The “G” in ESG wins more love from shareholders than the “E” or the “S”

Shareholders asked to approve new ESG policies are increasingly supportive of the “G,” even as they continue to refuse to support the “E” and “S.”

“G” refers to corporate “governance” changes, and such proposals have received significantly more shareholder support this year than proposals targeting environmental (E) or social (S) changes, according to an analysis of ISS-Corporate data by law firm Freshfields.

Of the 154 so-called governance proposals that were put to the vote between January 1 and June 14, 38 were accepted, according to the analysis.

Most of the bills passed called for eliminating supermajority voting requirements for major corporate actions, including at California-based chipmaker Nvidia (NVDA).

Other successful proposals required all directors to stand for re-election each year or gave shareholders the power to call special meetings.

This 25% success rate is significantly higher than Proposals E and S, which would require companies to reduce greenhouse gas emissions, adopt more sustainable supply chain practices, and adopt diversity, equity, and inclusion (DEI) goals.

Only two environmentally focused proposals received majority shareholder support during the same period measured by Freshfields.

Support was even weaker for social proposals. Only one passed, requiring DexCom (DXCM), a company that makes medical devices for monitoring glucose, to declare its political contributions. That measure received a 52% majority.

No “backlash”

One possible reason for this divergence is that the G in ESG does not attract the same level of political scrutiny as the E or S.

“These types of proposals are not seen as overly prescriptive for companies and are not part of the backlash against ESG in general that we have seen recently, meaning they tend to have a broader base of support,” he said. Michael Arnoldcorporate governance attorney at Cravath, Swaine & Moore LLP.

ESG and DEI issues have been hot topics during the 2024 presidential campaign. Former President Donald Trump promised to banish ESG-conscious retirement account investments are ‘forever,’ as top Trump ally says called DEI “bigotry” against white men.

Republican-led states are also push businesses to repeal race-based employee quotas, building on the Supreme Court’s 2023 decision to strike down race-based admissions policies at Harvard University and the University of North Carolina.

This anti-ESG and anti-DEI momentum has forced some companies to abandon some of their existing policies, let alone adopt new ones.

The story continues

Under pressure from shareholders, rural retailer Tractor Supply announced in June announcement that it would abandon its DEI goals.

Tractor manufacturer John Deere made a similar model announcement in July, saying it would continue to track workforce diversity but would end participation in cultural and social activities…