'Dale vs. Goliath': Petaluma investment adviser wants companies to consider more than the bottom line
Dale Wannen wanted a $37 billion Irish pharmaceutical company to tell the public what it's doing about climate change and environmental stewardship.
To pursue his goal, the Petaluma investment adviser didn't write a letter to executives at Actavis.
Instead, Wannen got a spot on the Dublin company's annual proxy ballot this spring for a proposal seeking a sustainability report. His proposal received support from the owners of nearly 45 million shares -- 32 percent of all the votes tallied.
While it didn't win, Wannen's measure was seen as a hit by those who advance shareholder proposals on a range of social, environmental and corporate governance issues. Under federal rules, a measure needs only 3 percent of the vote in order to automatically reappear a second time on the company ballot.
"He did really well for a first-time proposal," said Meg Voorhes, research director at the Forum for Sustainable and Responsible Investment, a Washington, D.C., investors association.
Shareholder proposals remain a key way for stock owners to voice concerns and rally support at the annual meetings of publicly traded companies. By some estimates, about 800 such proposals were filed last year. Roughly half of those dealt with social and environmental concerns.
The use of shareholder proposals gained prominence nearly four decades ago when anti-apartheid activists began calling on universities to divest from companies doing business in South Africa. Since the last recession, shareholders have put forth proposals on executive pay and the rules for removing company boards of directors.
This spring, pushback has come from the U.S. Chamber of Commerce and other business groups. They maintain the current rules make it too easy to repeatedly place matters on company ballots that have no chance of ever gaining majority support.
The chamber wrote in a petition to the U.S. Securities and Exchange Commission that the proposals often amount to a "tyranny of the minority" -- wasting resources and diminishing shareholder attention on items that aren't key to boosting the company's value.
Wannen, who operates Sustainvest Asset Management in Petaluma, comes down on the side of those who support the current rules.
He and others maintain their proposals do affect a company's bottom line because doing good is good for business. At the same time, they insist they are considering more than just short-term profitability.
In his ballot argument, Wannen noted that more than half of the S&P 500 companies already report on "environmental, social and governance impact," including such pharmaceutical giants as Johnson & Johnson, Pfizer and Abbott Laboratories. He considers sustainability reporting a minimum requirement for responsible corporations.
"As a green investment adviser, I want to see that a company is making that first step of transparency," Wannen said.
Wannen qualified to place his proposal on the Actavis ballot because he had owned at least $2,000 worth of the company's stock for one year. Even so, he had to find a friend's relative to personally represent him last month at the annual shareholders meeting in Dublin.
To pass muster, a shareholder proposal can't involve a personal grievance, contain false or misleading statements or deal with what the SEC considers ordinary business, Voorhes said. For example, decisions on what a company pays its workers has been deemed ordinary business.
Some nonprofits put forth their proposals without directly owning stock by finding a shareholder willing to sponsor the item.
Those who put forth proposals say corporations often take an adversarial approach to their requests.
"It's a very rare company that actually embraces a shareholder who comes forth and says, 'you should change this policy,'" said James McRitchie, the Elk Grove-based publisher of the website Corporate Governance and a regular author of shareholder proposals.
Gaining support typically requires winning over institutional investors like CalPERS, the state's public employee pension fund. Today, individual investors directly control only about a third of all company shares, said McRitchie, and they vote only about 30 percent of the shares they own.
But online tools exist today to help small investors get informed. The website Proxy Democracy can tell them how a mutual fund has voted on proxy proposals -- for those seeking investments that match their beliefs. And before annual meetings, the same site reports the declared votes of institutional investors -- for shareholders who want to pool their votes with like-minded stock owners.
By all accounts, relatively few shareholder proposals ever gain a majority of support. And the rules can make winning more difficult.