As has been discussed above, many corporations have institutionalized a policy of signing voluntary agreements, policies, and codes to reduce or restrict corporate social injury, monitor activities, or otherwise conduct business in a socially responsible fashion, irrespective of the harmful products they may produce; i.e., junk food and sugar products. The key word is “voluntary”, with no rule of law.
Initially, when we reviewed PEP’s lengthy Corporate Governance Guidelines, we noticed that the corporation’s directors were responsible for overseeing compliance with the voluntary Global Code of Conduct pursuant to “Director Responsibilities.”
There are also another dozen sections of the guidelines, covered over eight pages. These “guidelines”, however, are not legally binding as is true of all corporate “policies”, “statements”, “pledges”, “agreements”, and “voluntary codes”, such as PepsiCo’s Global Code of Conduct (which many corporations have signed or adopted). In fact, PepsiCo discloses the non-mandatory nature of their “policy” by stating:
These Guidelines should be interpreted in the context of all applicable laws and the Corporation’s Articles of Incorporation and By-Laws and other corporate governance documents and are intended to serve as a flexible framework within which the Board may conduct its business and not as a set of legally binding obligations. The board will review and, if appropriate, revise those guidelines annually, or more frequently if necessary.
If a board committee on sustainability is created, the charter of the board will have duties and as such, they will be fiduciary duties or obligations, and implementation will be legally binding. Voluntary codes, pledges, guidelines, and statements may be mere propaganda and corporate noise unless they are attached to an articulated fiduciary duty of the board members.
After our ongoing dialogue with senior governance staff, PepsiCo announced on February 2, 2017 that it had established a Public Policy and Sustainability Committee of the Board.
Shareholder Resolution 2017
“Board Committee on Sustainability”
Whereas, with the deepening and expanding interest by consumers and investors in sustainability and consumption trends, the success of our company is increasingly impacted by responses to challenges in an extensive range of public policy and sustainability issues including environmental priorities and initiatives, human rights, nutritional standards, the use and labeling of genetically modified crops, and political engagement,
Whereas, in the past several years, corporate management has increasingly adopted or amended many separate and ad-hoc policies, pledges, or statements on a plethora of issues including land and forest stewardship, bio-engineering and genetically modified products, product packaging, health and safety, health and wellness, sustainable agriculture, advertising to children and product placement in schools; the overall implementation of which, given the seemingly unlimited scope and variety of issues, may have strategic operational, financial, and reputational effects on our company’s performance,
Whereas, as fiduciaries, our Board of Directors has a responsibility for stewardship and oversight of our company’s strategic direction and corporate plan, but responsibility for sustainability oversight currently resides tangentially and vaguely with the Nominating and Governance Committee, which generally meets just four times per year, and requires only an annual “review” of key public policy issues and the company’s engagement with and responses to them, and this review is just one among 16 other duties of a committee whose primary purpose relates to the recruitment, election, duties, and succession planning for the Board members and corporate officers,
Resolved, the shareholders request the Board of Directors establish a new Committee on Sustainability to more appropriately oversee our company’s vision and responses to important matters of public policy and sustainability. Such committee could engage in ongoing review of corporate policies, above and beyond matters of legal compliance, to assess the Corporation’s response to changing conditions and knowledge of the natural environment, including but not limited to, waste creation and disposal, natural resource limitations, energy use, waste usage, and climate change.
The proponent believes it is important for an independent committee to be created with focused fiduciary duties representing shareholders for oversight of company sustainability policies and practices, including related public policy initiatives. Issues related to sustainability might include, but are not limited to: global climate change, emerging concerns regarding toxicity of materials, resource shortages, biodiversity loss, and political instability due to changing environmental conditions.
Adoption of this resolution would enhance our reputation and reinforce our company’s position as an industry leader in these areas of increasing and long term concern to investors and policy makers.