There is general agreement among investors that good governance is important for protecting long-term shareowner value. Conversely, companies with governance or compensation problems set off warning lights for investors. Governance criteria, including shareholder rights, executive pay, transparency and anti-corruption concerns, and board issues, applied to $16 trillion in assets under management at the beginning of 2020.
Priority Areas of Action
Board Diversity: US SIF supports regulatory measures to increase board diversity. In 2019, the percentage of Russell 3000 board seats held by women reached 19 percent, and the percentage held by racial and ethnic minorities reached 10 percent. Although this is the highest both have ever been, they are still well below the respective groups' demographic representation.
For decades, sustainable investors have advocated for racial and gender diversity on boards and employees of companies they own. At the start of 2020, money managers controlling $833 billion and institutional investors with $1.5 trillion in assets under management reported that they consider diversity as a focus area in their investment decision-making process, according to US SIF Foundation’s Report on US Sustainable and Impact Investing Trends 2020.
Board diversity is a leading issue for shareholder resolutions. From 2018 to 2020, 120 resolutions on board diversity were filed. While relatively few went to a vote, the average vote of support rose from 22.5% in 2018 to 32.4% in 2020.
Shareholder Rights: The shareholder proposal rule is a vitally important, market-based mechanism for shareholders of all sizes to communicate with companies, directors and other shareholders. For decades now, the rule has facilitated dialogue between shareholders and companies and has provided insights on issues of interest to shareholders and the marketplace. US SIF opposes the changes made to Rule 14a-8 in 2020. The new requirements unduly raised the ownership and resubmission thresholds, bars aggregation of shares to meet the new ownership thresholds and raises concerns about client representation.
Say on Pay: "Say on Pay" mandated by Section 951 of the Dodd-Frank Act has been a vital check and balance on executive pay packages and programs. Today US companies clearly are comfortable with an annual say-on-pay vote. According to a report issued by Compensation Advisory Partners, nearly all S&P 500 companies now have annual say-on-pay votes, with 93 percent of S&P 500 companies (as of May 15, 2017) seeking approval in 2017 of annual say-on-pay votes, up from 70 percent in 2011.
Sustainability and Political Contribution Disclosure: Investors are increasingly integrating environmental, social and corporate governance (ESG) information into the investment process but are still hindered by a lack of comprehensive, comparable and reliable data. The voluntary nature of corporate sustainability reporting means that the information available to investors remains inconsistent and incomplete. There needs to be more robust and effective disclosure.
Political contributions reporting: Investors should not be forced to go door-to-door with individual companies to find basic information on how corporate dollars are spent in the political arena. Corporate political spending is risky business, and opacity in corporate political spending only heightens these risks. Political spending disclosure is simply good risk management, as demonstrated by the Fortune 500 companies that now publish their political contributions. Clear, consistent, and uniform reporting of political spending by public corporations should be required.
Letters and Statements
Joint letter on Improper Exclusion of Evidence on the Impact of Rule 14a-8 Proposal 09/2020
Joint letter to SEC on investor opposition to Rule 14a-8 rulemaking 04/2020
Investor Letter to SEC Opposing Rule 14a-8 Rulemaking 09/2019
US SIF Comment Letter to SEC on Proxy Process Roundtable 11/2018
US SIF Letter to SEC Supporting Shareholder Rights Group Proxy Season Report 08/2018
US SIF Letter Opposing HR 5756 to Change Shareholder Resubmission Thresholds 05/2018
Joint letter to Senate Banking Committee on S. 2155 and shareholder proposal provisions 03/2018
US SIF Letter to Senate Opposing Proxy Advisor Legislation 03/2018
US SIF Letter Opposing Proxy Advisor Legislation (HR 4015) 12/2017
US SIF Letter on Section 844 of the Discussion Draft of the Financial CHOICE Act 04/2017
Joint Report - The Business Case for the Current SEC Shareholder Proposal Process 04/2017
Joint Report on SEC Disclosure 09/2016
US SIF Comment Letter on Regulation S-K Disclosure 07/2016
US SIF Letter to the SEC on Staff Review of Rule 14a-8(i)(9) 07/2015
US SIF Letter to SEC on Disclosure Effectiveness Review 09/2014
Investor Letter to the SEC in support of political spending disclosure rule 01/2014
US SIF Statement on Shareholder Resolutions and Corporate Responsibility 03/2013
US SIF Letter to the Editor regarding Washington Post piece, "More shareholders call on companies to disclose their political spending" 05/2012
Comment Letter to SEC on Corporate Political Spending 11/2011
US SIF Comments to the SEC on the U.S. Proxy System 10/2010
US SIF Letter to the SEC on Proxy Access 08/2010
US SIF Letter to SEC on Proxy Disclosure and Solicitation Enhancements 09/2009
US SIF Letter to SEC on Proxy Access 08/2009
US SIF Letter on SEC releases dealing with the shareholder resolution process and access to the proxy 09/2007