By Bob Plain in
Rhode Island’s Future
General Treasurer Seth Magaziner began pushing some of the corporations the state invests with to be more socially responsible in April.
Since then the $8 billion pension fund used its proxy voting
power to withhold affirmative votes for either excessive executive compensation
or lack of racial or gender diversity on boards of directors from 257 corporations – including eBay, Amazon,
Netflix, Facebook, Loews, JP Morgan Chase, Fidelity, United Health, General
Motors and at least three airlines.
The treasurer’s office created this dashboard to track the program.
The treasurer’s office created this dashboard to track the program.
“Our proxy voting program demands gender and racial diversity in the boardroom because a range of backgrounds and experience will help companies succeed and grow in the ever-changing global marketplace,” Magaziner told RI Future.
Now the treasurer is stepping up the state’s new activist
investment strategy to include shareholder resolutions – or requests on behalf
of shareholders for more information from the company.
Rhode Island joined onto a shareholder resolutions with Wells
Fargo, to “address recent revelations of widespread consumer fraud” earlier
this month and will be co-signing resolutions with several with big oil
companies “requiring the corporations to disclose their lobbying activities,”
according to news releases from the treasurer’s office.
“As Treasurer, I have a fiduciary responsibility to move the
companies in which we invest toward more sustainable business practices that
will help them succeed,” Magaziner said. And he doesn’t think consumer fraud
allegations or undisclosed astroturfing are good for business.
“On behalf of Rhode Island taxpayers and members of the State’s
pension system, we are entitled to know what Wells Fargo allowed to happen and
what steps they are taking to ensure that it can never happen again,” Magaziner
said of the Wells Fargo resolution.
In a letter to Wells Fargo that accompanied the resolution,
he wrote, “we are concerned that the conditions that led to such widespread
misbehavior across the company have yet to fully be corrected. A full
accounting of the root causes of the widespread fraudulent activity at the
company and a clear plan for corrective action going forward will go a long way
to rebuilding trust and increasing shareholder value.”
The formal resolution calls for a report by October,
2017. “Shareholders believe a full accounting of the systemic failures allowing
these unethical practices to flourish are critical to rebuilding credibility
with all stakeholders and will strengthen risk management systems going forward,”
it says.
A resolution with ConocoPhillips suggests the oil
company is under-reporting to its shareholders the amount it spends to
influence public opinion.
“As shareholders, we have a right to know whether energy
executives are using our money to influence lawmakers,” Magaziner said. “I am
particularly concerned that energy companies are using investors’ dollars to
block policies that will protect coastal areas like Rhode Island from the
threat of climate change.”
In his letter to ConocoPhillips dated November 22, Magaziner
wrote, “The undisclosed use of company assets to influence legislation and
regulation may conflict with the interests of shareholders and the long-term
position of the company.”
The resolution would require ConocoPhillips to report
all direct and indirect lobbying and “grassroots communication” and to disclose
spending at the national, state and local levels.
Similar shareholder resolutions will be filed with Exxon Mobile,
Chevron and Devon Energy before the end of the year. Rhode Island could be the
lead filer with Devon Energy. The United Steelworkers and the Philadelphia
Public Employees will be lead filers on the others. The ensuing reports could
shed light on how much big oil companies spend on astroturfing, or creating
advocacy groups that appear to be grassroots efforts but are secretly funded by
special interests.
The state pension fund owns about $7.5 million in Wells Fargo
stock, or 143,656 shares which are trading at about $52 per share today. It
owns about $1.6 million in Conoco Phillips stock, or 35,123 shares trading at
about $48 a share. Magaziner said being an active shareholder is a more effective
means of affecting positive corporate change than divestment.
Other states also use such “shareholder engagement” strategies
to influence corporate policy, Magaziner spokesman Randy Rice said.
Massachusetts and California have been active shareholders for many years, and
Rice also mentioned New York, Connecticut, Pennsylvania and Oregon. He said the
state plans to file more shareholder resolutions in the near future.
“We add another voice on these issues,” said Deputy Treasurer of
Policy Kelly Rogers, who oversees shareholder engagement activities for the
treasurer’s office. She half-jokingly called the strategy a “shareholder
revolution.”
Bob Plain is the
editor/publisher of Rhode Island's Future. Previously, he's worked as a
reporter for several different news organizations both in Rhode Island and across
the country.
