Shareholder activism has gone under the microscope over the last year, exposing the intricate ways Environmental Social Governance and related issues have infiltrated the proposal and voting processes. Annual meetings and proposal submissions have been overrun with climate and diversity concerns, which have proven to be a distraction or burden on companies and have also resulted in less profitable investment strategies.

The typical consumer and shareholder ultimately suffer the consequences through smaller returns and reduced company efficiency. Businesses are having to allocate significant time, money and resources to handle concerns that bear little on their overall performance.

A Security Exchange Commission bulletin in November 2021 stated that “proposals that raise issues of broad social or ethical concern related to the company’s business may not be excluded.” That fostered a lax environment for shareholders to pursue resolutions that have little to no material effect on the company’s financial performance. This approach has been a disaster. Not only have ESG-related issues taken quite a hold, but the sheer volume of proposals submitted to companies has been steadily increasing.

Last month, the American Consumer Institute published a paper discussing the matter, detailing some of the issues surrounding the annual shareholder meetings and proposal process. The number of proposals being submitted to companies has seen a dramatic climb over the last several years, and half of them concern social and political affairs. Proxy advisory firms, which give voting recommendations, are also culpable; they increasingly favor ESG topics.

Read the full Inside Sources article here.

Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal

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