Shareholders want a voice on climate
In SA, companies and asset managers should prepare for a more assertive and informed shareholder activism movement in the near future
BHP shareholders have filed two resolutions for consideration at the company’s annual general meetings in Melbourne and London.
The first is a proposal to obtain more shareholder oversight in company decisions through nonbinding shareholder resolutions and the second seeks to exercise that oversight in relation to the company’s position on climate change.
These resolutions are part of a global movement towards greater shareholder engagement, particularly in relation to climate change. The recent approval by ExxonMobil shareholders of a nonbinding resolution calling for its management to report on risks posed to the company by climate change is an example of the potential for shareholder activism to drive changes in company behaviour.
In SA, the stage is set for shareholders to become part of this global movement, and a responsible investment and shareholder activism initiative in the environmental and social justice space will be launched before the end of 2017.
While activism is on the rise, uptake is stunted by beliefs of what good business looks like
Shareholders of listed companies have the ability to influence decisions through direct engagement with companies, by filing resolutions and using their voting rights. They also have the power to divest, and the divestment movement — particularly in relation to fossil fuel investments — is gaining momentum.
While shareholder activism is clearly on the rise, its uptake is stunted by entrenched beliefs of what "good business" looks like. A key contributor to shareholder apathy is the notion that there must be a separation of ownership and control for optimum performance of the company. Shareholders are encouraged to leave matters of management to the directors and to exercise their rights only in relation to the removal of directors.
However, these views are shifting as debates and regulation on good corporate governance increase. At the heart of these debates is the relationship between management and shareholders, and the notion that engagement is necessary to ensure that management serves the best interest of the company in a responsible manner that takes into account the rights and interests of other stakeholders and the environment.
It is in this context that some BHP shareholders have filed their resolutions for consideration at the annual general meetings in London on Thursday and in Melbourne on November 16.
The first resolution proposes that the company’s constitution be amended to allow for shareholders to express, through ordinary, nonbinding resolutions, opinions or requests "about the way in which a power of the company partially or exclusively vested in the directors has been or should be exercised". BHP’s directors have recommended that shareholders vote against the proposed amendment, arguing "the power to manage BHP’s business is vested in the directors [and] it is important that the directors be able to exercise this power as they see fit and be solely accountable for doing so".
The second resolution is a request, by way of an ordinary, nonbinding resolution, for a review of all payments made by BHP for direct or indirect lobbying relating to climate and energy policy, and an assessment of whether the obstructive position taken by industry bodies such as the Minerals Council of Australia, of which BHP is a member, on Australian climate and energy legislation is consistent with the company’s position on climate change.
The directors argue that while there is a wide range of views on the best way to tackle climate change, BHP has taken a clear position and a review of this nature is unnecessary. But the shareholders’ proposal is not about BHP’s position on climate change. It is about ensuring that BHP’s actions promote its stated position and that the company is not lobbying, either directly or indirectly through its membership of industry bodies or otherwise, in a manner that undermines its stated position on climate change.
A proposal of this nature highlights the clear value of shareholder activism, which can be to ensure that companies do not engage in "behind the scenes" efforts that contradict their own stated commitments.
While BHP is not one of those companies with its head in the sand in relation to climate change (it accepts the science, has a position statement and has met internally set targets), its commitments must be weighed against its particular responsibility for climate change.
BHP is ranked 20th in the Carbon Disclosure Project’s Carbon Majors Report 2017, which lists 100 producers responsible for 71% of global industrial greenhouse gas emissions from 1988 to 2015.
Whether these resolutions will pass remains to be seen. They have been requisitioned by BHP shareholders representing about 0.0075% of the shares and considerable voting power is therefore still needed.
However, the resolutions represent more than a positive or negative vote. They are part of a growing movement to take active ownership of one’s shares — particularly around important questions such as climate change, which transcend the boardroom and require more than a "business as usual" approach. In SA, companies and asset managers should prepare for a more assertive and informed shareholder activism movement in the near future.
• Reddell is an attorney in the Corporate Accountability Programme at the Centre for Environmental Rights.