Annual Summary of Shareholder Activity 2020-2021
Every year as we prepare our report for the corporation and the congregation, the Office of Corporate Social Responsibility has an opportunity to demonstrate the spiritual bond that exists between the call to live the Gospel and the call to practice justice and solidarity. Implementing this bond is a marvelously challenging job amid ongoing Zoom meetings, proxy season, proxy memos, corporate annual meetings, and some final confrontations with the Securities and Exchange Commission (SEC) because our resolutions may have been anything but “ordinary business.” Our shareholder advocacy work with corporations is also more than “ordinary business,” but we forge ahead, winning some, losing some, and continuing to press on. We’re dealing with a national and global calamity/pandemic, a climate crisis, political ill will, severe human-rights abuses, and the list goes on. We’re all vulnerable, but that truth doesn’t stop us from directing our energies to all aspects of our ministry, whether it’s shareholder advocacy, impact investing/community development, or outright campaigns against a variety of egregious actions.
We’ve all had painful and hopeful experiences during the past 15 months while we mourn the loss of our brothers and sisters and rejoice in the hope of vaccinations for all. We see all around us the need for solidarity, racial justice, environmental justice, and an end to white supremacy and racism in every aspect of our lives. As Franciscans and as members of the Interfaith Center on Corporate Responsibility (ICCR), Investor Environmental Health Network, and other coalitions, we know that structural racism, abuse of power, and economic disempowerment are forces that undermine our efforts to move through multiple changes within the corporate structures as well as our own. We don’t and won’t hesitate to call out those corporations who fail to recognize that the time has come to be transparent about their salient issues. It is time to take deep steps to incorporate Diversity, Equity, and Inclusion (DEI) in every aspect of company business life, and it is the time to begin the path toward a Just Transition. It is time to revisit and reflect on this excerpt from Amanda Gorman’s 2021 inaugural poem, “The Hill We Climb”:
And so we lift our gaze, not to what stands between us, but what stands before us.
We close the divide because we know to put our future first, we must first put
our differences aside.
We lay down our arms so we can reach out our arms to one another.
We seek harm to none and harmony for all.
Let the globe, if nothing else, say this is true.
That even as we grieved, we grew.
That even as we hurt, we hoped.
That even as we tired, we tried.
And as we “tried,” we have witnessed and participated in an “explosion” of actions that call on corporations to respond to the many crises of our time. We have made the call collaboratively with our ICCR partners, our Investor Environmental Health Network (IEHN) partners, Investors for Opioid and Pharmaceutical Accountability (IOPA), Ceres, the World Benchmarking Alliance, and a host of other social and environmental justice organizations. Our attached report gives a summary overview of the many actions that have addressed the numerous negative impacts caused by corporations. Not all actions resulted in the intended progress, but corporations are keenly aware that they must seek equitable solutions in all areas of their operations. No businesses have been excluded, and the path forward is one of collaboration, communication, and action.
One of the hopeful areas is that several steps have been and are being taken to make sure that corporations accept their responsibility to decarbonize our global economy. This goal will only be reached if climate justice includes solutions for workers and communities, also known as a “Just Transition.” A just transition will help bring about the right balance among economic, environmental, and social components. According to the World Benchmarking Alliance, “Our planet faces enormous economic, social and environmental challenges and despite important progress, no country is on track to achieve all SDGs [Sustainable Development Goals] by 2030. Awareness is growing that the SDGs, the Paris Agreement, and sustainable development beyond 2030 can only be achieved through transformational change and that without these transformations we will never achieve truly socially inclusive and environmentally sustainable economies and societies.” As we can see, this goal is highly complex but possible, and these transformations will require changes in current institutions, practices, technologies, policies, lifestyles, and thinking, even for the Sisters of St. Francis of Philadelphia.
Although our shareholder work is generally focused on companies in our investment portfolio, the issues we address frequently extend to society in general. Many of these issues have broad implications because our work often extends to matters of public policy with our state and federal governments. The CSR office has reached out to our federal, state, and local representatives through emails, letters, phone calls, and virtual meetings to urge them toward action benefitting society. Presently, Sr. Nora Nash is actively involved in Chester/Delco Environmental Justice Movement biweekly planning meetings. The objective is to pursue a variety of actions to close the Chester Covanta incinerator. We are also in dialogue with the Chester Water Authority and Essential Utilities (formerly Aqua America), which are local actions. Our fear is that Essential Utilities is undertaking a hostile takeover of the Chester Water Authority.
