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Why Shareholder Reforms Are Vital for All Working People

It's no accident that today's economy is unfair to working people. The rules have been manipulated for the past 40 years by corporate CEOs who have not been held accountable. One of the ways the AFL-CIO works to restore balance to our economy is by changing anti-worker corporate practices through shareholder-driven reforms.

The focus of the AFL-CIO's 2016 shareholder proposal is four-fold:

  • Executive Pay and Stock Buybacks
  • Government Service Golden Parachutes
  • Remedies for Human Rights Violations
  • Corporate Lobbying Disclosure

These shareholder proposals will be voted on at company annual meetings and are intended to benefit companies, shareholders, their employees and all workers by improving corporate accountability. Working people are corporate shareholders through their retirement savings. Union-sponsored and Taft-Hartley pension plans hold more than $587 billion in assets. Union members also participate in the capital markets as individual investors and as participants in employer-sponsored pension plans. The submission of shareholder resolutions is an important tool that investors have to communicate with each other and the companies that they own. Many of today’s best practices in corporate governance and corporate responsibility were established as a result of shareholder resolutions. Below is a description of the AFL-CIO’s 2016 shareholder initiatives.  Download the AFL-CIO's 2016 shareholder reform proposal .

Executive Pay and Stock Buybacks

For 2016, the AFL-CIO Equity Index Fund is introducing a new shareholder resolution to adjust executive pay metrics to exclude the impact of stock buybacks. In recent years, public companies have increasingly used their retained earnings to buy back shares of stock instead of investing for economic growth.

Certain financial metrics used for setting executive pay, such as earnings per share, can be inflated by stock buybacks in the short term. Moreover, the company’s long term health may suffer if share buybacks come at the expense of company investments in capital expenditures or research and development.

The AFL-CIO’s stock buyback shareholder resolution asks companies to exclude the impact of stock buybacks from the compensation formulas used for their senior executives. If adopted, executive pay will be better aligned with long-term economic growth rather than short term financial manipulation. The resolution was filed at IBM, Illinois Tool Works, 3M and Xerox.

Government Service Golden Parachutes

The AFL-CIO renewed its efforts in 2016 to eliminate government service golden parachutes at Wall Street banks. Under these arrangements, executives receive unvested shares of stock if they voluntarily enter government service. These shares would otherwise be forfeited upon an executive’s resignation.

In other words, Wall Street executives may receive a windfall of equity awards if they agree to take a government job. The AFL-CIO has questioned whether providing financial incentives to enter government service undermines the independence of government officials who regulate Wall Street.

This Wall Street pay practice became controversial in 2015 after the AFL-CIO submitted shareholder resolutions urging companies to disclose which of their executives are entitled to receive government service golden parachutes. For 2016, the AFL-CIO is asking Wall Street banks including Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Lazard and Bank of America to ban these payments altogether.

Remedies for Human Rights Violations

The AFL-CIO Reserve Fund has introduced a new shareholder resolution for 2016 that urges companies to participate in a mediation process to remedy human rights violations. The Organisation for Economic Cooperation and Development (“OECD”) provides mediation through national contact points in participating countries.

The AFL-CIO’s shareholder resolution urges companies to agree to participate in mediation of any alleged violations of human rights if requested by the OECD national contact point (the U.S.Department of State.)

The AFL-CIO’s human rights shareholder resolution has been submitted at companies such as Pepsico and Mondelez that have refused to participate in the OECD national contact point mediation. In addition, the resolution has been filed at companies in the tobacco industry such as Reynolds American, Philip Morris and Altria where human rights violations in the supply chain for tobacco are more difficult to remedy.

Corporate Lobbying Disclosure

The AFL-CIO Reserve Fund is submitting shareholder resolutions for 2016 to urge disclosure of corporate lobbying policies and spending at Charles Schwab, Navient and Tesoro. The AFL-CIO’s resolution also requests that companies disclose their indirect lobbying and grassroots lobbying expenditures, including memberships in organizations that create model legislation.

Without disclosure of corporate lobbying spending, there is a risk that senior management and directors may allow their personal political preferences to motivate and influence decisions. Disclosure will allow shareholders to assess whether corporate lobbying expenditures are in the best interests of shareholders.

Disclosure also encourages better oversight of lobbying activities by boards of directors. In recent years, a number of companies have resigned from organizations that have created controversial model legislation such as the U.S. Chamber of Commerce and the American Legislative Exchange Council.

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