Findings on pay and politics resolutions
In 2021, our analysis of asset managers’ voting performance included shareholder-filed governance resolutions on incorporating ESG metrics into executive compensation. In 2022, we also included shareholder-filed governance resolutions that directly relate company compensation and political spending policies to environmental and social issues. We grouped these together under the heading ‘pay and politics’.
- Finding 23: Five of 47 pay and politics resolutions received majority support, with an average of 33% overall support.
- Finding 24: There is limited investor interest in incorporating climate considerations into executive compensation.
- Finding 25: European asset managers vote much more strongly in favour of healthcare companies aligning their political spending with their publicly stated values than US asset managers.
- Finding 26: Seven asset managers voted against lobbying disclosure resolutions that received majority support, despite seeing the reputational damage caused by opaque lobbying payments.
Finding 23: Five of 47 pay and politics resolutions received majority support, with an average of 33% overall support.
Overall shareholder support for pay and politics resolutions ranged between 8% and 60%. Five reached majority support. There were five categories of pay and politics resolutions:
- Alignment of political spending with values: disclosure-oriented resolutions requiring the reporting of political spending and its alignment with companies’ stated values. This category of resolution received the highest percentage support (Figure 19). One of nine received majority support.
- Lobbying payments and policy: disclosure-oriented resolutions requiring reporting of payments used for lobbying, membership of tax-exempt organisations and decision-making for payments. Two of 21 received majority support.
- Political contributions: disclosure-oriented resolutions requiring statement of funding and support directed to election candidates or electioneering-related lobbying and charitable donations, including rationale for activities. Two of 11 received majority support.
- Climate metrics for executive pay: action-oriented resolutions asking for emissions reduction targets to be incorporated into executive remuneration calculations. None of two received majority support.
- Pay disparities: resolutions calling for reporting on or adoption of a policy on pay disparities between executives and non-executives. None of four received majority support.
Figure 19 – Of the pay and politics resolutions, those relating to alignment of political spending with values got the highest average overall support.
Finding 24: There is limited investor interest in incorporating climate considerations into executive compensation.
Just two resolutions in our analysis requested that companies disclose or adopt executive remuneration policies that incorporate climate change performance. One at Japanese electric utility Electric Power Development Company (J-Power) got 19% support whereas one at travel company Booking Holdings got 15% support.
Of the 61 asset managers that had holdings in J-Power and/or Booking Holdings, 27 voted against or abstain on these resolutions. According to their published rationales, these investors are reluctant to support them for two reasons. First, they do not want to be seen as intervening in what they see as the role of remuneration committees. Second, they do not see the added value that remuneration policies might bring to reducing emissions.
Executive compensation policies that incorporate a meaningful climate metric and are weighted appropriately can be powerful incentives to align a company’s strategy with the Paris Agreement. This is especially true for companies in sectors with relatively higher abatement costs compared to the rest of the economy, such as J-Power.
Finding 25: European asset managers vote much more strongly in favour of healthcare companies aligning their political spending with their publicly stated values than North American asset managers.
Six of the nine resolutions requesting companies to disclose how their political spending aligns with publicly stated values were filed at healthcare companies. They received between 34% and 50% support overall.
Following the COVID-19 pandemic, the power of healthcare companies and, subsequently, their links to political groups have come to the forefront. Shareholders therefore want to know where their political spending is going and whether it aligns with the company’s public values. This allows them to assess potential reputational risks.
We observed a regional divide in investor attitudes towards these resolutions. Of the 47 European asset managers, 44 voted for these resolutions, while 18 of the 21 North American asset managers voted against one or more of these resolutions (Figure 20).
Figure 20 – European asset managers in our analysis supported resolutions on alignment of political spending more often than North American asset managers
Proxy advisors, as well as asset managers, disagreed on how to vote on these resolutions. ISS recommended investors vote for all six of these resolutions, whereas Glass Lewis recommended they vote for just one.
Investors that opposed these resolutions stated that reports on the alignment of spending with values are not necessary as disclosure is already sufficient. Yet these resolutions specifically asked companies to fill a gap where disclosure on political spending may already exist, but there was a lack of transparency about spending being in line with publicly stated values.
We hope to see some of these resolutions pass in the 2023 proxy voting season.
Finding 26: Seven asset managers voted against lobbying disclosure resolutions that received majority support, despite seeing the reputational damage caused by opaque lobbying payments.
Two of 21 resolutions about lobbying payments and policy received majority support (at Netflix and Travelers), with three more receiving between 45% and 50% support (at Caterpillar, Uber and Amazon).
These resolutions requested baseline corporate governance disclosure. The reputational risks from opaque lobbying payments were made salient in 2022 by the negative media attention Federated Hermes received for sponsoring the State Financial Officers Foundation. It is therefore surprising that seven US asset managers opposed one or two of these resolutions which otherwise received majority support (Figure 21).
Figure 21 – Seven asset managers opposed one or both of the lobbying resolutions that received majority support
Case study: Uber
Ask: Prepare an annual report on lobbying activities
Resolution number: 4
AGM date: 9 May 2022
Result: 45.2% For / 54.8% Against
The resolution requested Uber to annually disclose its direct and indirect lobbying expenditures, and whether they are consistent with its expressed goals and shareholder interests. The same resolution was filed in 2021 and received 31% support overall. The 2022 result of 45% reflects a considerable step up in investor support. Support from the BlackRock, Vanguard and State Street Global Advisors would have given this resolution majority support.
In the US, Uber has spent tens of millions of dollars lobbying for Proposition 22 – legislation that would keep workers legally defined as independent contractors rather than employees. Meanwhile, the so-called ‘Uber files’ have revealed the extent to which European politicians have been lobbied both directly and indirectly by Uber.
In the supporting statement, the filer stated that ‘Uber also lobbies extensively at the state level, where disclosure is uneven or absent. Uber was a prominent participant in a $200 million ballot initiative in California to keep drivers classified as contractors’. Despite this, asset managers voting against the resolution stated that Uber’s current disclosure was sufficient.
It was predominantly European asset managers that supported this resolution. They stated that better disclosure enables shareholders to properly evaluate risks. One asset manager specifically mentioned the negative attention to Uber’s lobbying to maintain employees defined as independent contractors.
 Ritz (2022) Linking Executive Compensation to Climate Performance. California Management Review 64(3):124-140. https://doi.org/10.1177/00081256221077470
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 Bellan R (2022) Uber shareholders to vote on lobbying disclosure proposal. In: TechCrunch. https://techcrunch.com/2022/05....
 Cann V (2022) Uber’s privileged access to politicians shows the lobby system urgently needs to change. The Guardian.
 Uber (2022) Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 - Uber. https://www.sec.gov/Archives/e....
All links accessed November 2022.