One important purpose of our annual corporate report is to highlight some of the over 100 corporate engagements that took place over the past 12 months. The coronavirus didn’t interfere with these engagements; in fact, it heightened the need for engagement across most lines of business and challenged corporations to address the very core of their existence. In our corporate engagements we are committed to making the moral and business case for corporate responsibility as seen through our mission statement and Environmental, Social, and Governance (ESG) risks.
HUMAN RIGHTS AND THE RIGHTS OF COMMUNITIES
In the spirit of Pope Francis and his many recent writings on human rights and human dignity, we engage many companies in which we have shares to demonstrate strong risk oversight and sound corporate governance by seriously managing their human rights risks and addressing their human rights impacts. The UN’s Guiding Principles on Business and Human Rights calls on companies to respect human rights within their operations and throughout their value chains. ICCR’s Investor Alliance for Human Rights (IAHS) has provided strong guidance for work with companies as we assess their current salient risks and evaluate their human rights impacts. We were participants in a group of 208 global investors organized by IAHS that sent a statement to 106 companies that have scored zero on all human rights due-diligence indicators in the 2020 Corporate Human Rights Benchmark report. It is important that corporate management and board members provide leadership that addresses significant operational, financial, and reputational risks associated with negative human-rights impacts across all businesses. Many companies proudly display their human rights policies while their focus on implementing those policies is often lacking due diligence, assessments, monitoring, and measurements.
Watch: “Human Rights and Business” (A good overview)
Amazon, Chevron, Core Civic (private prison), Delta Airlines, GEO Group (private prison), Hershey, Lockheed Martin, Northrop Grumman, Sturm Ruger, J. P. Morgan Chase, Wells Fargo, Dollar Tree
We continue to engage the above-named companies on the ongoing development or salient risk related to human rights policies. Resolutions were again filed with Amazon, Chevron, Lockheed Martin, and Northrop Grumman. All resolutions were challenged at the SEC, and unfortunately, even with our second challenge, Chevron’s resolution didn’t go through.
Northrop Grumman – As primary filers and in collaboration with other ICCR members, we’ve led many dialogues (2013-2020) with the company. We did get them to adopt a human rights policy, but the company refuses to disclose its salient risks and complete an impact assessment. Because of the good vote (24%) in 2019, we refiled our resolution on 12/2/20 and the company challenged it at the SEC. We counter-challenged the SEC ruling and our resolution received another good vote (22.35%). Northrop Grumman has a long history of partnering with Israeli military forces and corporations, and its weapons have been used in deadly attacks against Palestinian civilians in Gaza in the past. As I write this report, we are all saddened because of the Israeli/Palestinian conflict and the human rights abuses right before our eyes.
Lockheed Martin – Our dialogues with the company have continued for several years on different topics. We wrote a letter to the company on 10/13/20 on many issues of concern and had a conference call with the company on 11/6/20. We referenced multiple lawsuits from a Florida facility for toxic pollutant contamination that has resulted in brain lesions, multiple sclerosis, cancer, and birth defects and has litigation linked to a uranium facility. We pointed to the Treaty on the Prohibition of Nuclear Weapons, which enters into force in 2021 and may require Lockheed Martin to demonstrate that the company is not conducting prohibited activities in jurisdictions that ratified the treaty. We filed our resolution and received a very good vote (32.2%) on the lack of human rights disclosures, especially since the company is connected to $40 billion in contracts related to nuclear weapons. A quotation from Sr. Nora’s presentation at the Lockheed Martin annual general meeting in May was highly referenced: “As Catholic religious congregations, in a society struggling with excessive violence, we assert that there is a clear moral responsibility for Lockheed Martin and its investors to acknowledge the direct role that the defense industry plays in perpetuating human rights harms in war and conflict, and that all actors must contribute to appropriate remedies.”
Amazon – We cofiled a resolution that requested that the board review customer due diligence to determine whether customers’ use of its surveillance and computer vision products or cloud-based services contributes to human rights violations. Amazon’s surveillance and cloud products may exacerbate systemic inequities, compromise public oversight, and contribute to mass surveillance. Amazon Web Services (AWS), the top cloud provider, with 2019 revenue of $35 billion, serves all U.S. intelligence agencies and serves international governments.
Our resolution was challenged at the SEC on the grounds that it “substantially duplicated” a previous proposal; however, Investor Advocates for Social Justice won the challenge and the vote was 35.3%. While Amazon typically has limited engagement with shareholders, ICCR members hold monthly “big tent” calls among themselves. These calls serve as strategy sessions in which members can plan next steps, talk about which nonprofit or government regulatory bodies could serve as allies, and update each other on progress with the company. Amazon had more than 10 resolutions on the ballot for the annual meeting.
