The Rundown: Everything you need to know about conservative activist shareholder proposals

Later this month, activists will target retailer Kohl’s with a proposal to set up a committee to question whether charitable donations to LGBTQ+ groups have harmed its bottom line, per the company’s 2024 proxy statement.

The weapon of choice? Shareholder proposals.

OK, what are those?

Essentially, anyone holding a certain amount of shares in a company can table a proposal for other shareholders to vote upon. The qualifying thresholds differ across countries, but in the U.S., you’ll need to have held $25,000 worth of stock for at least a year, or smaller amounts over a longer amount of time.

Shareholder proposals are one of the ways that the beneficiaries of a company can keep its management honest, especially on environmental, social or governance (ESG) matters. “It’s all part of good corporate governance,” said Sophie Marjanac, head of ClientEarth’s corporate accountability team. “Shareholders are meant to hold boards to account on these sorts of issues.”

Not every request goes to a vote — Walmart and Verizon got permission to ignore some recent proposals — but those that do give shareholders a chance to push a board into action.

So, why does this matter?

The results of proposal votes aren’t usually binding, but if your goal is to increase political pressure on company management, an advisory vote might do the trick. Over the last decade, activists have used shareholder proposals to nudge companies to employ more women in top jobs, or work harder to reduce their environmental impact, explained Andrew Behar, the chief executive officer of As You Sow, a non-profit that uses shareholder advocacy to promote environmentally and socially conscious corporate behavior.

He told Digiday that As You Sow had been able to get over a hundred companies to agree to publish more detailed DEI disclosures last year by filing shareholder proposals.

“Last year As You Sow had 210 engagements and 99 companies agreed to take action, a great many of them on DEI disclosure,” he said, without naming the companies it had targeted. “We escalated 111 by filing shareholder resolutions; 56 agreed to terms and we withdrew. The remainder went to a vote which then led to more engagements and action by the vast majority companies.”

According to data analytics firm ISS Corporate, Russell 3000 companies in the U.S. face 730 shareholder proposals in 2024, up 7% from 2023. 11% of those, a spokesperson told Digiday, were considered anti-ESG proposals; around 40 were filed in 2023.

Most anti-ESG bids fail; according to ISS Corporate, median support for such votes was below 2%. “The anti-ESG crusade is cynical political theater,” said Behar.

Political theater can still put a dent in a brand’s reputation, though. A successful shareholder rebellion might cut short years of careful work courting a given demographic, for example, while the time and resources required to fend off a challenge might embroil a brand in an unwanted culture war during an election year.

Why are proposals on the rise?

Marjanac said that the rise in anti-ESG proposals showed how politicized that topic had become. “This anti-ESG movement is really political. It’s been pushed by Republican attorneys general and right wing pressure groups in the U.S. essentially reacting against ESG issues rising up the corporate agenda.”

Behar suggested the rise in proposals was part of a wider effort by conservative groups to “flood the zone.“ The proposals might not change policies at the companies they target, but they can generate press for a wider cause and, he added, potentially discredit shareholder activism as a means of holding companies accountable.

“They are threatened by the success of pro-ESG shareholder advocacy,” which he said had succeeded because it was rooted in good business sense, rather than ideology.

“As You Sow bases its resolutions on solid data. We have analyzed 1,600 companies over five years and seen a statistically significant correlation of increased diversity in management with financial outperformance on eight key financial metrics. Asking a company to outperform is what we do.“ By comparison, he added, “anti-ESG resolutions try to make the case that white men are being discriminated against without looking at the data or impact.”