Exercising proxies and voting stock is one method for investors to communicate with corporate management on a variety of issues, including corporate governance, social responsibility and environmental quality.
To increase shareholder power, our clients may designate Harrington Investments, Inc. (HII) to vote proxies of company stock held in their portfolios. All proxies are voted in compliance with our Proxy Voting Policy & Guidelines shown below.
Often proposals arise that are not covered in our Proxy Voting Policy & Guidelines. In these cases, we vote our proxies on a case-by-case basis, consistent with our fiduciary duty and our social investing criteria.
Proxy Voting Philosophy and Corporate Power
Board of Directors
Shareholders generally have no real choice in the election of Directors as they almost always run unopposed. Even if an overwhelming majority of Shareholders oppose a Director, that person will still serve as Director so long as he or she gets one vote. The real election for Directors occurs within the boardroom, with Shareholders relegated to a rubber-stamp process of affirmation.
To counter this undemocratic process, HII votes "withhold" or "against" management's self-nominated slate of directors. The exception is when the advisor believes that management has performed exceptionally in terms of financial, environmentally and social criteria. In rare circumstances, HII will vote exclusively for female and/or minority director nominees to emphasize the need for added diversity of the corporation's board of directors.
Auditing Firms
Today, accounting firms are large and few in number due to numerous mergers and acquisitions of smaller firms. Many of these firms provide investment banking, expensive consulting and accounting services on top of their auditing duties, which may lead to serious conflicts of interest and financial irregularities. Such concerns were recently addressed by the U.S. Securities and Exchange Commission (SEC).
Many large accounting firms also encouraged employee "revolving door" policies, in which senior accountants for corporate clients are hired, providing accounting services to their former employer. By the same token, employees of large accounting firms are hired by corporate clients to provide accounting services within the corporation. This "revolving door" encourages conflicts of interests and an "old boy" network which may result in a violation of fiduciary duty, or other non-professional conduct, and close relationships between employees of accounting firms and employees of their customers because of their relations, may prevent them from being objective, and not truly represent shareholder interests.
Because it is hard to determine the extent to which auditing firms are also providing business services, HII generally votes "against" or votes "abstain", to approve annual auditing firms.
Proxy Voting Policy & Guidelines
Consistent with HII fiduciary financial environmental and social obligations and consistent with our social and environmental criteria, we vote in favor of precatory and/or binding by-law amendment resolutions that do the following.
1. Democratize corporate governance & equality in the work place, including the support of:
- Annual election of all board members, as opposed to staggered terms.
- Confidential balloting.
- Cumulative voting.
- Independent Boards and nominating committees.
- Coupling executive compensation with financial, social and environmental performance.
- Reducing wage disparities between upper management and lower level employees.
- Reporting on CEO or management overcompensation and/or review of stock option plans.
- Reporting on corporate political contributions and lobbying costs.
- Reporting on equal employment and diversity.
- Reporting on sexual orientation policies.
- Promoting gender, racial and ethnic diversity among company employees.
- Promoting diversity among the Board of Directors and upper management of a company.
2. Directly or indirectly promote, or call for a report on, environmental performance, such as:
- The Coalition for Environmentally Responsible Economies (CERES) and/or the Global Reporting Initiative (GRI).
- Phasing out, issuing a report on, or requiring labeling of genetically modified ingredients of company products.
- Reporting on global warming or climate change.
- Promoting renewable or alternative energy.
- Reducing fuel consumption.
- Requesting environmental disclosure or feasibility reporting regarding environmental cleanups.
- Phasing out chlorinated compounds, PVC medical products, toxic materials, and/or nuclear power.
- Reducing radioactive emissions.
- Cessation of Arctic National Wildlife Refuge oil drilling and exploration.
- Phasing out of old growth timber harvesting and sales.
3. Address global accountability, such as:
- Reporting on vendor standards.
- Asking for improved human & labor rights policies or reports.
- Endorsing the McBride Principles, the China Principles, the Sullivan Principles, and other corporate codes of conduct, which may include independent monitoring and sanctions for violations.
- The cancellation of debt to countries with high external debt relative to export earnings.
- Halting predatory lending.
- Encouraging community re-investment and equal opportunity.