CHEVRON(Environmental Justice /Racial Equity Analysis in particular) – For over 10 years now, the Sisters of St. Francis have been the lead filer on resolutions focused on human rights and the company’s human rights policy. We have continuously challenged the company to make the policy operational. It has been evident that the company struggles to effectively address the many salient issues related to its operations in the development, storage, and transportation of oil and gas. We have no data to substantiate that Chevron is using the core international human rights framework to assess, identify, prevent, mitigate, and remedy adverse human rights impacts.
Our dialogues and resolution were directed at Chevron’s emissions that contribute to the climate crisis, which disparately impacts people of color, reinforcing and even furthering systemic racism. Chevron’s operations, discharges, and leaks also harm human health. These harms fall heavily on environmental justice communities, which are communities disproportionately impacted by multiple sources of pollution and social vulnerabilities and oftentimes consist of people of color or low income. For example, 80% of residents living adjacent to Chevron’s Richmond, California, refinery are people of color and they experience higher rates of cardiovascular disease, cancer, and asthma. Long-term exposure to air pollution causes more severe Covid-19 symptoms and higher mortality rates. Chevron’s Richmond facility is the city’s largest polluter, and the company has spent millions of dollars to influence city politics and funding. Meanwhile, it did not pay any taxes in 2018. Chevron claims that these facts are not true, and the company refuses to align, access, and examine these serious issues. The company challenged our resolution at the SEC. We re-challenged, but the resolution didn’t pass the SEC.
Core Civic (Private Prison Company) – Our meetings with the chief ethics officer and others from human rights and the environmental, social, and governance (ESG) division were successful. We commended Core Civic for including the HR risk assessment and making it accessible to the public on its website. At the same time we urged the company to begin to show how they are addressing identified risks using specified metrics, specifically regarding “Recommendations: Management of Salient Human Rights Issues,” which are listed, and “Assessing Impact and Tracking Performance.” We also requested that there be a timeline for full implementation of human rights. Covid-19 was a major part of the dialogue because of the outbreak of Covid-19 in several of Core Civic’s private prisons and detention centers.
Wells Fargo – Since our major work with the bank took place over the period 10/2/16 to 2/1/19, we have noted some progress and expect that the actions of the new CEO, Charles W. Scharf, will bring about many needed changes. As per our written report of 1/11/21, we have moved to the work of the Human Rights Impact Assessment (HRIA). March was to be the month when stakeholders were interviewed, but as of 6/21/21, we have not made progress in this area. We have met with the law firm to share our grievances about the progress and process. The company appears to be limiting the standard HRIA process, but we’re still waiting for affected stakeholders to be interviewed with impunity. The company received a very poor score on diversity, equity, inclusion from Bank Track.
CLIMATE CHANGE/WORKING FOR CLIMATE SOLUTIONS
Chevron, Coca Cola, Conoco Philips, Southern Company, Amazon, all banks, and many other companies
In Laudato Sì, Pope Francis has his finger on the essence of what caused the pandemic, and it is profoundly scary (#44, 45). The urgency and scale of the climate crisis is looming like never before as we continue to urge companies to reduce their carbon footprint and methane emission and to report disclosures according to the Task Force on Climate Related Financial Disclosures (TCFD) and the Carbon Disclosure Project.
Coca-Cola – The big focus at the moment is Coca-Cola’s World Without Waste initiative to reduce plastic use and increase the recycling of plastic packaging. The company is evaluating setting a specific plastic-reduction goal, but it is not committed to doing so because it is focusing on its World Without Waste commitments: Make 100% of packaging recyclable by 2025, incorporate 50% recycled content across all packaging by 2030, and recover the equivalent of 100% of Coca-Cola’s packaging for recycling by 2030. The company has not researched, or was not prepared to share, a specific tonnage of virgin polyethylene terephthalate (PET) usage that would be reduced through achieving its recycled polyethylene terephthalate (rPET) goal.
The company highlighted recent updates to its Dasani bottled-water brand to demonstrate how using less plastic is part of the company’s considerations for each of its brands. In rolling out updates to Dasani, the company tested using aluminum cans and bottles, increasing recycled content, light weighting, and utilizing a water dispenser with which consumers can bring their own container. The company estimates the chosen water-dispenser design, which will be rolled out in places such as corporate campuses, could avoid the use of one billion plastic bottles over five years.
