Amazon faces record challenges at shareholder meeting
Move underscores rise of ESG-based investing
Published: May 26, 2022 08:57 PM

Photo:VCG Inc faces 14 investor resolutions challenging its policies at its annual shareholder meeting on Wednesday, a record for the retail and cloud computing giant, as socially minded investors scrutinize its treatment of workers.

The increase in the number of resolutions underscores the rise of environmental, social and corporate governance (ESG)-based investing, which is spurring more shareholders to push for corporate accountability.  

US corporations face an unprecedented wave of shareholder resolutions focused on ESG themes for 2022, a new review shows, as activists look to build on favorable regulatory changes and more executives seem willing to make deals.

Shareholders have filed a record 529 resolutions related to environmental, ESG issues for the annual meetings of publicly traded US companies so far this year, up 22 percent from the same point in 2021, according to a study released by activist group As You Sow and researchers including the Sustainable Investments Institute.

Many seek details on carbon emissions or workforce diversity. Successes activists scored last year such as changing directors at Exxon Mobil Corp could make directors look at proposed changes more favorably, said sponsors of the review.  

"Companies are realizing that their investors want them to have less risk," said Andrew Behar, CEO of As You Sow. He and others said shareholders may benefit from new guidance from the US Securities and Exchange Commission which makes it harder for companies to skip votes. 

Wins for activists so far this year include a March 4 vote at the annual meeting of fast food company Jack in the Box Inc, where 95 percent of votes cast were in favor of a resolution dealing with sustainable packaging sponsored by Green Century Capital Management.

It also reflects changes under securities regulators appointed by US President Joe Biden that have made it easier for investors to file proposals and more difficult for companies to convince regulators that these resolutions should not go to a shareholder vote.  

The US Securities and Exchange Commission has in November last year published new staff guidance that may make it harder for corporations to keep shareholder proposals on matters like workforce diversity or climate from being voted on at annual meetings.

The new bulletins replace Trump-era guidance that gave companies more room to toss proposals on hot-button social issues, changes critics said had aimed to silence investors' voices.

Among other changes, staff now will give more consideration to the social policy significance of a shareholder proposal and will recognize "that proposals seeking detail or seeking to promote timeframes or methods do not per se constitute micromanagement," or grounds for exclusion, said the bulletin published by the SEC's Division of Corporation Finance.

"The right to put proposals in front of other shareholders for a vote is an important part of the securities laws," SEC Chairman Gary Gensler said in a statement.

A fresh record for such resolutions at an S&P 500 company will be chalked up next week, when Google parent Alphabet Inc faces 17 on June 1, said research firm Insightia, the most since it began tracking them comprehensively in 2014.

Roughly ten of the shareholder resolutions that Amazon investors will vote on pertain to worker rights and other "social" issues, such as calls for the company to report on worker health and safety or the treatment of its warehouse workers. The others call for things like a review of Amazon's use of plastic or changes to the company's process for board nominations.

Amazon has recommended that its investors vote against all 14 resolutions, saying in its proxy statement that it often has already acted to address the underlying concerns of a proposal. While the resolutions are nonbinding, companies often take some form of action if they receive backing of 30 percent to 40 percent of votes cast.

Top proxy adviser Institutional Shareholder Services has recommended investors vote for eight of the proposals, while Glass Lewis has backed seven of them.

Royal London Asset Management Ltd, Britain's largest mutual life, pensions and investment company, plans to vote in favor of at least six of the shareholder resolutions at the Amazon meeting, its head of responsible investment, Ashley Hamilton Claxton, told Reuters.

Britain's biggest asset manager, Legal & General Investment Management, and British asset manager Schroders Plc have also declared ahead of Amazon's shareholder meeting they will back at least some of the investor resolutions.

Amazon is a popular holding among ESG-focused funds. About 32 percent of funds classified as promoting the environment or social justice under European Union rules are invested in Amazon, according to Jefferies Financial Group Inc. Only Microsoft Corp constitutes a more popular holding, found in 39 percent of such funds.

Brandon Rees, a deputy director for the AFL-CIO, the largest US labor organization, said he hoped ESG funds holding Amazon will more often support labor-focused resolutions.

"It's my belief that worker rights and workers have been buried in the 'S' of ESG," Rees said.