Here Comes Proxy Season

Proxy season 2022 is right around the corner. We know this is the time of year when investors and proxy advisors are contemplating their voting strategies, so this edition of our newsletter is dedicated to the 19 shareholder proposals we’re supporting this year. We also highlight a US$46B asset owner CEO’s public support for system stewardship.


Our 19 proposals focus on systematic risks, including antimicrobial resistance, declining public health, poverty wages, misinformation, climate change, and more. We’ve asked most of these companies to publish a report on external costs they impose on the broader economy, and how and to what extent those costs affect their shareholders’ diversified portfolios.

Here’s the full proposal list. For more detail, please visit our website, where we have linked each company name to the full text of the relevant proposal, and where we’re publishing exempt solicitations as they’re filed.

The common thread running through all these proposals is the question of how a company’s externalized costs affect shareholders by reducing the value of other assets in their portfolios. Companies are not required to disclose such costs, leaving investors without crucial information about the full impact that companies have on their diversified portfolios. Creation of externalities analyses would be a critical first step toward allowing investors to grapple with the reality that prioritizing individual companies’ internal financial returns—even over the long-term–may not always be in their (or their beneficiaries’) best interests.

Example: Pfizer and Johnson & Johnson limiting vaccine supply. The International Monetary Fund estimates that properly addressing the COVID-19 pandemic could add $9 trillion to global GDP, but pharmaceutical companies—including Pfizer and Johnson & Johnson—are resisting calls to waive World Trade Organization intellectual property rules for their vaccine technologies. Our proposals ask these companies to report on the public health costs created by the limited sharing of their COVID-19 vaccine technologies and any consequent reduced availability in poorer nations. Essentially, we want Pfizer and J&J to discuss the trade-off they force on their diversified shareholders when they prioritize their profits over global public health.

Example: Poor pay at Tractor Supply. Tractor Supply bills itself a leader in employee treatment, yet its starting wage is more than 32 percent below a 2019 calculation of living wage, which predates recent inflation. Studies have shown that every unit of reduction in equality leads to a similar reduction in GDP. Our proposal asks Tractor Supply to report on 1) whether it participates in compensation and workforce practices that prioritize its own financial performance over the economic and social costs created by inequality and racial and gender disparities and 2) how any such costs threaten returns of diversified shareholders who rely on a stable and productive economy. Essentially, we want Tractor Supply to discuss the trade-off it forces on its diversified shareholders when it takes steps that increase its profit margins but lower GDP.


  1. Most critically, we’re seeking investors’ votes in favor of these proposals.
  2. We encourage investors to announce their support publicly and in advance.
    1. If doing so at the individual-proposal level presents too heavy a lift, investors might follow the lead of one major asset manager with which we’re working to craft a statement of general support for this type of proposal. Our model proxy-voting guidelines can serve as the basis for such a statement.
  3. We also encourage investors to reach out to their proxy advisors and asset managers to express support for these proposals.

If your organization is considering supporting one or more proposals, we’re available to assist with written material or presentations.


Moving beyond ESG integration. The proposals are designed to buttress shareholder advocacy that moves beyond arguments based on “ESG integration” or how social and environmental concerns will affect a company’s financial returns. This “outside-in” or “enterprise risk” connection between impact and financial return may involve:

  • Enhancing efficiency
  • Protecting reputation
  • Avoiding regulatory action

ESG integration does not address externalized costs. While an ESG-integration strategy is adequate to support change when company value and improved impact converge, it can’t address the many situations where companies can optimize their internal returns by externalizing costs. These external costs derail economic growth, and the long-term value of diversified portfolios is directly correlated to the health of the economy, making profitable cost externalization a bad trade for companies’ diversified investors.

Externalities analyses focus on the root cause of social and environmental risks. One large asset manager calculated that publicly traded companies destroyed $2.2 trillion in social and environmental value in 2018. Such conduct, repeated year after year, is rapidly pushing our economy toward dangerous social and ecological boundaries, threatening people and planet, and consequently the value of diversified portfolios over the long run. To protect themselves, shareholders must take their advocacy beyond ESG integration and focus on the full impact that portfolio company decisions have on diversified portfolios. Our proposals are designed to facilitate that shift.

Real-world costs. Examples of GDP losses from externalized costs include:

  • Antimicrobial resistance: $100 trillion through 2050
  • Racial disparity: $5 trillion over the next five years
  • Inequality: 2-4% reduction in demand

A recent report from Principles for Responsible Investment—the world’s largest coalition of asset owners and managers—calls for system stewardship that protects systems from corporation-generated externalities:

“Systemic issues require a deliberate focus on and prioritisation of outcomes at the economy or society-wide scale. This means stewardship that is less focused on the risks and returns of individual holdings, and more on addressing systemic or ‘beta’ issues such as climate change and corruption.”  

A recent report from law firm Freshfields Bruckhaus shows global investment professionals are obligated to address externalities:

“The more diversified a portfolio, the less logical it may be to engage in stewardship to secure enterprise specific value protection or enhancement. Diversification is specifically intended to minimise idiosyncratic impacts on portfolio performance…

“Yet diversified portfolios remain exposed to nondiversifiable risks, for example where declining environmental or social sustainability undermines the performance of whole markets or sectors… Indeed, for investors who are likely to hold diversified portfolios in the long-term, the question is particularly pressing since these are likely to be the main ways in which they may be able to make a difference.”

The Freshfields report is more than 500 pages long, so TSC has summarized the key portions pertaining to system stewardship.

An inconvenient but unavoidable truth. Unlike ESG integration, authentic system stewardship may ultimately require investors to engage with companies in situations where the best option for diversified shareholders is for an individual company to surrender internal return. But while such stewardship may require difficult choices—not all engagements will be “win-win”—the answer is not to ignore the problem. Shareholders can’t afford to ignore the threat externalities pose to social and environmental systems that support our entire economy. The untenable alternative is to ignore the dangerous trade-offs companies make when they prioritize financial returns over all else, a practice at the root of rising temperatures, falling biodiversity, growing inequality, and myriad other blinking red lights, all of which threaten diversified shareholders.

Please contact Sara with any questions or to get involved.


Debby Blakey, CEO of A$64 billion (US$46 billion) Australian super/pension fund HESTA, told Responsible Investor why HESTA chose to be the proponent for the two proposals we filed at Hormel Foods and Meta Platforms. Blakey said companies that prioritize profits over “healthy social and environmental systems pose a significant financial risk to investors.” 

“We’re deeply concerned Meta Platform’s continued lack of content oversight can contribute to the spread of misinformation that can ultimately harm overall economic health and GDP, and therefore have a significant negative impact on financial returns we can generate for our members.” 

We couldn’t agree more, and greatly appreciate HESTA’s leadership.  

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