The Just Report: No Turning Back
On Wednesday, a relatively new activist investor firm owning 0.02% of ExxonMobil stock gathered enough support to win at least two seats on the oil and gas giant’s board. The shockwaves of this outcome, which would have been unthinkable a few years ago, will reverberate throughout every boardroom in America and may even change the course of shareholder activism itself.
The firm, Engine No. 1, and its campaign are emblematic of a generational shift in American capitalism. When it nominated board members to push the company on its climate and clean energy strategy, it did so on the basis of shareholder value creation, not politics or some sense of “social good.”’ The institutional and retail investors who voted in their favor did so because they were persuaded by the business imperative put forth by the campaign. (Disclosure: Engine No. 1executive Jennifer Grancio and ExxonMobil board member Ursula Burns are both JUST advisors.)
Likewise, the 61% of Chevron investors who voted on Wednesday in favor of cutting Scope 3 emissions (emissions from the use of the company’s products) believed this was in shareholders’ best interests.
The same can be said of matters relating to diversity, equity, and inclusion (DEI). As JUST’s managing director of corporate engagement, Yusuf George, explained on CNBC this week while discussing our latest pay equity analysis, this is not about politics. It’s about the right of every worker to be respected, valued, and given a fair shot. That’s the American way. That’s what good business looks like.
Clearly, many shareholders agree. Bloomberg reported there were a record 37 DEI-related proposals this proxy season, with an average 43% of support as of a week ago, up from 21% last year. Strong majorities of shareholders voted for the release of annual diversity reports at IBM(94%), DuPont (84%), Union Pacific (81%), and American Express (60%). Why? Because companies that do better on DEI are more competitive, do better in the market and make more money for shareholders.
This notion that investing in stakeholders is somehow anathema to serving shareholders is a dangerous fallacy. Investing in workers, building strong and diverse teams, supporting local communities, creating good jobs, reducing environmental impacts, doing right by your customers, and yes, running a company with ethics and integrity – this is how shareholder value gets created. It’s how American companies can compete and win on the world stage. And it’s what millions of Americans want.
Be well,
Martin Whittaker
P.S. In honor of our veterans on Memorial Day, we produced this special piece of research. Please check it out.
This Week in Stakeholder Capitalism
Amazon is instituting a plan to reduce worker injuries by 50%.
GM is now supporting unionization at its new battery factories for its electric fleet.
Ford boosts investments on electric vehicles and commits to spend $30 billion.
Shell has been ordered by a Dutch court to cut its carbon emissions.
Under Armour is raising its starting wages to $15 an hour in the U.S.
What’s Happening at JUST
As part of our ongoing work tracking how companies are following through on their DEI commitments, we shine a light this week on pay equity analysis. 85% of Americans overall and 91% of Black American respondents believe it is important for companies to conduct annual pay analyses, yet only 31 of America’s largest employers disclosed conducting an analysis by race or ethnicity and only 14 disclose the gaps. Yusuf joined Andrew Ross Sorkin on CNBC Squawk Box to discuss the details.
Our Corporate Racial Equity Tracker was featured in the Anti-Racism Daily newsletter, and our recent survey work was highlighted in this Financial Times feature marking the anniversary of George Floyd’s death.
Martin appeared in the Financial Health Network’s Emerge Everywhere podcast and Columbia Business School’s Capital for Good podcast to discuss the rise of ESG and stakeholder capitalism.
The Forum
“Context matters. People are not merely financial engines. We are still in the middle of a pandemic even though we are seeing significant improvements. Nearly every facet of people’s work and nonwork lives has been upended.”
- Tsedal Neeley, a professor at Harvard Business School, in The New York Times’ DealBook on how companies should be approaching hiring and working conditions.
“I don’t think you can, in this age, have a dichotomy of what you say outside and what you say inside. That’s not sustainable. Any company that’s doing this is doomed.”
- Hubert Joly, former CEO of Best Buy, on why alignment between C-suites and boards is key to any company’s authentic action to serve its stakeholders.
“This is a landmark moment for Exxon and for the industry. How the industry chooses to respond to this clear signal will determine which companies thrive through the coming transition and which wither.”
- Andrew Logan, a senior director at Ceres, speaking to The New York Times on this landmark activist shareholder result
Must-Reads of the Week
Lots of new research on inequality. McKinsey reports on “Unequal America” through a new opportunity survey that spotlights Americans’ views on economic opportunity, the obstacles they face, and the path ahead to create a more inclusive economy. Morning Consult and Axios’Inequality Index inched up as stimulus checks’ impact winds down. Researchers at the University of Chicago chart the stagnation of average earnings and income inequality since the 1970s in a series of interactives.
Quartz looks at new apps that enable retail investors to vote against things like increased CEO pay during proxy season. The Financial Times reports that this year has broken the record for the most CEO pay increases rejected by shareholders.
Fast Company features a new Glassdoor report that shows LGBTQ employees rate their companies much lower than their non-LGBTQ counterparts, especially workers at Walmart, Wells Fargo, and Amazon.
Forbes chronicles corporate attempts to prevent burnout by adding more vacation days to employees’ calendars. The problem? Most aren’t actually using them. CNBC also reports on how companies are trying to support their workers’ mental health.
Chart of the Week
For Memorial Day, we took a closer look at veteran hiring practices, and saw that companies that disclose specific veteran hiring policies outperform those that don’t. Learn more here.
