The release last week of Pope Francis’ Laudato Si unleashed a heaven-rending chorus of hallelujahs from the religious left. The activist shareholder investors in the choir loft, those affiliated with the Interfaith Center for Corporate Responsibility, were no exception. No sooner had the ink dried on the paper on which the encyclical’s printed than ICCR members hauled out the hyperbole. For example:
Nora M Nash, OSF: Laudato Sii (Be Praised) will rise up and the cry of Mother Earth will be heard once again from the Amazon Rainforest to the Tiadaghton Forest; from Navidad Bianco Shanty Town in Mexico to Rana Plaza in Bangladesh; from the Great Mississippi to the Three Gorges Dam; from the oil fields of Alaska to mines of the Central African Republic. A new “Canticle of the Sun” will promote dynamic engagement across our fragile munity.
And this hubristic howler:
Zevin Asset Management: Zevin Asset Management is proud to be joined by Pope Francis in our focus on the urgency of climate change. The Papal Encyclical is evidence of the universal nature of the problem and we are hopeful it will inspire universal solutions. We anticipate that it will direct more investors to take up the issue of climate change solutions in their investment decisions.
To which this writer can only respond (sarcastically, of course): “Wow, the Pope is climbing aboard the Zevin bandwagon? Well, it’s about time!”
Sarcasm aside, it’s a shame if not a sin that Zevin and its ICCR cronies don’t recognize the harm caused by their shareholder activism. This writer has submitted ample word counts discussing the negative impact of ICCR resolutions on fellow investors, panies in which they invest and panies’ clientele. And, yes, this brand of shareholder activism also negatively impacts panies’ economic footprint in munities and states in which they operate.
es another Proxy Monitor report from the Manhattan Institute Center for Legal Policy’s James R. Copland, which bolsters your writer’s previous assertions with yet more empirical proof. Copland researched the shareholder proposals submitted by public employee unions, including California Public Employees’ Retirement System with $297 billion in assets; California State Teachers’ Retirement System ($187 billion); New York State Common Retirement Fund ($178 billion); New York City Retirement Systems ($159 billion); and Florida State Board of Administration ($155 billion). . Not surprisingly, the groups upon which Copland’s research focuses reflect the very same issues and points-of-view as ICCR (as well As You Sow, another religious group of shareholder activists):Section I examines such funds’ shareholder-proposal activism, over time and by subject matter, as well as voting results. Section II looks at how their shareholder-proposal activism may have impacted subsequent share value in panies. The study concludes that these publicly traded pension funds’ shareholder-proposal activism did not tend to create share value; and that the New York State fund’s activism—which traces to 2010 under ptroller Thomas DiNapoli—has been negatively associated with subsequent share-price movement relative to the broader stock market.
Copland continues:
Just as public employee pension funds vary in their propensity to introduce shareholder proposals, they vary in the types of proposals introduced. Although most of the 2015 New York City pension funds’ shareholder proposals involve proxy access, a corporate-governance concern, most of the City funds’ proposals historically have involved social or policy issues…. 62 percent of the New York City funds’ shareholder activism over the last decade has involved social or policy concerns with an attenuated, if any, relationship to share value—a number deflated by this season’s proxy-access push. (While 14 percent of the shareholder proposals that New York City funds have introduced over the decade involve proxy access, 22 of the 23 proxy access proposals were filed in 2015.)
Copland notes the percentages of public-employee shareholder resolutions by topic: Lobbying and Political Spending (17 percent); Executive Compensation (14 percent); “Other Social Policy” (12 percent); and Environment (8 percent) for the years 2006 to 2015. As suspected, very few of these resolutions, if passed, would enhance shareholder value. In fact, he points out such resolutions harm shareholder value whether they are adopted or not.
Critics of pension funds’ shareholder activism worry that “unions and state and local governments whose interests in jobs may well be greater than their interest in share value, can be expected to pursue self-interested objectives rather than the goal of maximizing shareholder value”—a concern articulated by the U.S. Court of Appeals for the D.C. Circuit in 2011, when it threw out the Securities and Exchange Commission’s promulgated mandatory proxy access rule (one substantially similar to that currently being advanced by the New York City funds’ initiative). Perhaps owing to these concerns, the two largest mutual fund groups, Fidelity and Vanguard, have largely opposed the New York City funds’ proxy access proposals.
Indeed, the evidence does not support the public pension funds’ claims that their shareholder-proposal activism enhances share value: the Fortune panies targeted by shareholder proposals sponsored by the five largest state and municipal pension funds saw their share price, in the subsequent year, underperform the broader S&P 500 index (by 0.9 percent), with broad variations….
These findings substantially undercut the hypothesis that public pension funds’ shareholder-proposal activism adds to share value for the average diversified investor—and suggest such efforts may actually destroy value.
Likewise, one can draw the same conclusions for ICCR and AYS shareholder resolutions. Rather than congratulating themselves that Pope Francis shares their moral high ground regarding climate change and the incumbent belief human activity is causing it, ICCR and AYS might actually look at how their activities are harming shareholder values and their fellow investors.