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February 14, 2013

AFSCME Files 25 Shareowner Resolutions
    by Robert Kropp

The resolutions filed by the AFSCME Employees Pension Plan address sustainability issues including board diversity, human rights policies, separation of Chair and CEO, and lobbying expenditures.

SocialFunds.com -- Year after year, increasing numbers of mainstream investors join sustainable investment organizations in supporting shareowner resolutions addressing the environmental, social, and corporate governance (ESG) performance of companies. One result of the growing support has been an increased willingness on the part of companies to engage with shareowners in order to come to agreement before the resolutions are voted on at annual general meetings. For the past two years, for instance, the Interfaith Center on Corporate Responsibility (ICCR) has reported that members are engaging in more corporate dialogues than the number of resolutions filed.

However, as ICCR points out in its 2013 Proxy Resolutions and Voting Guide, resolutions to continue to be filed, often as "a direct response to a company's 'irresponsibility' on a specific issue, or other emerging events." And the nation's pension funds, aware that their long-term fiduciary duty to beneficiaries includes the consideration of ESG factors, are at the forefront of ongoing shareowner action.

This year, the AFSCME Employees Pension Plan, an institutional investor with more than $850 million in assets under management, has filed 25 shareowner resolutions, "to increase corporate management's accountability and transparency and better align the interests of management with those of shareowners."

AFSCME has filed two resolutions addressing board diversity, which, despite studies indicating that more representative boards can improve corporate financial performance, continues to lag among US companies.

Shareowner resolutions have been filed at Caterpillar, Halliburton, and McDonald's, requesting that the companies report on human rights risks in their operations. Caterpillar has requested that the Securities and Exchange Commission (SEC) allow it to exclude the resolution from its proxy statement, arguing that it duplicates a resolution on global corporate standards submitted by the Presbyterian Church.

AFSCME has filed 11 resolutions requesting that companies separate the positions of Board Chair and CEO. "If the board is led by a chair who is also the Chief Executive Officer (CEO) of the company, then the CEO effectively becomes his or her own boss, eliminating the independent oversight needed to protect shareholder interests," AFSCME stated. "Requiring that different people fill the roles of chair and CEO avoids that fundamental conflict of interest." A report published last year by GMI Ratings found that shareowner returns over a five-year period are almost 28% higher at companies with a separate CEO and chair.

AFSCME has also filed five resolutions calling for disclosure by companies of their policies and payments for direct and indirect lobbying activities. Overall, ICCR members have filed 38 resolutions addressing lobbying expenditures, "including any work done through third parties such as trade groups or nonprofits and membership in and payments to any tax-exempt organizations that write and endorse model legislation."

Addressing one of the most significant risks to global economic stability, AFSCME has filed resolutions with Bank of America, Citigroup, and Morgan Stanley, requesting that the too-big-to-fail banks report on transactions that could enhance shareowner value, including the separation of one or more of their businesses. The stock market shares of the three banks are less than their book values.

"Business as usual in the corporate boardroom needs to end," said AFSCME President Lee Saunders. "These proposals will bring greater transparency and accountability when boards of directors fail to properly represent shareholders' best interests."

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