Duke Energy – We cofiled our resolution with Duke Energy and agreed to withdraw it if the company did a report on “Trade Associations and Climate Review.” The company released the report in March. The report gives evidence that they took the action seriously and seem incentivized enough to align company policy with the Paris Agreement goals. The report identifies some key policy attributes that we believe will allow them to achieve a net-zero goal while maintaining affordable and reliable energy for their customers. We appreciate the report and hope to continue to engage the company as it actualizes the policies.
Wells Fargo Climate Solutions – The bank has taken several steps to address climate change but does not have a robust public policy. The company supports Paris Agreement climate goals but is just starting to catch up with the sector on climate action—for example, no science-based targets and no commitment to RE100 (renewable energy 100%)—and is just considering the task force on climate-related financial disclosure report and the plan to measure Scope 3 financed emissions. It doesn’t make direct or indirect political contributions or support organizations that write model legislation such as the American Legislative Exchange Council (ALEC). The company doesn’t directly lobby on any climate-related bills or issues, although they are the second largest financier of the fossil fuel industry. They are not participating in climate-change collaborations that many of their peers are in, for example the Climate Solutions Working Group within the U.S. Chamber of Commerce and Ceres. On 3/9/21, the company announced setting a goal of net zero greenhouse gas emissions—including financed emissions—by 2050. After our dialogue, Wells Fargo joined several of its peers in delivering an important market signal that urgent action on climate is essential for both our environment and our economy.
J.P. Morgan Chase – We cofiled a resolution with JPMC on the climate risk of financing fossil fuels. After several weeks of communication, we agreed to withdraw the resolution because of a written commitment by JPMC to publicly state its support for the Paris Agreement climate goals, measure and track its clients’ greenhouse gas emissions, establish targets, and begin reporting in 2021, plus additional commitments. Our bank group met with the company another time to raise questions about the financing of nuclear weapons and whether they are considering adding this financing to their prohibited activities or sensitive sectors now that the Treaty on the Prohibition of Nuclear Weapons has entered into force. JPMC is identified as a top 10 financier of nuclear weapons in the “Don’t Bank on the Bomb” report.
CONTRACT SUPPLIERS/VENDOR STANDARDS/ETHICAL RECRUITMENT/TRAFFICKING/IMMIGRATION
GEO, Core Civic, Delta Airlines, Amazon, Coca-Cola, American Airlines, Hershey, Northrop Grumman, Walmart, Cotton Industry, Yum Brands
During this shareholder advocacy season, we have pressed numerous companies on immigration, worker rights, trafficking, ethical recruitment, and bonded labor—all very much still evident across the globe. For this proxy season we filed or cofiled four resolutions referencing immigration, including immigrant detention (Core Civic), GEO, biometric data (Northrop Grumman), and due diligence (Amazon). Immigrants and migrant workers are often exploited. Exploitation includes discrimination, retaliation, debt bondage, and confiscation of wages through illegal reductions. Many times these individuals are restricted in accessing personal documents and are limited in freedom of movement, which often leads to forced labor and trafficking. All of the above companies are encouraged to have strict guidelines in place for the ethical recruitment of workers.
Hershey – We spoke to three Hershey executives in sustainability roles about the company’s initial responsible-recruitment efforts. While the company recently adopted a Responsible Recruitment Policy, it only applies to Hershey’s direct labor contractors, not to its suppliers’ labor recruiting practices. This deficiency makes the policy limited in scope. Hershey has a vision to expand the scope of the policy once they begin effectively implementing standards for direct labor suppliers, but at this point, the policy is not addressing the most severe risks of unethical recruitment practices deeper in the supply chain. Recommendations to participate in multi-stakeholder initiatives, updates on palm oil sourcing practices, the need for more robust grievance mechanisms, and much more were shared with the company.
The Cotton Industry – Since August 2020 and throughout the year, we have been actively involved with letter writing to many companies about forced labor in the supply chain, especially connected with the Coalition to End Forced Labor in the Uyghur Region of China. Through forced and prison labor, family separation, and forced sterilization, among other serious human rights violations, the government of China continues to press ahead with its systematic program to eliminate the Uyghur community’s identity and way of life. Cotton is one of the many products of the region, and this urgent cause is vital to all companies in bringing about change for the Uyghur people. Several nations have filed genocide resolutions against the Chinese government. A new report from the Uyghur Human Rights Project documents the camp system and the individuals impacted.
