September 22, 2011
Ceres Issues Proxy Voting Guidance
by Robert Kropp
A new report argues that institutional investors without clear guidelines on sustainability issues
run the risk of breaching their fiduciary duty.
The 2011 proxy season saw shareowner support for environmental and social resolutions top 20% for
the first time. Still, according to a new report from Ceres, "The largest asset managers often fail to take advantage of
this opportunity to promote key governance and sustainability reforms at large public companies,
including the types of reforms that may have averted the recent financial crisis."
"Investors can no longer afford to ignore or abstain from taking a position on increasing
environmental and social challenges companies are facing, including climate change, water scarcity
and human rights," Mindy Lubber, president of Ceres, stated. "Shareholders have a fiduciary
responsibility to vote their proxies on these issues, but in too many instances it isnít happening
due to weak voting guidelines."
The report, entitled Proxy Voting for
Sustainability, seeks to correct the absence of guidelines by providing sets of principles to
help investors decide how to vote on resolutions addressing governance, social issues, general
sustainability, and environmental performance.
Linked to each of the principles are
examples of existing shareowner resolutions.
While the guidance provides a framework for a
sustainable proxy voting policy, it is not prescriptive. One the other hand, the report points out,
if an investor's current policy does not reflect the principles espoused by the report, then the
investor's votes are less likely to support an emerging sustainable economy, and may fail to
prioritize long-term share value as well.
"You cannot defer to the opinion of specific
management bodies in deciding how to vote on issues that will help determine business success or
failure and significantly impact long-term value creation in the coming years," the report
concludes. "If you fail to specifically address these issues in your guidelines, you run a serious
risk of breaching your fiduciary duty by voting inconsistently or failing to vote on resolutions of
critical importance to the companies you own and the shareholders or beneficiaries to whom you owe
your fiduciary duty."