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PAB and Other Faith-Based Investors Face Stricter Rules in Corporate Responsibility Efforts
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The Forum for Sustainable and Responsible Investment Foundation reports that faith-based and healthcare organizations represent 4% of assets at major companies, yet they file 36% of resolutions, making them a powerful voice at corporations around the world. 

For decades, the Adrian Dominican Congregation, through the Portfolio Advisory Board (PAB), has been part of this work: filing resolutions, engaging companies, and speaking to corporate boards at their annual meetings. This work has been done in coalition with other faith-based shareholders from the Interfaith Center on Corporate Responsibility (ICCR), where members often pool their holdings to have a seat at the table. 

This longtime work has resulted in hundreds of examples of companies changing their policies and practices after constructive engagement with shareholders. ICCR members have championed positive changes in areas such as annual director elections, supply chain risk and impact reporting, political and lobbying spending disclosure, climate risk reports, and due diligence practices for human rights risks.

In 2020, the Securities and Exchange Commission (SEC) enacted new rules that severely restrict small shareholders in the resolution process. In the past, shareholders could pool their ownings to reach the $2,000 worth of stock that needed to be owned for one year in order to file a resolution. 

The new rule bars shareholders from pooling stocks, and an individual organization must own at least $2,000 of the company’s securities for at least three years. The new rules offer no provisions for shorter ownership, such as owning at least $25,000 for at least one year to file a resolution. 

The SEC also changed the minimum vote to return a resolution the following year. A first-year resolution must now get 6% vote support, up from 3%. By the third year, a resolution must receive 25% vote support – a tall order for many resolutions on social issues. 

In 2021, ICCR and several other investor groups entered litigation to rescind the rule changes. The PAB offered several examples of how the changes would negatively impact their work. Unfortunately, the courts have postponed the ruling several times, now indicating a decision in late November, subjecting the current shareholder filing season to the more stringent filing rules. These limitations curtail the voice of small shareholders and place additional constraints on the PAB’s work for the 2023 season.

It’s important to note, the engagement process is more than just filing shareholder resolutions. The ongoing dialogues and long-term relationships that are a hallmark of the PAB mean that much of our work continues. Companies are aware that very often we as faith-based shareholders are like “canaries in a coal mine” or an “early warning system.” We hear the social and environmental concerns from partners and advocates on the ground and see the world with a moral lens; thus, we raise issues that may not have yet made it to the C-Suite level. 

As this article is posted, the PAB is considering the 2023 shareholder season work plan, engaging to effect change toward justice in the policies and operations of corporations in which we hold investments.

Pat Zerega, PAB Consultant

 

Article by Pat Zerega
Portfolio Advisory Board Consultant
Mercy Investment Services 

 

 

 


 

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Portfolio Advisory Board,  Adrian Dominican Sisters | 1257 E. Siena Heights Drive | Adrian, Michigan 49221
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