CHEMICAL FOOTPRINT PROJECT, PRODUCT SAFETY, PLASTICS
Hasbro, Dollar Tree, Dollar General, Lowe’s, Walmart, Target
In this area, our main initiative right now is to ask companies to check all aspects of product safety, from plastics to chemicals, with a focus on the Chemical Footprint Project (CFP).
You might be a little shocked when you visit the Mind the Store Campaign website, but I think a trip is worth it. You’ll see a retailers’ report card and note the scores of companies that need to improve product safety.
Hasbro – Our recent dialogue was very productive in light of the CFP. The company continued its commitment to being a signatory and to have completed the CFP for the first time. The company is currently focusing on the disclosure and transparency of chemical-management policies and practices. As a toy company, Hasbro keeps track of a bill of substances with suppliers. Chemical management is part of their vendor scorecard and evaluation process. They are the first company that we are aware of that has hired a “chief purpose officer,” and she’s focusing on making sure that their employees find purpose in their work.
Dollar Tree – Recently we had a dialogue with the company on issues related to increased violence around dollar-store neighborhoods. Dollar Tree has begun to collect data in some pilot communities, but much of the data appear anecdotal. The company disagreed with the ProPublica assertion that dollar stores are a magnet for crime; Dollar Tree is proud to serve poor communities. A dialogue on product safety is planned for later in the summer. The company did participate in the CFP and received a low score, but they are willing to participate again this year. The company released a sustainability report but included the same 17 chemicals that were listed three years ago.
Lowe’s – Lowe’s continues to be very active in the Green Chemistry Leadership Council (GC3) and is part of GC3’s Supply Chain Working Group, which is developing a framework for sharing chemical information between suppliers and businesses/brands.
Lowe’s 2021 priorities are to increase ingredient transparency, remove forever chemicals (PFAS) from products, not sell fabric/textile cleaning products containing PFAS, and continue to identify safer alternatives for PFAS. The company is working with a third party to pull data from scientific studies to try to quantify risks from chemicals of high concern. Lowe’s hopes this effort will help companies be more proactive in removing and avoiding harmful chemicals. We also discussed pesticides and ways that the company is engaging landscaping providers to reduce/eliminate the use of neonics and other harmful pesticide products.
GUN SAFETY and FINANCING NUCLEAR WEAPONS
MasterCard – It appears that MasterCard may be financing ghost guns. Ghost guns are produced by an unlicensed person, contain no serial number, and are unregulated by the ATF. Ghost guns are the fastest-growing gun safety issue. We are concerned that facilitating the payment of ghost guns for people who might be federally prohibited from possessing firearms presents legal and reputational risks to MasterCard and dangerous public health risks during what is already an acutely vulnerable time for our nation. The company maintains that the question of ghost guns is a legislative issue and that they rely on the financial institutions to manage the risk. They agreed to follow up and, where possible, to address the gun issue.
Sturm Ruger – We officially withdrew our resolution on Human Rights Assessment in order to get an opportunity to have dialogue with the company. We were asked to sign a confidentiality agreement so that a core group of two or three ICCR members might be able to have a dialogue. As a result of our withdrawal of our human rights proposal, the company met privately with two of our investors; that information is still confidential. Hopefully there will be some progress.
Visa – The company reflected the thinking of the financial institutions since they are Visa’s real clients. The company is firm on the stance that gun safety is a legislative issue but that Visa will take a consistent, principled approach to address the issue whenever possible. They pointed out that because they are a global company, they have no direct relationship with merchants. They indicated that the recent horrible mass shootings are challenging them to review their policies. Visa representatives appreciated many questions, answered what they could, and will take some questions for further advisement.
Citi – Citi ranks in the top 10 financial institutions financing nuclear weapons, holding 4% of overall investments. Out of all financial institutions, Citi issues the most loans to nuclear weapons companies and holds the top two biggest individual loans to Boeing and Honeywell. From 2018 to 2019, Citi increased investments in the nuclear weapons industry by 3% ($528 million). Our dialogues with Citi focused on human rights policies, risk-management strategies, and the importance of elevating the seriousness of financing weapons companies and their impact on global unrest. On other issues, Citi received a very poor DEI score from Bank Track. Citigroup’s new CEO announced that the company will offset its greenhouse gas emissions to cover its individual footprint by 2030 and its lending portfolio by 2050.
ICCR members have asked corporations to detail their policies and procedures in responding to the global Covid-19 pandemic. In the health-care field, this response entails the use of government financial support for the development and manufacture of vaccines and therapeutics as well as safety protocols and supply-chain coordination.
