Johnson & Johnson sought to exclude our proposal asking for a report on the costs it externalizes by limiting access to its COVID-19 vaccine technology, and how its diversified shareholders absorb those costs. The company argued the proposal violated U.S. Securities and Exchange Commission (SEC) rules because (1) it related to “ordinary business,” and (2) it duplicated another proposal, which requested a report on how Johnson & Johnson accounts for the government aid that supported its COVID-19 vaccine development when selling the vaccine.

By rejecting both arguments, the SEC made clear that shareholders have a legitimate interest in voting on proposals that address the macroeconomic implications of a significant policy issue. Along with the Staff guidance on which we previously reported, this decision represents a growing recognition that investors need protection from the damage companies can do to social and environmental systems, just as they need protection from harms to individual companies.

Bloomberg columnist Matt Levine weighed in on this proposal and the SEC’s decision:

“It seems reasonable to say that pandemics are bad for the world economy and that curing or preventing them would be good. If you are a big diversified institutional shareholder who owns a big chunk of all the companies in the world, ending the Covid-19 pandemic would be very good for your portfolio. This was particularly true in the early days of the pandemic in 2020, when much of the world economy was severely disrupted and vaccines were still in development. Back then, I sometimes argued that the best thing a big public pharmaceutical company could do, for its shareholders, would be to (1) develop a Covid-19 vaccine or cure, (2) spend as much money as possible to manufacture it as quickly as possible and (3) give it away for free. This might be financially disastrous for that company, and its stock might go down, and its shareholders might lose money on that stock. But most shareholders these days are broadly diversified; the shareholders own lots of other stocks, which would go up. Making a vaccine widely available would be hugely positive-sum for corporate profits, and thus corporate shareholders, as a whole, even if it was costly for the particular company making the vaccine. And since that company’s shareholders — who, at least in some sense, own the company — also own all the other companies, and understand all this, they might pressure the company to sacrifice its own interest for the common good.”

Referring to our proposal Levine wrote.:

“I just want to point out that this is a thing now; you can write a shareholder proposal asking a company’s shareholders to think about their interests as diversified shareholders and asking the company to prioritize those interests above its own economic performance. … The model of financial capitalism for many decades was that a company’s shareholders were interested exclusively in the financial performance of the company. Now new models are available.”

We’re encouraged by the SEC’s analysis in this case, and we’re guardedly optimistic that it bodes well for our other proposals currently under SEC challenge. We’ll keep you posted, and you can always see the full slate here.