Social "S" Proposals

We continued to vote on a high number of social proposals this year, similar to last year’s volume.⁷⁷ Many of these proposals sought to advance a social cause—from increasing racial representation to forcing companies to support unionization to constraining AI—by pitching their social objective as a financially prudent move. These claims, however, largely did not withstand scrutiny, as many of these social causes did not appear to present a material financial risk to companies on their face, and proponents rarely (if ever) provided the kind of detailed, quantitative analysis we look for in determining whether to support a proposal. Nonetheless, as always, we looked at each issue—and each company-specific proposal—carefully to determine whether it was likely to lead to long-term financial return.

Racial Equity Audits

Racial equity audit proposals urge companies to divert company resources and shareholder dollars to audits examining corporate commitments to racial justice and civil rights initiatives. Strive saw fewer of these proposals during the 2023-2024 season, with many appearing at the same companies as the year prior.

Strive views such proposals as legally suspect and as potentially creating a discriminatory work environment rather than preventing one. Moreover, the companies receiving these proposals generally already have pre-existing systems in place to monitor unlawful workplace activity. Thus, Strive views such efforts as fiscally irresponsible, and therefore voted against these proposals.

PEPSICO, INC.

Pepsi faced a proposal calling for a racial equity audit.⁷⁸ The proposal criticized Pepsi for its “advertisement featuring a wealthy White woman giving a police officer a Pepsi during a time when Black Lives Matter protestors were working to bring attention to police brutality against Black Americans.”⁷⁹ It further faulted the company for “advertising low-nutrition products more heavily in communities of color and encouraging a hostile work environment.”⁸⁰ The proponents therefore asked Pepsi to conduct a third-party audit on how to “improv[e] the racial impacts of its policies, practices, products, and services.”⁸¹

As Strive has previously explained, racial equity audits are non-neutral evaluations designed to shame companies into adopting radical DEI policies at the expense of merit.⁸² Such audits are focused on advancing racial justice as seen through a specific ideological lens; they are uninterested in creating shareholder value. Such reports are expensive, and, particularly after Students for Fair Admissions v. Harvard,⁸³ create legal and commercial risks for the companies that undertake them. For these reasons, Strive voted against the Pepsi proposal.

DEI PROGRESS
REPORTS

Over the past several years, many companies have been pressured to adopt DEI goals. Now, activists are pressuring companies to turn those words into action.

Because Strive believes that DEI goals are harmful to companies, we opposed proposals asking companies to report on their progress towards DEI goals.

COCA-COLA

Coca-Cola faced a proposal asking for a DEI risk report, including an assessment of whether its DEI activities “may create risks of discriminating against individuals who might sue the company.”⁸⁶ The proposal references the Harvard decision, and cites concerns over the legality of Coca-Cola’s DEI programs, particularly its use of numeric race and gender quotas.⁸⁷ In response, Coca-Cola dismissed any legal concerns, and doubled down on its commitment to DEI. “[T]he broader stakeholder community understand[s] and appreciate[s] the positive impacts” of the company’s “focus on diversity, equity and inclusion,” the Board explained, and so changes were “not necessary.”⁸⁸

Strive disagreed. Because Strive believes that shareholders are best served when corporate hiring and promotion is based on merit, and because DEI policies create costly and unnecessary legal risk, we voted for this proposal.

MCDONALD'S

Strive's Engagement on DEI

Strive proactively engaged with more than two dozen companies that had adopted anti-meritocratic DEI hiring and promotion policies.

On behalf of our clients, we expressed concerns over McDonald's pursuit of value-destroying and potentially illegal diversity policies, particularly in light of the recent U.S. Supreme Court decision in Students for Fair Admissions v. Harvard. In a letter to the CEO & Chairman, we outlined the legal and business risks associated with those policies and urged McDonald’s to prioritize the financial interests of shareholders by rescinding its diversity targets, denouncing discrimination, and committing to merit-based decision-making.⁸⁹ A month later, it was reported that McDonald’s removed references to ESG from several parts its website.⁹⁰

Read: Vivek Ramaswamy-linked firm takes McDonald’s Stake, Targets Diversity Policies

RACE/GENDER
PAY GAP

Activists once again urged companies to investigate racial and gender pay gaps. Strive believes that providing raw data on any alleged gaps likely serves only to provide fodder for negative media commentary and potential lawsuits. Pay gap reporting can also incentivize intentional, illegal discrimination by making companies more reluctant to hire women and minorities for entry-level positions that typically come with lower pay.

Because the pursuit of these costly and distracting efforts would not benefit the bottom line, Strive voted against these proposals.

MARRIOTT INTERNATIONAL

Marriott received a pay gap proposal, asking the company to calculate and disclose the “percentage median gender pay gap, globally and/or by country” and the “percentage median racial/minority/ethnicity pay gap, US and/or by country.”⁹¹

Because such proposals are costly to implement and serve only to fuel litigation, Strive sided with Marriott’s management and voted against this proposal.

UNIONIZATION

Strive again voted against several proposals asking companies to adopt union-friendly measures. Advocates argue that union membership helps financial performance, but do not cite persuasive evidence to support this assertion.

While Strive supports corporate adherence to all applicable U.S. labor laws, we oppose measures that produce unnecessary cost and material risk to shareholders such as activist-driven unionization proposals that go above and beyond preexisting regulatory requirements.