AmerisourceBergen – On 1/20/21, we wrote the company a letter asking them to take two specific actions: 1) to undertake a corporation-wide review of AmerisourceBergen’s compensation structures to ensure they do not conflict with the company’s Covid-19 occupational health and safety protocols, and 2) to have the Audit Committee oversee an internal audit of the implementation and effectiveness of the occupational health and safety controls compared to OSHA Covid-19 control-and-prevention guidelines for retail workers and employers and/or any company-developed standards that go beyond OSHA Covid-19 guidelines. The company provided a brief written response detailing policies they have implemented since the beginning of the pandemic, but they have thus far resisted requests to dialogue.
Johnson & Johnson – Oxfam filed a shareholder resolution asking their board of directors to report to shareholders on whether and how JNJ subsidiary Janssen’s receipt of government financial support for the development and manufacture of vaccines and therapeutics for Covid-19 is being, or will be, taken into account when engaging in conduct that affects access to such products, such as setting prices. Although the company has stated it will distribute a vaccine on a “nonprofit” basis, it has not defined what “nonprofit” means.
Merck – A resolution was filed asking their board of directors to report to shareholders on whether and how the receipt by Merck of public financial support for the development and manufacture of a vaccine and therapeutics for Covid-19 is being, or will be, taken into account when making decisions that affect access to such products, such as setting prices. We cofiled this resolution. Merck abandoned its Covid-19 vaccine program in January 2021 after trials showed poor efficacy. The proposal was withdrawn. Merck said it would focus Covid-19 research and manufacturing efforts on two investigational medicines for the treatment of symptoms of Covid-19. The lead filer has reached out to the company to request a dialogue on these treatment products.
Pfizer – Benefiting from public funding in developing Covid-19 products creates pressure on drug makers to support widespread access in order to achieve public goals. The U.S. federal government supported the basic scientific research that underpins Pfizer’s Covid-19 vaccine and committed in advance to buy nearly $2 billion of that vaccine. The German government also provided crucial financial support to Pfizer’s vaccine partner BioNTech. The resolution asks Pfizer to report on how that financing affected their plans for equitable access to the vaccine. This proposal received 28.28% of the vote.
Much of the governance work with pharmaceutical manufacturers and distributors is managed by Investors for Opioid and Pharmaceutical Accountability (IOPA). As members we engage with these companies to encourage them to tie executive pay and incentive programs to sustainable practices, responsible marketing, equitable access, and affordable medicines.
Abbvie – ICCR shareholders held a dialogue on 9/20/20, seeking to have the company publish a report assessing the feasibility of incorporating public concern over high drug prices into the senior executive compensation arrangements described in AbbVie’s annual proxy materials. In response to our concerns, AbbVie changed the performance-shares program’s measurement period for earnings per share from three one-year periods to a single three-year period. This change is an improvement, but it does not effectively address the issue of short-term incentives driving executive pay.
AmerisourceBergen – The Sisters of St. Francis filed a resolution asking the company to take the steps necessary to establish that the Compensation Committee may decline to pay in full an award to a senior executive under any annual cash-incentive program that is based on a performance measurement period that is one year or shorter for a period following the award. Currently, their incentive program encourages executives to take risks for short-term gain to the detriment of long-term sustainable growth. AmerisourceBergen agreed to change its Compensation Committee Charter to allow for the “exercise of discretion to reduce any compensation award.” In acknowledgement of this action, we withdrew our proposal.
Bristol-Myers Squibb – We filed a shareholder resolution requesting that the board of directors adopt a policy to require that the chair of the board of directors, whenever possible, be an independent member of the board. Shareholders supported this resolution last year with a 44.6% positive vote. This proposal, along with others filed by members of the IOPA, was presented during calls to Institutional Shareholder Services, Glass Lewis, and several large asset managers. As primary filers of this proposal, the Sisters of St. Francis of Philadelphia submitted an exempt solicitation in support of the proposal, which garnered 44% of the vote.
Johnson & Johnson – The Sisters of St. Francis of Philadelphia submitted a proposal requesting that JNJ defer a certain portion of senior executives’ annual incentive pay for a specified time period, both to be determined by the Compensation & Benefits Committee, to permit an informed review of whether a bonus award was warranted in light of subsequent events and to facilitate any adjustments resulting from use of the company’s recoupment policy from the deferred portion of that award. This approach is more proactive than a claw-back policy. Unfortunately, the SEC determined that our proposal constituted “ordinary business” and omitted it.
