It is time for Washington and Lee University to drop both George Washington and Robert E. Lee from the University name. The predominantly White faculty at Washington and Lee recently announced that it will petition the Board of Trustees to remove Lee from the University name. This is the first time in Washington and Lee’s history that the faculty has drafted such a petition. It is worth exploring why the faculty has decided to make a collective statement on Lee now and why the faculty has not included a demand to drop Washington in their petition. The answer is simple—it is no longer acceptable, profitable, or convenient to be associated with Lee but it is for Washington. At least for now.
Washington and Lee Law Review - Social Justice
by Virginia Harper Ho
In 2017, shareholder proposals urging corporate boards to report on their climate-related risk made headlines when they earned majority support from investors at ExxonMobil, Occidental Petroleum, and PPL. The key to this historic vote was the support of Blackrock, State Street, and Vanguard, which broke with management and cast their votes behind the proposals. The 2018 proxy season saw several more climate-related proposals earn majority support, and in 2018 and 2019 record numbers of proposals were withdrawn after the companies agreed to respond to shareholders’ requests.
The highly visible 2017 proposal illustrates a number of key aspects of shareholder activism today. The first is the mainstreaming of shareholder activism from its origins in the civil rights and socially responsible investment movements to a point where the largest institutional investors are integrating “environmental, social, and governance” (ESG) or “non-financial” factors into their voting and investment policies. Second, the proposal shows how the focus of shareholder activism around ESG matters has broadened beyond the civil rights, labor, and human rights issues that were its major target throughout much of the twentieth century. Climate change risk and corporate environmental impacts are now among the top subjects of shareholder proposals today. Third, as explained below, mainstream investors like Blackrock and Vanguard are supporting ESG-oriented activism for economic reasons, not only or even necessarily because of commitments to a particular ethical or political position. And finally, this proposal is one of many ESG proposals (about 20 percent of all environmental and social proposals in 2018) that seek greater corporate transparency about non-financial risks and impacts, either to better inform investor decision-making or to prompt changes in corporate practice.
This Article focuses on the challenge of achieving corporate transparency for investment purposes and considers whether shareholder activism is the best way to achieve it. Many in the business community appear to think so. For example, in 2016, many corporations and law firms offered comments to the Securities and Exchange Commission (SEC) on the question of whether the agency should develop new ESG-related disclosure rules. Nearly all took the position that shareholder engagement and other forms of shareholder activism were the best way to improve ESG disclosure and that the SEC should leave well enough alone.
This article builds upon the author’s remarks at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.
by Lisa M. Fairfax
In 1952, the SEC altered the shareholder proposal rule to exclude proposals made “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes.” The SEC did not reference civil rights activist James Peck or otherwise acknowledge that its actions were prompted by Peck’s 1951 shareholder proposal to Greyhound for desegregating seating. Instead, the SEC indicated that its change simply reflected a codification of a position the SEC staff had taken in 1945.
Today, the shareholder proposal rule has evolved, giving way to several amendments that now enable shareholders to submit proposals on the proxy statement that involve significant policy issues that transcend economic significance to the corporation. Nevertheless, we continue to grapple with the underlying corporate governance issues raised by Peck’s proposal. Those issues center around at least two questions: First, what constitutes proper subjects for corporate action? Second, what should be the shareholder’s role in advancing those subjects?
My talk today seeks to answer these two questions, particularly as they relate to the theme of this conference and the kind of activism engaged in by shareholders such as James Peck. Put a different way, those questions can be viewed as follows: First, can the pursuit of social justice be a proper subject of corporate action and behavior? My answer is yes. The for-profit company has proven that it can deploy resources to advance economic innovation and change. Art, music, technology, social media, the sharing economy, all of these innovations reached the public through the for-profit corporation. Why not use the vast resources and power of the for-profit corporation to be the engine for social innovation and change?
This article is based on the author’s keynote address at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.