Big Tech poised for busy proxy season as shareholder pressure mounts
The world’s biggest tech firms will face an onslaught of shareholder proposals on human rights, gender and racial pay gaps and climate change, starting May 27 when Amazon and Facebook convene virtually for their annual general meetings.
Tech companies on average have seen more shareholder resolutions filed this year than any other sector in the U.S. public markets — a reversal of longstanding norms in which shareholder pressure is concentrated in the energy sector, according to investors who spoke to The Logic.
Amazon shareholders filed at least 14 resolutions — 12 of which are moving forward to a vote — more than any other company. Alphabet shareholders, who will convene on June 3, have 10 items on the ballot; Facebook shareholders have eight items up for a vote; and Apple has three. The firms refute many of the claims laid out in the resolutions and urge shareholders to vote against each resolution.
“These are companies that did not get attention for a long time,” said Michael Passoff, CEO of Proxy Impact, which advocates for shareholder-led changes at U.S. companies. “That’s changing as [they] have more influence over our lives and democracy.”
Shareholder activism at tech firms has been increasing over the last couple years. At Amazon, shareholder ballot items jumped from three in 2018 to 12 in 2019; Alphabet saw its number of shareholder proposals rise from seven to 13 in that same period. The number of shareholder proposals filed at companies in the information technology sector — which includes Alphabet, Facebook and Apple — has doubled since 2010, according to an analysis by Proxy Impact.
A growing share of resolutions focuses on accountability and transparency at the firms. At Amazon, for example, half of the shareholder proposals fall into this category, with shareholders asking for reports on how the company addresses products that proliferate hate and violence; they also want third-party reports on how the company conducts due diligence on clients using certain technologies — including its surveillance, cloud and facial recognition tools — to ensure they aren’t used in contexts that could violate human rights.
The shift follows years of mounting pressure on tech firms to address their growing impact on social, environmental and governance (ESG) issues globally.
“This manifests in really significant business risks for the company,” said Jamie Bonham, director of corporate engagement at Toronto-based NEI Investments, which is part of a shareholder conglomerate that has proposed a resolution urging Alphabet to create an independent committee at the board level to monitor the human rights risks tied to its businesses.
What shareholders want from Big Tech
A breakdown of shareholder resolutions this proxy season
Shareholders are seeking more equitable voting rights, with proposals for a one-vote-per-share voting structure at Alphabet and Facebook. Investors of the two firms are also requesting that the companies nominate at least one human- or civil-rights expert for their boards. Shareholders of Amazon and Facebook, meanwhile, are asking the companies to make the chairs of their boards an independent position.
Shareholders are pressuring tech firms to take more responsibility for the content on their platforms and how customers use their technologies. Amazon investors are asking the firm to publish a report on its policies and efforts to address products on its platform that proliferate hate and violence; they also want third-party reports on how the company conducts due diligence on clients using certain technologies — including its surveillance, cloud and facial recognition tools — to ensure they aren’t used in contexts that could violate human rights. Facebook is facing a resolution on its political advertising policies, with shareholders asking for a report on exemptions it gives politicians for their ads and posts. Its shareholders are also voting for more transparency around how their platforms are used to exploit children. At Apple, shareholders are asking for annual reports on the company’s free-speech policies.
Shareholders of Alphabet, Amazon, and Facebook are all seeking more disclosure on gender and racial pay equity. The three companies are facing votes to compel them to issue reports on workers’ pay data — specifically global median pay, including base, bonus and equity compensation — based on gender, race and ethnicity. Amazon shareholders are also seeking a public report showing promotion broken down by gender and race. And Alphabet shareholders will vote to have the firm issue a report on its treatment of whistleblowers.
Resolutions: 4 (Amazon: 2; Alphabet: 1; Apple 1; Facebook: 0)
Amazon shareholders are asking for the environmental impact of their operations, particularly on racialized communities. The proposal lists 12 predominantly Black and Latinx cities with some of the poorest air quality in the U.S. in which Amazon has warehouses. Alphabet and Apple shareholders, meanwhile, will vote on a resolution to tie executive compensation to environmental, social and governance (ESG) metrics.
Bonham said by not addressing human rights and other ESG concerns, the Google parent company risks losing current and prospective employees and users that oppose the firm’s ethics. It also risks having public regulators impose policies on the company, which Bonham said may not be in the interest of the firm or its shareholders.
Regulations are already being considered. Lawmakers in the U.S. have drafted a bill that would give them the authority to subpoena companies and hold hearings on their role in spreading misinformation and hate through content on their platforms. The European Union has already enacted laws requiring more transparency around how firms collect and use digital data, and in February, European Commission president Ursula von der Leyen announced plans for new legislation on data, particularly around “high-risk” artificial intelligence.
The number of proposals on voting ballots this year also speaks to the firms’ reluctance to listen to their shareholders and address their concerns, said Passoff. Shareholders rarely put forward proxy voting resolutions as a first step in negotiating policy changes at a company in which they hold a stake, he said. Rather, a proposal is often a last-ditch effort to get a company to act by applying public pressure and quantifying it with a vote.
“A big part of why we’re filing a resolution is we’re having a hard time getting the company to talk to us,” siad Bonham. “I don’t think we’d be at this stage if we could have a really substantive conversation with the company, but they have proven really resistant to that.”
In November 2019, NEI, along with some 80 other investors with nearly US$10 trillion in assets under management, signed a letter to Alphabet requesting a dialogue on its role in digital surveillance, spreading disinformation, harassment and hate speech, among other concerns, said Bonham. “The company wasn’t up for it.”
Earlier that year, Ross LaJeunesse, Google’s former head of international relations, resigned. He later claimed the company pushed him out after he raised concerns about, among other projects, its now-shelved plan to build a censored search engine in China.
Alphabet, along with Facebook, was among the tech giants upon which a group of institutional investors — including NEI and BMO Global Asset Management — called to do more to cull the spread of hateful content online, after failing to address their concerns in the year following the Christchurch, New Zealand, mosque shootings.
“Because we’re not having a dialogue with the company, we don’t see any signs that they’re going to be implementing anything more substantive than what they’re doing,” said Bonham.
While tech shareholders are voting on a number of new resolutions this year, some of the proposals have become mainstays on the firms’ proxy voting ballots. For example, Facebook and Alphabet have had proposals to make shareholder voting rights proportionate to the number of shares an investor holds since at least 2015; Apple shareholders have asked to have more say on board nominees for the past six years.
“There are always governance issues at these companies because they tend to be very founder-focused,” said Passoff. “It’s not one-share-one-vote; many of [the founders’] shares are worth a lot more.” For example, Facebook’s dual-class voting structure gives CEO Mark Zuckerberg and a small group of insiders 10 votes for every share they own, compared to the one vote per share typical investors have. That leaves Zuckerberg with more than 53 per cent of the voting power, despite owning less than 13 per cent of the company.
“If the Board were to find a proposal to be beneficial, we would look to engage with the shareholder to consider implementing it,” said Ryan Moore, head of financial communications at Facebook.
Amazon and Alphabet did not respond to The Logic’s request for comment.
The founder-focused dynamic ensures shareholder proposals are stubbornly resistant to passing. But Passoff said the resolutions help get a company’s attention in a way that can heighten public and political pressure. “The vote is mainly going to be looked at as just sending a message to management and the concern of your shareholders,” said Passoff. “We can’t really do much but complain, but everyone is complaining.”