ANTI-ESG PROPOSALS ON THE RISE
Another notable trend in the 2022 proxy season is
the slow rise of anti-E&S proposals seeking to counter
the impact of E&S-focused action at the corporate level.
16
Until recently, E&S shareholder proposals have largely
pushed companies to take more environmentally friendly
and socially progressive action, whereas anti-E&S
shareholders and activists have generally relied
on means other than shareholder proposals to attempt
to influence corporate change. Unsatisfied with abandoning
E&S shareholder activism to pro-E&S proponents, anti-
E&S activists represent a growing voice, and in 2022 they
addressed a range of topics, including racial and gender
diversity, climate change and corporate transparency.
Most of the anti-E&S proposals were expressly opposed
to existing or proposed E&S initiatives at the subject
company. Anti-E&S activists have targeted a vast array
of companies. For example, the National Center for Public
Policy Research submitted a proposal calling on Johnson
& Johnson to audit its DEI efforts, arguing that these efforts
do not have their intended effects.
17
In addition, Intel faced
a proposal asking that it refrain from publicly displaying
the pride flag on the grounds that it created a hostile work
environment for religious employees.
18
Following Engine
No. 1's proxy contest at Exxon Mobil in 2021, at Exxon
Mobil's 2022 annual meeting, shareholder activist and
lobbyist Steven Milloy submitted a proposal to prohibit
all future shareholder proposals that do not have prior
board approval, arguing that stock ownership had become
politicized and that climate activists were "nuisance
shareholders" assailing corporations' business operations.
19
However, anti-E&S proposals failed to receive support or
were excluded from voting altogether at higher rates than
their E&S counterparts. Generally, anti-ESG proposals
received an average of less than 3% of support in 2022,
and as such, are not eligible to be resubmitted in 2023
as they failed to meet the SEC's 5% threshold requirements
for resubmission.
20
For shareholders, it is not always easily discernable from
the plain text of the proposal whether it is pro or anti-E&S
in nature.
21
A subset of anti-E&S proposals attempt to
advocate against corporate E&S efforts by taking advantage
of the SEC's procedural rules regarding the exclusion
of future shareholder proposals on similar topics, but do
so in a manner different from the intended effect of these
rules.
22
These anti-E&S proposals usually have resolutions
that are drafted in language that is identical to an E&S
proposal on the same issue, but supporting statement
accompanying the resolution makes clear the proponent
is critical of the E&S initiative behind the resolution. Thus,
anti-E&S activists can put forward a proposal substantially
similar to an E&S proposal and cause a future E&S proposal
attempting to address the same action to be barred from
future shareholder meetings as a result of the SEC's rules
against duplicative shareholder proposals.
While anti-E&S proposals have often been easily excluded
or defeated and therefore have minimally impacted
corporate action, the level of anti-E&S activism is likely
to continue to grow in the coming years. Shareholder
engagement and communication has always been the
antidote of choice for boards and management to contend
with shareholder activism. Understanding the issues that
shareholders have been most recently focused on is an
important way to help inform companies as they prepare
to navigate the proxy seasons ahead.
16
In 2022, close to 52 anti-ESG proposals were submitted, in comparison
with 26 in 2021 (see Georgeson, An Early Look at the 2022 Proxy Season,
at 7, https://www.georgeson.com/us/insights/2022-early-proxy-season-
review (2022)); see also Ruth Saldanha, "Anti-ESG Sentiment Gains
Spotlight but Not Support," Morningstar, https://www.morningstar.com/
articles/1109374/anti-esg-sentiment-gains-spotlight-but-not-support (August
15, 2022); see also Martha Carter, Matt Filosa, Sydney Carlock & Sean
Quin, "ESG and the Bear: What to Make of the 2022 Proxy Season," Teneo,
https://www.teneo.com/esg-and-the-bear-what-to-make-of-the-2022-proxy-
season (August 15, 2022).
17
See Ruth Saldanha, "The Rise of Anti-ESG Shareholder Proposals,"
Morningstar, https://www.morningstar.com/articles/1086978/the-rise-of-anti-
esg-shareholder-proposals (April 1, 2022).
18
See U.S. Securities and Exchange Commission, "Intel Corporation;
Rule 14a-8 no-action letter," https://www.sec.gov/divisions/corpfin/cf-
noaction/14a-8/2022/hotzintel031822-14a8.pdf (March 18, 2022).
19
See ExxonMobil, "Notice of 2022 Annual Meeting and Proxy Statement,"
https://corporate.exxonmobil.com/-/media/Global/Files/investor-relations/
annual-meeting-materials/proxy-materials/2022-Proxy-Statement.pdf
(April 7, 2022); see also Corbin Hiar, "Conservative shareholders attack
'climate clown show'," E&E News, https://www.eenews.net/articles/
conservative-shareholders-attack-climate-clown-show (June 10, 2022).
20
See Martha Carter, Matt Filosa, Sydney Carlock & Sean Quin, "ESG and
the Bear: What to Make of the 2022 Proxy Season," Teneo, https://www.
teneo.com/esg-and-the-bear-what-to-make-of-the-2022-proxy-season
(August 15, 2022).
21
At companies such as Duke Energy, General Electric, Eli Lilly and Pfizer,
anti-E&S proposals largely copied from the pro-ESG proposals in order
to get on the ballot (see "The Rise of Anti-ESG Shareholder Proposals,"
Morningstar, https://www.morningstar.com/articles/1086978/the-rise-of-anti-
esg-shareholder-proposals (April 1, 2022)).
22
Under Rule 14a-8(i)(11), companies can exclude proposals that substantially
duplicate another proposal previously submitted, and Rule 14a-8(i) (12)
raises the voting thresholds required for any defeated proposal to be
brought again. A failed shareholder proposal may not be resubmitted
for three years unless it receives the support of at least 5% of the voting
shareholders in its first submission. Proposals submitted two and three
times in the prior five years must receive 15% and 25% support,
respectively, in order to be eligible for resubmission in the following
three years (see U.S. Securities and Exchange Commission, "SEC Adopts
Amendments to Modernize Shareholder Proposal Rule," https://www.sec.
gov/news/press-release/2020-220 (September 23, 2020). This is higher
than the 3%, 6%, and 10% support thresholds that was applicable prior to
the amendment of Rules 14a-8(i) (11) and 14a-8(i)(12) in 2020. In July 2022,
the SEC proposed amendments to Rules 14a-8(i)(11) and (14)a-8(i)(12) that
would reduce the number of proposals that would be excluded, including
by finding that a proposal is duplicative only if it "addresses the same
subject matter and seeks the same objective by the same means." (see
U.S. Securities and Exchange Commission, "Fact Sheet: Shareholder
Proposals Under Rule 14a-8: Proposed Rules," https://www.sec.gov/files/34-
95267-fact-sheet.pdf.
Shearman & Sterling LLP 27 | Trends in E&S Proposals in the 2022 Proxy Season
