Financial Choice Act would limit efforts to advance corporate responsibility
The Financial Choice Act, recently introduced in the House of Representatives, is an attempt to undo many of the provisions of the 2010 banking overhaul law known as Dodd-Frank. American Baptist Home Mission Societies (ABHMS) has broad concerns about the legislation and its efforts to remove protections that are critical for consumers, such as the Consumer Financial Protection Bureau. However, there is an additional provision that, if passed, would limit the voice of ABHMS in using our investment portfolio to advance corporate responsibility.
Specifically, this bill includes provisions that would change the requirements for filing a shareholder resolution with a company in which you hold shares so that only the largest investors — those owning 1% of outstanding stock — could file. Currently, shareholders holding as little as $2,000 in shares for at least a year can do so. In effect, the nation’s largest institutional investors — including the nation’s largest public pension funds — would be unable to file shareholder resolutions.
We are concerned about this because of our long history of socially responsible investing and using this strategy to communicate with corporate Boards and Management. As a founding member of the Interfaith Center on Corporate Responsibility (ICCR), ABHMS has pressed companies such as Chevron, ExxonMobil, and Tyson Foods to improve management of environmental, social and governance risks. Through dialogue, we educate companies about the impact of business operations on communities and work with them to develop and implement strategies that affect positive systemic change. When we find that dialogue does not address the risks in an adequate manner, we file a shareholder proposal to bring an issue before all shareholders for consideration on the annual proxy statement.
This process is an important strategy to mitigate risk, align our investments with our Christian values, and carry out our fiduciary duty. Many of the concerns raised in our shareholder resolutions are linked to long-term risks that are not considered in short-term financial reporting or negative impacts of corporate activities on communities and other stakeholders.
“ABHMS has a strong history of managing its investments in ways that consistently provide strong financial returns. We’ve done so while using our voice to influence corporate leaders to broaden their view of risks and consider the social and environmental impacts of corporate decisions,” says Michaele Birdsall, ABHMS chief financial officer and treasurer. “The idea that our voice, along with the voices of other investors, would be considered too small to count while efforts are underway to prop up institutions considered ‘too big to fail’ flies in the face of our democratic and Christian values.”
We value the shareholder proposal process as it stands because it facilitates communication between shareholders and companies, helps companies mitigate risks, protects shareholder value and improves financial performance, and protects shareholder rights. In response to shareholder proposals we have filed, we have seen companies increase their disclosure of greenhouse gas emissions, adopt human rights policies, and reduce the sale of harmful chemicals. This advocacy strategy is particularly important in a moment of political uncertainty and deregulation, where some of the protections for workers, clean water, and the environment may be scaled back.
ABHMS has sent letters to the House Financial Services Committee noting its opposition to these proposed changes and will continue oppose this anti-investor provision as the legislation moves forward. ABHMS urges American Baptists to contact their Congressional representatives by phone or email to request that they defend the right of shareholders to file proposals with companies. In addition, we invite American Baptists to consider ways they might join or take part in our work on corporate social responsibility.
Mary Beth Gallagher is executive director, Tri-State Coalition for Responsible Investment. Visit ABHMS to learn more about our commitment to socially responsible investing.
The views expressed are those of the author or authors alone, and not those of the American Baptist Home Mission Societies.