Pfizer – The Investors for Opioid and Pharmaceutical Accountability (IOPA) intended for members to file shareholder resolutions at several pharmaceutical companies on having an independent board chair. However, Pfizer was scheduled to receive several proposals on issues that were deemed more currently pressing. As lead filers, the Sisters of St. Francis agreed to refrain from filing this year and, instead, to pursue a dialogue. We are requesting that the board of directors adopt a policy requiring that the chair of the board of directors be an independent member of the board. This is a long-standing issue with this company, and dialogues are difficult in regard to making progress.
Our tobacco work encompasses the companies that manufacture the products, the retail pharmacies that sell them, and media companies that allow tobacco depictions in their entertainment content accessible to children. The reason for engaging with media companies is a surgeon general’s report that determined a causal relationship between tobacco depictions in movies and on television and the initiation of smoking by youth.
Altria Group – The Sisters of St. Francis of Philadelphia lead this action, filing a proposal requesting the company to report on its efforts to discourage tobacco use among young people. At the company’s request, we met with them on 1/13/21 and 3/10/21. Altria has many initiatives in place to keep cigarettes and other nicotine products out of the hands of those underage. The resolution, however, includes a request to report on the marketing of these products to people of color, specifically the marketing of menthol products to African Americans. Not only does Altria produce menthol cigarettes that are extremely popular among youth and people of color, but also their new nicotine pouches come in two varieties of nicotine. The Biden Administration is proposing legislation to ban menthol flavors of cigarettes, but the ban does not include e-cigarettes. This proposal received 36.1% of the vote.
Disney – Disney has long been the leader among media companies regarding limiting tobacco depictions in their movies. However, their acquisition of Fox’s movie division, with their library of movies, has raised concerns about their policies going forward. Our shareholder group sent a letter to Disney’s CEO urging immediate changes in company policy and operations in order to help protect the health and lives of millions of children and teens exposed to tobacco imagery in the company’s movies and TV shows. Specifically, we ask that they end tobacco depictions in new media products in programs attractive to youth, end tobacco brand displays or mention of tobacco brand names, and support development of uniform parental-control interfaces and standards across platforms. A dialogue followed on 8/28/20, with the company reporting progress in limiting youth exposure to tobacco images.
Rite-Aid – Rite-Aid sells tobacco products in their pharmacies, a practice that is antithetical to their mission to improve the health and wellness of their customers. The company has been hesitant to meet with us in the past and, when we’ve had discussions, was stubborn in defending their involvement with tobacco. Recently a new management team has changed their path, rebranding with a greater focus on health and committing to engaging with stakeholders. A May 18, 2021, dialogue revealed that Rite-Aid, while not eliminating tobacco, will deemphasize the product, offering fewer choices. They see themselves eventually purging tobacco altogether.
Walgreens Boots Alliance – Although shareholder proposals focusing on tobacco have been unsuccessful in passing the SEC in the past, we decided that filing on the company’s continued sale of cigarettes during a primarily respiratory pandemic was worth trying. The company must have recognized the poor optics of challenging the filing, as they did not contact the SEC. The proposal garnered 13.16% of the vote. As a follow-up, our group has written a letter to the company’s new CEO, who began running the company in April 2021. We are asking for her to consider taking the company in a more responsible direction. We reached out, and the company has agreed to have another conversation in late June 2021.
FOOD JUSTICE, RACIAL EQUITY, AND PAID SICK LEAVE
The food system in this country is broken. Urban food deserts, massive waste, antibiotics in meat, exploitative labor practices, and generally unsustainable methods have been the hallmarks of the food industry.
Aramark – Our 1/27/21 dialogue was a follow-up to the previous year’s conversation. Aramark has been accused of participating in slave labor, though they insist labor is voluntary. State laws vary widely from hours worked to compensation, and this variation may be the cause of much of the problem. Also, there are many lawsuits regarding unsanitary conditions and worker safety. Aramark has contracts with more than 500 state and county prisons, providing food and commissary services. They have compiled statistics suggesting their inmate participation on work and job training reduces recidivism. They also tout their commitment to diversity, stating “36% of Aramark’s Board of Directors and nearly 80% of our total workforce is diverse.”
Dine Brands – We joined the action with Dine Brands by cofiling a resolution on food waste with Mercy Investment Services. In addition to stressing the loss of food, the focus of the filing was on the environmental and social impacts of waste. Between 30-40% of all food produced in the U.S. is wasted, generating devastating social and environmental consequences. Decomposing food in landfills generates methane emissions, exacerbating climate change. Wasted food production is estimated to consume 21% of all freshwater, 19% of all fertilizer, and 18% of cropland. After a 12/20/20 dialogue, the filers agreed to withdraw the resolution in exchange for continued conversations and a commitment by Dine Brands to expand its work on ESG issues.
