According to the report, the number of Corporate Social Responsibility (CSR)-related shareholder proposals that came to a vote rose from 150 in 2000 to 191 in 2010, and those proposals garnered average voting support of 18.4% of votes cast in 2010 vs. just 7.5% a decade earlier. The percentage of social and environmental shareholder resolutions that garnered at least 30% shareholder support, a critical threshold for many corporate board members, rose from just 2.6% in 2005 to 26.8% in 2010.
“Increased awareness among investors and regulators of the reputational and financial risks associated with CSR and environmental sustainability places more pressure on companies to identify and manage these issues. This trend has truly evolved over the last decade and it is gaining more traction as reflected in the growing number of proposals voted on and the level of “for” votes cast this season,” explained Steve Starbuck, Americas Leader Climate Change and Sustainability Services, Ernst & Young LLP.
Driven by concerns about the financial and reputational risks associated with climate change and sustainability, institutional investors are increasing the number of environmental and socially focused shareholder proposals and making them more specific. A growing number of these proposals are linking social and environmental matters to traditional governance issues, such as compensation and the qualifications of board members.
“As shareholder resolutions related to climate change risk and other environmental issues increase, the most progressive, forward-thinking companies will be prepared to address stakeholder concerns,” said Ann Brockett, Americas Assurance Leader, Climate Change and Sustainability Services, Ernst & Young LLP.
In response to the report findings, Ernst & Young executives developed the following list of leading practices that companies and their boards can consider as they react to shareholder proposals related to social and environmental issues:
Enhance dialogue with shareholders and improve disclosure in key areas related to social and environmental issues. Robust sustainability reporting can help with this.
Ensure that directors’ skills are relevant to the chief areas of stakeholder concern, including risk management tied to social and environmental matters. Then provide shareholders with a better understanding of how directors’ backgrounds and skills contribute to corporate strategy.
Consider whether using non-traditional performance metrics – including those related to environmental/sustainability issues – could help align compensation with risk.
For more information and to access the full report, Shareholders press boards on social, environmental risks, visit www.EY.com/climatechange.
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