It’s a matter of social justice, said Tim Brennan, the UUA’s treasurer and vice president of finance, who filed the resolutions. “There are CEOs making as much in a day as the average worker makes in a year,” he said. The resolutions bring attention not only to the specific issue of executive compensation, he added, “but to the broader lack of fairness in the distribution of wealth in our country.”
The UUA filed resolutions asking for a shareholder vote on executive compensation at three companies in which it owns shares: Abbott Laboratories, a pharmaceutical company; Clear Channel Communications, a media conglomerate; and Valero Energy Corporation, the largest oil refiner in North America.
The “say on pay” resolutions call for an annual, non-binding advisory vote by shareholders on compensation packages for CEOs and other top executives. Growing discontent with the disproportionately large compensation CEOs receive is driving the new shareholder activism. New rules adopted by the Securities and Exchange Commission in July will require corporations to reveal in one lump sum the total value of compensation packages given to their top five executives. “People will be shocked by the numbers when they come out,” Brennan said.
Last year, only seven corporations allowed shareholders to cast advisory votes on executive compensation, according to the Washington Post. This year, 50 companies will let shareholders vote. On February 14, the insurance company Aflac, Inc., announced that it would become the first major U.S. company to let its shareholders vote on executive pay.
The UUA’s resolutions are among 44 filed by a diverse group of investors coordinated by the Employees Pension Plan of the American Federation of State, County, and Municipal Employees (AFSCME) and Walden Asset Management. The UUA is a member of the Interfaith Center on Corporate Responsibility (ICCR), a coalition of religious institutional investors that lobbies corporations for greater social and environmental responsibility. ICCR members joined in filing the “say on pay” resolutions.
The UUA has a long history of shareholder activism. In 1966, the UUA joined with other investors to press Eastman Kodak to hire more African Americans in its headquarters city, Rochester, N.Y. According to a UUA history of socially responsible investing, the Eastman Kodak initiative was the first time that shareholder activism resulted in changing a corporate policy. In 1967 the UUA General Assembly passed a resolution asking the Board of Trustees to “exercise the power represented by the Association’s ownership of common stock as an effective instrument for promoting social justice by combating discriminatory business practices.” The General Assembly has passed a dozen resolutions on corporate responsibility since 1967.
In 2000, the UUA scored another success as lead filer of a shareholder resolution calling for an end to discrimination based on sexual orientation at Home Depot.* The company complied in the spring of 2001. In 2005, the General Assembly adopted a resolution promoting “performance-based executive compensation” and “full disclosure of charitable giving and political activities” from companies in which the UUA invests.
“When the UUA board established the Committee on Socially Responsible Investing,” said Jim Gunning, a longtime member of the committee, “we had to go back to GA resolutions, to the Seven Principles, to Actions of Immediate Witness, and ask, ‘What are the UU values expressed here?’ We try to be clear about why we’re taking on some issues.”
Brennan and Gunning are optimistic about the impact that shareholder advocacy can have on corporate decision making. “These resolutions on ‘say on pay’ have been getting 30 and 40 percent support,” Brennan said. “There may be a perception that they’re not even getting the majority, but the fact is, the boards know what’s going on. They have an upheaval among their biggest investors who are unhappy with the way the company is being governed.”
Gunning said, “It’s shareholder democracy. Corporations wield enormous power in our economy. We found they don’t pay attention unless shareholders speak up.”
The $130 million in the UUA’s General Investment Fund is invested by professionals with guidance from the board-appointed Investment Committee, the Association’s treasurer and vice president of finance, its elected financial advisor, and the Committee on Socially Responsible Investing. The UUA uses socially responsible investing screens with the 35 percent of the fund it has invested in U.S. securities. Brennan said the UUA also urges the fund managers that control its mutual funds and international investments to observe socially responsible investing guidelines. (The UUA’s investment policies and guidelines are available on its website; See below for link.)
In addition to the three executive compensation resolutions it filed this year, the UUA is also the lead filer in a shareholder resolution asking Starwood Hotels and Resorts Worldwide, Inc., which owns the Sheraton and Westin hotel chains, to disclose its greenhouse gas emissions.
Christopher L. Walton contributed to this report.
Clarification 3.6.07: This sentence has been amended to clarify that the UUA filed a shareholder resolution with Home Depot. The dozen General Assembly resolutions that inform the UUA's investment practices should not be confused with shareholder resolutions filed by the UUA as an owner of corporate stock. Click here to return to the modified sentence.
- Socially Responsible Investing. Resources from the UUA Committee on Socially Responsible Investing. (UUA.org)
- Interfaith Center on Corporate Responsibility. Coalition of religious groups and other investors. (iccr.org)
- UUA Investment Policies and Guidelines. Includes appendices on socially responsible investing screens and manager selection criteria. (UUA.org)