 48% voted in favor of greater lobbying disclosure, and disclosure of the effect of net zero by 2050 on its business and finances, and, of course, at Exxon, not only did an activist win at least 2 board seats over sustainability demands, but shareholders also supported proposals calling for greater lobbying disclosure.  And, earlier this month, shareholders at ConocoPhillips and Phillips 66 voted in favor of proposals to set emissions targets.

Unsurprisingly given the outcomes, BlackRock and Vanguard supported some of the Exxon dissident nominees, and also supported the successful Exxon shareholder proposals.  State Street supported some of the Exxon dissidents as well, though I don’t know if it’s reported its stance on the shareholder proposals.  BlackRock also voted in favor of the successful Chevron proposal.

Given the stunning success of shareholder environmental activism at the oil giants, then, it comes as a disappointment that it appears the deadline has passed for Congress to undo the SEC’s recent amendments to Rule 14a-8.  Senator Sherrod Brown introduced a resolution to revoke the changes, but no further action was taken.  These amendments to 14a-8 make it much harder for shareholders – especially smaller shareholders – to submit proposals, which is an issue because, though proposals are often supported by institutional investors, it’s retail shareholders who have traditionally taken the laboring oar of introducing and promoting them (although, when it comes to social/environmental proposals, a lot of specialty investors like religious organizations and SRI funds also introduce them).

On this, I have to point out that the Big Three – BlackRock, Vanguard, and State Street – were supporters of the new Rule 14a-8 restrictions.  Vanguard did so openly; BlackRock and State Street tried to play it close to the vest, but, as I explained in my draft chapter on ESG investing (see note 49), the Investment Company Institute supported the amendments, and it’s highly unlikely it would have done so without BlackRock and State Street’s buy-in.  In other words, BlackRock and State Street apparently sought to maintain their “sustainability” bona fides without publicly admitting they wanted to neuter shareholder ESG activism.  And it wouldn’t surprise me if the preferences of BlackRock, Vanguard, and State Street had something to do with Congress’s failure to act on Senator Brown’s resolution calling for the 14a-8 amendments’ repeal.

Point being, despite the headlines about the Big Three’s newfound support for sustainability, their commitments are fragile, and more than anything else, they seem to want to avoid being forced to take public positions on these matters in the first place.

https://lawprofessors.typepad.com/business_law/2021/05/back-to-back-they-faced-each-other.html

Ann Lipton | Permalink

Comments

Great post, thank you. It’s disappointing the SEC amendments weren’t overturned using the CRA while it was available. Maybe the SEC itself can work on rolling them back, although I guess that’s a more cumbersome route than using the CRA.

Have a good Memorial Day!

-hr

Posted by: hardreaders | May 29, 2021 10:43:14 PM

Glad you liked it - I hope you as well have a good Memorial Day!

Posted by: Ann Lipton | May 30, 2021 7:06:09 PM

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