Apple DEI Efforts Are a Target of Activist Shareholder Proposals

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Apple CEO Tim Cook addresses an audience via video screen
Apple CEO Tim Cook. Apple’s board has opposed every shareholder proposal since 2000. (Photo by Chesnot/Getty Images) Getty Images

At Apple’s March 10 shareholder meeting, there were five shareholder proposals. All were voted down, including the “Civil Rights and Non-Discrimination Audit Proposal,” which failed by a better than 70-to-1 voting margin.

Despite its seemingly neutral title, the proposal questioned whether Apple’s diversity, equity, and inclusion, or DEI, programs should exist at all. 

The loss doesn’t bother the National Center for Public Policy’s Free Enterprise Project, the conservative shareholder activism organization behind the proposal. The group didn’t expect a win. It’s proposal is part of a long game—not just for the National Center but more broadly activists on the right, who are adopting the shareholder proposal strategies effectively built and used by groups on the left for decades. Their goal is to eventually achieve the complete end not only of DEI, but all environmental, social, and governance (ESG) goals, of which DEI is just a part. 

Apple isn’t an isolated target. Across corporate America, there has been a “well-funded and vocal reaction” to the success of worker-and environment-friendly shareholder proposals over the last 50 years, according to ProxyPreview, which monitors ESG-related shareholder resolutions from a pro-sustainability orientation, in its 2023 edition. ESG and DEI programs are a particular target, the organization wrote, because they are perceived to “discriminate against conservative white people.” 

Anti-ESG shareholder propsals soar

The number of anti-ESG proposals for 2023 stood at 43, up 60 percent from last year. Other companies facing proposals that challenge their DEI efforts include Coca-Cola, PayPal, John Deere, and Home Depot. Such activity is only part of a broader effort that includes state-level anti-ESG legislation that, among other things, seeks to prohibit public employee pension funds from considering ESG factors in making investment decisions. President Joe Biden’s first veto, which occurred earlier this month, was of a Republican-led bill that would overturn a Department of Labor rule allowing pension funds to consider ESG factors in their investments.

Apple—which didn’t respond to multiple requests for an interview—would seem far from an ideal subject for such an action. The company historically hasn’t been friendly toward shareholder proposals. Since at least 2000, the company’s board has opposed everyone it has received. Over the years, proposals have focused on transparency in how the company addresses forced labor in its supply chain, improved recycling of computer products, executive compensation—activists set them up and Apple’s board knocks them down, and because shareholders typically follow the board’s lead, they die.

However, liberal activists kept coming back time and again and in 2022, the dynamic changed for the first time in many years when shareholders voted in favor of two outside proposals. One called for the board to reconsider the use of non-disclosure clauses “in the context of harassment, discrimination and other unlawful acts.” The other? A call for an independent audit of the company’s DEI efforts to be sure they were effective enough.

Apple’s self-reporting shows a mixed record of DEI success. Since 2014, its U.S. workforce has gone from majority to plurality White and minority groups have gained some ground. (Racial reporting in much of the rest of the world is not allowed by laws in other countries.) But the percentage of tech staff that was Black fell from 2014 to 2021. And globally, men still make up about two-thirds of all employees. Apple states, “Because even a 1 percent improvement impacts a substantial number of people, increasing overall representation takes time.”

Apple’s DEI efforts are a work in progress

From a DEI perspective, there is a lot of room for improvement. Apple points to justice and equity as one reason for its efforts, but it makes a business case for DEI as well. While the company has thrived despite its lackluster progress, it claims “a culture where everybody belongs [is] what sparks our innovation.”

That isn’t surprising. Many sophisticated investors and large sovereign wealth, pension, and other funds see long-term value in ESG initiatives. Big funds don’t act from purely altruistic motives, said Mohammed Zakriya, an assistant professor of finance at IESEG School of Management in Lille, France, who has studied the topic. “They have a monetary mindset because they exist to make profits for investors,” he said. “They state it’s purely for long-term survival [of investments], which ties into profitability.” For example, planning offices and factories with an eye on potential environmental impact can mean reduced future costs due to interrupted operations and loss of property. A more inclusive staff can lead to a broader collection of backgrounds, cultural knowledge, and experiences that, according to researchers, can improve the chance of creativity and innovation.

