A Sneak Peek Into the Corporate Boardroom
May 2023
In this month’s newsletter, we’re celebrating the fact that the Fennel app is no longer in beta, and has officially launched to the public! That means anyone can go to their respective app store right now, download the app, and create an account. No more waitlist!
And what better way to celebrate than to unveil Fennel’s first ever creative campaign, “Behind Closed Doors”?
Fennel worked with creative studio 10 Days to put together a dramatized version of what goes on during corporate shareholder meetings (you know, behind closed doors).
This video revolves around an actual 2022 shareholder meeting at a large, high-profile US company. The shareholder votes depicted in the video are real, and a few of the lines said in the video were direct quotes from the meeting transcript.
Check it out below:
The goal of “Behind Closed Doors” isn’t to single out a specific company (although, we were advised not to mention the featured company by name), and it isn’t about the votes in the video either. This could be any large public company and chances are there could be some impactful shareholder proposals on the ballot.
The goal of this campaign is to show people that large public companies are voting on big, impactful decisions every year at their AGMs. And if you own stocks, you can vote too.
If you don’t vote — and most individual investors don’t — just know that it’ll be the companies and large financial institutions making these decisions in your place. Which means you could be missing out on voicing your opinion when it comes to issues like corporate lobbying, plastic pollution, public health, animal welfare, etc. — things that you might care about.
So show up, vote, and make your voice known. As they say in Succession, “you can’t make a Tomelette without breaking some Gregs.”
What We’re Talking About
Companies are laying low on ESG as backlash intensifies (Axios)
What happened: Axios spoke to a few ESG experts about the ESG backlash that has been going on in certain corporate and political circles. What used to be “an easy layup to score good press” for companies, has since become highly politicized, thanks in part to well-funded think tanks.
We’ve seen this battle take place in the political realm, but Axios highlights this trend by pointing to the boardroom — noting that shareholders have filed 68 anti-ESG proposals in 2023.
“About one-third of the anti-ESG proposals this year are focused on diversity,” Axios points out, “asking companies, including Apple, JPMorgan, Coca-Cola and McDonald’s, to report on the ‘risks’ that their anti-discrimination or racial justice efforts pose to their business.”
Why we care: Fennel lives and breathes ESG and shareholder activism, so we decided to take a closer look at these “anti-ESG” proposals that Axios references, and specifically the one mentioned at JPMorgan. This proposal is asking JPM to “report on ensuring respect for civil liberties.” It argues that financial services companies sometimes use subjective standards around “intolerance” and “hate speech” to discriminate against people based on their religion or political views. (Remember the backlash against PayPal after its “misinformation” policy?)
But just because this proposal comes from the conservative end of the political spectrum, doesn’t make it “anti-ESG.”
Disclosing information about how companies impact civil liberties is exactly what ESG is about. The other proposals at Apple and McDonald’s ask those companies to disclose “the ‘risks’ that their anti-discrimination or racial justice efforts pose” because those investors think these policies affect business. Again, that’s what ESG is.
Upcoming Shareholder Votes
(May 16) Do you approve of Tesla’s executive compensation package? — Technically this isn’t an “upcoming” vote because it just happened, but it’s worth unpacking Tesla’s executive compensation package because it shows how Elon Musk, the world’s second richest person, gets paid.
Elon Musk, the Technoking of Tesla and Chief Executive Officer (yes that’s his official title, check the proxy statement), doesn’t collect a salary. Instead, he gets paid in stock awards when Tesla passes certain performance milestones. This incentivizes Musk to increase Tesla’s share value as much as he can, so he can get paid as much as possible. This model has made him quite rich. In 2021 alone he made over $23.4 billion in realized stock gains. That’s just one year.
(May 24) Should Amazon disclose more information about how it pays taxes? — Shareholders are asking Amazon for more transparency into how the company pays taxes, noting that it doesn’t “disclose revenues, profits or tax payments in non-US markets” and has been called out by President Biden for not paying federal income tax.
Amazon pushes back, saying that for 2022 it paid “$2.2 billion in current federal income tax expense.” The Institute on Taxation and Economic Policy states that Amazon paid $2.1 billion in federal income tax on $35.1 billion income in 2021, which was an effective tax rate of 6.1% — well below the 21% corporate tax rate.
But that’s because Amazon was able to qualify for numerous corporate tax breaks, which many large companies use to significantly lower their tax bill. The issue of large companies not paying “their fair share” of taxes really lies in US tax laws. Still, shareholders want more transparency, just in case the laws ever change.
A Noteworthy Number
$100 million
That’s the value of a sponsorship deal that FTX offered Taylor Swift — which the singer ultimately turned down.
Before FTX failed spectacularly late last year, it put a lot of effort into marketing itself as a respectable company, with Super Bowl ads, stadiums bearing its name, and a long list of celebrity endorsements.
FTX wanted to add Swift to that list, but she declined. Maybe it’s a good thing that she did, because now some of those celebrities are being sued as part of a class action lawsuit.
So why did she decline? Thanks to that ongoing class action lawsuit, we now know.
The FTX deal would’ve had Swift sell tickets to her fans as NFTs, but according to lawyers involved in the lawsuit, she asked if these NFTs counted as “unregistered securities” — which would’ve put them in murky legal territory. Swift wasn’t satisfied with the answer, so she pulled out of the deal. (Coincidentally, allegedly selling unregistered securities is one of the issues raised in the class action lawsuit.)
So I guess the lesson is that doing your due diligence can really save you in the long run. It’s also a reminder that Taylor Swift is incredibly financially literate. She’s the daughter of a managing director at Merril Lynch, wanted to be a financial adviser when she was younger, and even gave rapper Fetty Wap advice on how to manage his music career more like a business.
In the words of the pop star, “I keep my side of the street clean.”
Your Bestie,
Fennel
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