Though voting is most often associated with the actions of individual citizens, Yale is casting a vote of its own on issues of climate change.
This spring, Yale’s Advisory Committee on Investor Responsibility has begun to use proxy voting — the process by which the University casts its vote on a variety of shareholder resolutions — to formally support corporate practices of sustainability. In August, University President Peter Salovey announced new guidance for the ACIR that instructed the University to “generally support” shareholder resolutions, proposals that are submitted by investors in a company, that include such issues as the disclosure of greenhouse gas emissions. Salovey also said the University would endorse resolutions that encourage strategies designed to reduce the company’s long-term impact on the global climate.
Chair of the ACIR and law professor Jonathan Macey LAW ’82 said that from early spring until June, his committee will review the shareholder proposals of firms in which the University possesses individual stock, and in following the outlined aims set forth by the Yale Corporation’s Committee on Investor Responsibility, will now formally support the resolutions pertaining to environmental sustainability. Though Macey and Provost Benjamin Polak expressed support for the type of shareholder engagement achieved by proxy voting, others argued that this form of pressure is insufficient in changing corporate behavior.
Moreover, Macey conceded that shareholder resolutions ultimately are not the sole solution.
“I don’t think in-and-of-itself it will end climate change problems, but it is part of a large mass movement,” Macey said. “I think it is an important step.”
Under the Securities and Exchange Commission’s 14a-8 rule, provided that certain conditions are met, a publicly traded company must allow the opportunity for shareholders to vote via ballot — called “proxies” — on a range of issues including the election of a company’s board of directors, approval of company auditors and in this case, proposals regarding issues of climate change. Macey said that when Yale received proxies drafted by environmental groups and in pursuant to Rule 14a-8, the University generally votes the pro-environmental line.
Macey added that the ACIR is at the beginning of the process. Though he could not disclose the exact number of resolutions that the committee was actively reviewing, he estimated that it was in the range of 20 to 50. Macey added that the University’s policy and practices regarding proxy voting are guided by the principles of “The Ethical Investor” — a 1972 book that the Yale Corporation adopted in the same year to outline the University’s responsibilities to address the social impact of its investments.
“The University will vote for a proposition which seeks to eliminate or reduce the social injury caused by a company’s activities,” the University guidelines state. “[Yale] will vote against a proposition which seeks to prevent such elimination or reduction, where a finding has been made that the activities which are the subject of the proposition cause social injury.”
Macey said that in the past, the ACIR has voted aggressively on resolutions that limit tobacco advertisements aimed at children and other related issues. According to its 2013–14 report, the ACIR also considered and voted on proxy resolutions in areas including consumer protection, corporate political contributions and equal employment opportunity.
Macey added that proxy voting carries unique benefits over divestment since it allows shareholders to maintain influence over corporate behavior, rather than forfeit that power.
“If you sell your stock, you have no further interactions with the company, and you are selling your share to someone who — by definition — is [not only] declining to divest but is actively interested in accumulating shares and — by definition — cares less about the social issues than you do, [since] otherwise they wouldn’t be buying the share you are selling in protest,” he said. “Whereas if you are engaging with a company, you remain connected to the company and are introducing [a] democratic pulse to try to influence the company behavior.”
Macey said that at this stage, the ACIR would only be voting on resolutions conceived and drafted by other individuals or groups. He noted, however, that writing and proposing original resolutions is “certainly within the realm of possibility” going forward.
Polak said a benefit of proxy voting is that it allows Yale to take action that is more than symbolic in nature.
“I am not saying symbols are worth less or aren’t effective — symbols are effective,” Polak said. “But with voting proxies, you can actually make things happen, you can actually participate in votes, and actually change behavior of companies, and that is something that Yale does and will continue to do.”
Macey said resolutions that pass — typically by majority vote with each share correlating to a vote — force the board of directors to consider the issue presented, although he noted, resolutions may be phrased in a non-binding manner. However, because Yale typically holds a large number of shares in the companies in which it has invested, their vote could be especially influential.
Still, members of Fossil Free Yale — the student group advocating for divestment from the fossil fuel industry — remain largely unconvinced that these measures will yield tangible change.
FFY project organizer Mitch Barrows ’16 said that though FFY continues to work with the ACIR to advocate for fossil fuel divestment, it will not work directly on any shareholder resolutions. He said shareholder engagement has largely proven ineffective in addressing the social injustice committed by the fossil fuel industry.
“‘The Ethical Investor,’ Yale’s investing guidelines, gives convincing theoretical arguments against shareholder resolutions; in most cases, shareholder power is obstructed, fractional and slow to take effect,” Barrows wrote in an email. “These firms strategically place obstacles in their bylaws to inhibit the effectiveness of shareholder resolutions, limiting their prevalence and diminishing their importance.”
He added that even in the few cases in which companies have signed on to shareholder resolutions, comprehensive efforts have not been effective at requiring emission disclosure or spurring institutional change to limit the expansion of greenhouse gas emission.
Still, Macey said the ACIR would work with and welcome the input of FFY.