Activist investors continue to make liberal use of the SEC’s Rule 14a-8 to submit proposals for inclusion in company proxy statements. One of the most important shareholder trends to emerge from 2018 is the increasing involvement and support of large institutional investors in certain campaigns. Crisis management was one area in particular that institutional investors prioritized and sought disclosure on in 2018. Highly charged current events such as the MeToo Movement, the opioid crisis and the debate over gun safety, for example, have led shareholders at some of the largest retailers and manufacturers to urge greater disclosure on the reputational risks of these issues.
In the wake of the MeToo Movement, support for shareholder proposals related to board and employment diversity, anti-discrimination policies and gender pay gap reports increased. This support can be attributed to institutional investors increasing prioritization of board diversity and human capital management. In 2018, one large institutional investor amended its proxy voting guidelines to include the expectation that at least two women directors serve on each board. Several other institutional investors also amended their voting guidelines in 2018 to include references to diversity, sexual harassment and corporate culture. Separately, after two executives at one prominent sporting goods manufacturer suddenly departed over complaints of inappropriate workplace behavior, Trillium Asset Management filed its first-ever proposal on sexual misconduct risk management. The proposal was later withdrawn after the company agreed to engage with shareholders.
In 2018, the Investors for Opioid Accountability, a group of faith-based investors, rallied tremendous success for several first-time proposals submitted to opioid manufacturers and retailers that addressed the risks of the opioid crisis. At two of the largest opioid manufacturers, proposals related to the opioid crisis received 62% and 41%, respectively. A proposal submitted to Cardinal Health, Inc., was withdrawn after the company agreed to disclose financial risks related to the opioid crisis. At McKesson, shareholders rejected the company’s executive pay plan over union criticism of the drug distributor’s role in the opioid crisis in West Virginia and other states. In 2019, one large opioid distributor was unsuccessful in excluding a proposal that required the board to report on the financial and reputational risks of the opioid crisis. The proposal eventually received 59% of shareholders’ votes.
The public debates over gun violence in 2018 prompted shareholders at two of the largest gun manufacturers to take preemptive steps to address gun safety. Shareholders at American Outdoor Brands Corp. (formerly Smith & Wesson) and Sturm Ruger approved of proposals requiring the board to report on actions taken to address gun safety and the mitigation of harm associated with firearm products. At Sturm Ruger, shareholders overwhelming approved of the proposal with approximately 68% of the vote.