So why do groups oppose equal treatment in hiring and employment, let alone ESG in general? Often, it’s ideological. The defeated proposal claimed DEI programs seem to advocate “distribution of pay and authority on the basis of race, sex, orientation and ethnic categories rather than by merit” and that there’s a concern “the programs themselves are deeply racist, sexist and otherwise discriminatory.”

Ethan Peck, an associate for the National Center’s Free Enterprise Project, calls ESG “a complete scam.”

“DEI is a scam, too,” Peck says, who adds climate science is as well. 

Peck says such programs are attempts by top executives “doing the bidding of the U. N. and organizations like the World Economic Forum and Blackrock” to convince people to take actions they themselves wouldn’t. The point is to “take power away from shareholders and give it to the elite” by saying “we have to do it for the social good.” He didn’t cite any evidence for his theory.

“When you hire someone on the color of their skin, you’re violating the Civil Rights Act,” Peck said. That is, Title VII of the Civil Rights Act of 1964, under which it is illegal for employers to discriminate against anyone “because of such individual’s race, color, religion, sex, or national origin.”

“We’re taking the only avenue available to us to stop them,” he adds. 

Anti-ESG efforts funded by the fossil fuel lobby

“Unfortunately, the new crop of anti-ESG activists seem to be telling us what they’re not in favor of,” says Joshua Brockwell, investment communications director for Azzad Asset Management, Inc., a faith-based sustainable investment advisor. “I don’t see a lot of proposals that advance something that might be to the good of the company other than business as usual.”

Many anti-ESG efforts, especially those directed at climate change, have been documented as being funded by the fossil fuel industry since at least the late 1990s. NCPP does not identify its donors, but it was explicitly founded as a conservative and free-market think tank. The Center for Media and Democracy has identified a history of dozens of major funders, gathered through IRS filings. An archived page from an old Greenpeace project showed the group received $445,000 from ExxonMobil between 1998 and 2008.

Using corporate shareholder meetings to advance political and social aims is decades old. “Ralph Nader in the 1960s came up with the idea of a shareholder proposal based on political issues,” says Nell Minow, an expert in corporate governance and vice chair of ValueEdge Advisors, an institutional investor advisory firm. Nader’s proposals initially addressed auto safety, environmental problems, and aid to minorities.

Others began to use the same approach on a wide variety of issues. “Then we had really the first effective coordinated series of shareholder proposals on South Africa [about apartheid],” Minow says.

Although votes aren’t binding, they can become embarrassing. More liberal policy proposals have gone from receiving no attention to regularly reaching 30 percent to 50 percent of shareholder votes. They catch attention.

They can also bump up against SEC Rule 14a-8, which goes back to the Securities Exchange Act of 1934 and governs submission of shareholder proposals. Boards and the SEC can exclude proposals for a number of reasons, which activists have learned to navigate over the years.

As activist groups on the left have been successful in at least getting proposals past the barriers, Minow thinks conservative groups are largely copying their wording. Also, because the SEC rules only allow one variation on a proposal in a year, similar phrasing and quick submission from a group on the right can block out proposals on the left, a view that Morningstar has also reported. 

Peck says their intentions are different and only use language similar to successful efforts from liberal groups to get proposals accepted. As far as getting something in quickly and keeping competing proposals out, “there’s definitely an element of that,” Peck says. “If you snooze, you lose.” Although he claims he’d rather see all proposals allowed.

“If conservative shareholders want to push for companies to adopt positions that favor conservative causes, they are free to do so,” says Samuel Gregg, a distinguished fellow in political economy and senior research faculty at the American Institute for Economic Research, a libertarian think tank. “The risk, however, is that it simply results in the further politicization of shareholder meetings.” Gregg thinks ultimately political neutrality would be the most attractive approach to investors.

But with determined true believers on all sides, the chances of that are likely lower than getting a proposal passed at Apple.

Apple’s Diversity Efforts Targeted as the Right Steals the Left’s Activist Playbook





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