When dialogue attempts are not working, ESG Services seeks the views of other shareholders on the environmental, social and governance issue facing the company. This is done by filing a shareholder resolution that is included in the management proxy circular and submitted to a vote at the company’s annual general meeting (AGM).
Shareholder resolutions can be a powerful tool for raising the awareness of environmental, social and governance issues among directors, senior executives and other shareholders. The time between filing the resolution and the company finalizing the management proxy circular for publication is often fruitful for dialogue, because companies wish to see the resolution removed from the AGM agenda. This often prompts companies to allocate more resources to ESG concerns. As a result of this, shareholder resolutions do not always go to a vote.
In general, NEI will withdraw the resolution in the following situations:
- The company agrees to substantially adopt our resolution without a vote.
- The company agrees to partially adopt our resolution and commits to a series of meetings between our ESG Services team and key operational personnel, company decision-makers, and appropriate stakeholders to explore issues further.
- The company provides us with evidence to show that the resolution is “moot” because it is already dealing with the issue.
If the resolution goes ahead, a Proxy Alert is issued challenging the company’s response to our resolution and offering additional reasons for investors to support it.
Because many investors vote with management automatically without considering the merits of the case, when our resolutions do go to a vote, they seldom win majority support. But they seldom need to. Recognizing that shareholder concern about an issue is building, and that the resolution we have advanced offers an effective response to a significant business challenge, companies are often willing to negotiate and begin adopting more progressive policies.
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