Kroger – Our shareholder group presented questions on the safety of the company’s and its suppliers’ operations relating to the measures they have enacted in response to the Covid-19 pandemic. Kroger Health has agreements in place with a number of businesses based on their specific need or request for services to help manage the Covid-19 outbreak. Kroger expects all suppliers to meet all worker health and safety standards as outlined in their Vendor Code of Conduct and federal, state, and local regulations or ordinances. They worked with their many meat-production facilities to assure that safety measures were put in place related to employee attendance, Covid-19 testing, spacing on the production line, and other steps to improve physical distancing. Kroger offered Kroger Health’s services and expertise regarding health monitoring and testing and the proper use of PPE and disinfection where helpful.
McDonald’s – We sent a letter to the company on 11/19/20 asserting that the current public health crisis has demonstrated how racial inequities created and perpetuated by the food, health, and financial systems, structures, and policies have exacerbated the adverse economic and health impacts on Black, Latinx, and Indigenous communities in the U.S. In short, the crisis has highlighted the role that structural racism has played in fueling these disparities. Specifically, we asked that they review their product development, marketing strategies, and lobbying expenditures. This topic will be included in the dialogue in June or July.
Additionally, the Sisters of St. Francis of Philadelphia filed a shareholder resolution asking the board of directors to analyze and report on the feasibility of extending the paid-sick-leave (PSL) policy adopted in response to Covid-19 and made effective on March 3, 2020, as a standard employee benefit not limited to Covid-19 and asking the company to create incentives for franchisees to adopt such a policy. Studies show that PSL mandates adopted in the U.S. since 2007 have reduced the rate at which employees report to work ill in low-wage industries where employers haven’t tended to provide PSL and have lowered disease and overall absence rates. The company challenged the filing and had it omitted from the proxy. A dialogue is being negotiated for June or July.
Restaurant Brands International – The Sisters of St. Francis of Philadelphia joined Seventh Generation in a letter requesting the company to investigate how racial inequities created and perpetuated by the food, health, and financial systems, structures, and policies have exacerbated the adverse economic and health impacts on Black, Latinx, and Indigenous communities in the U.S. In short, the impacts highlight the role that structural racism has played in fueling these disparities. Our group is requesting a meeting as a follow up to this letter.
Tyson Foods – The shareholder resolution, which was cofiled by the Sisters of St. Francis of Philadelphia, requested the company to prepare a report on Tyson’s human rights due-diligence process to assess, identify, prevent, mitigate, and remedy actual and potential human rights impacts. The Investor Advocates for Social Justice conducted a comprehensive effort to support the filing: meeting with proxy advisory services, contacting media, and working with worker groups on the ground. This effort succeeded, receiving 78.7% support from independent investors (excluding the Tyson Limited Partnership) and 18.4% support overall.
Yum Brands – The Sisters of St. Francis of Philadelphia sent a letter, along with cosigners, to the company on 11/19/20 asserting that the current public-health crisis has demonstrated how racial inequities created and perpetuated by the food, health, and financial systems, structures, and policies have exacerbated the adverse economic and health impacts on Black, Latinx, and Indigenous communities in the U.S. In short, the crisis has highlighted the role that structural racism has played in fueling these disparities. The company has resisted dialogues on this topic so far, but we remain hopeful of future conversations.
Generally, issues of public policy have an impact on our shareholder advocacy work and vice versa. We have met with state representatives on the environmental impacts of natural gas pipelines, methane, and the Chester incinerator environmental-justice issue. We have cosigned letters to the USDA on worker safety in meat-processing plants and to the FDA on nutrition-innovation policy. We have joined public campaigns to pressure our representatives to initiate greater oversight of the distribution of opioid medications. The CSR office has reached out to our federal and state representatives through emails, letters, phone calls, and in-person meetings to urge them toward action benefitting society.
As we round out our summary of our actions for 2020/2021, another round has begun. We’ve already cofiled a new resolution with Microsoft and are in the process of doing another with Walgreens. Just last week, on 6/17/21, ICCR filed a lawsuit against the SEC because of the new regulations on filings with companies. Read about the lawsuit here: https://www.iccr.org/investors-file-lawsuit-overturn-trump-era-sec-rule-revision-would-significantly-curtail-shareholders.
Sr. Nora M. Nash, OSF