DELTA
AIRLINES

Strive opposed a union-related proposal at Delta Air Lines.⁹² The proposal asked the airline to adopt and disclose a “Non-Interference Policy” that would make it easier for employees to unionize, regardless of whether the company believed unionization was beneficial.⁹³ Strive shares Delta’s view that employees have the right to choose or reject union representation for themselves and that the proposal would have extended beyond preexisting legal frameworks and protection for union organization.⁹⁴

Since such extra-legal demands would create unnecessary risk to shareholders, and since the annual shareholder meeting is not the appropriate forum for such debates, Strive opposed this proposal.

HUMAN RIGHTS

As a general matter, Strive opposes most self-described human rights proposals, as most such proposals are designed to advance social goals like aiding workers in developing nations or protecting indigenous lands, without explaining how the proposal is likely to increase financial return.

CHEVRON

Chevron received a proposal seeking a human rights report.⁹⁵ The proponent claimed the report was needed because Chevron has engaged in “severe human rights abuses, including torture, forced labor/slavery, rape, murder, and even genocide” and that its “emissions contribute to the climate crisis, which disparately impacts people of color and furthers systemic racism.”⁹⁶ Chevron's board opposed the proposal, stating that it was “riddled with falsehoods.”⁹⁷

Strive agreed the proposal was unlikely to generate financial value for shareholders, and so voted against it.⁹⁸

JPMORGAN CHASE

JPMorgan Chase received a proposal asking the company to issue a human rights report focused on indigenous people.⁹⁹ The proponents criticized the company for abetting what they call “acts of cultural genocide,” such as providing banking services to oil and gas companies that run pipelines through tribal land.¹⁰⁰ JPMorgan vigorously disputed the claims, explaining “the proponent inaccurately describes the Firm’s financing activities” by relying on “subjective determinations by sources that are not necessarily aligned with or knowledgeable of our shareholders’ long-term financial interests.”¹⁰¹

On that front, JPMorgan advised that the requested report “would incur unnecessary expense” and recommended shareholders vote against it.¹⁰² Strive agreed and voted against the proposal.¹⁰³

POLITICAL
SPENDING/LOBBYING

While partisan politics have no place in the boardroom, we recognize that it is often in the best interest of companies and their shareholders to engage with lawmakers on issues that are relevant to their business. When they do so, they should do so with an eye towards maximizing shareholder value, without interference from shareholder activists.

For that reason, we voted against shareholder proposals seeking to push particular political views or otherwise interfere with company judgment on how best to engage with lawmakers on business goals.

PFIZER

In 2024, Pfizer received a proposal requesting an annual lobbying report.¹⁰⁴ The proposal criticized Pfizer for donating to politicians who “would weaken women’s access to reproductive healthcare.” Pfizer opposed the proposal, explaining it was “commit[ed] to remaining bipartisan in the political process,” and that issuing the requested report “would divert the company’s public policy focus away from our core business priorities to social issues.”¹⁰⁵

Strive agreed that the proposal was unlikely to lead to long-term shareholder value and so voted against it.

CHARTER
COMMUNICATIONS

Charter Communications also received a proposal seeking a lobbying report.¹⁰⁶ The proponent criticized the company for belonging to associations with which the proponent disagrees. Charter opposed the proposal, explaining that its lobbying efforts increased shareholder value, and that more detailed disclosures would “further encourage issue activists, some motivated by special or short-term interests, to pressure us to alter our political participation in a manner that could adversely affect stockholder interests.”¹⁰⁷

Because Strive agreed that issuing detailed lobbying reports would not be in the best interest of shareholders, and because the proposal sought to politicize the company’s actions, Strive voted against it.

ABORTION-
RELATED

Some social proposals sought to increase access to abortion. Because such proposals are not directed towards improving shareholder value, Strive voted against them.

ALPHABET

Last season Google’s parent company, Alphabet, received a proposal asking the company to restrict pro-life search results for abortion-related search inquiries.¹⁰⁸ The proponent argued that making it easier for pregnant women to obtain abortions will help improve “women's employment and educational attainment”.¹⁰⁹ Alphabet opposed the proposal, explaining that the company's current policy “allow[s] ads that promote different services and perspectives” so long as such ads do not make “health claims that could mislead our users.”¹¹⁰

Because the proponents were motivated by social concerns, and because they provided no persuasive analysis that their preferred policy would generate greater returns than the company’s current one, Strive voted against the proposal.

WALGREENS
BOOTS ALLIANCE

Walgreens faced a proposal urging the company to speak publicly about the need for abortion-inducing medication, including mifepristone.¹¹¹ Walgreens opposed the proposal as “unnecessary” and failing to “enhance stockholder value.”¹¹²

Because Strive agreed with the Board’s rationale, and because the report would likely politicize the company’s actions, we voted against it.

ARTIFICIAL
INTELLIGENCE (AI)

Artificial intelligence proposals grew in number and prominence this year. This shouldn’t be surprising. The “AI Arms Race” is on,¹¹³ with companies in virtually every industry eager to implement artificial intelligence solutions. But the innovation isn’t without controversy.

While many view the field as bursting with opportunities, others seek greater regulation and limits on what AI can offer. At the corporate ballot box, certain activists campaigned against the use of AI for internet advertising and advocated restrictions on generative AI producing “misinformation,” while labor unions protested that AI would result in their dues-paying members being laid off.

Strive examined these proposals on a case-by-case basis to determine whether, in our view, the resolution would bring value to shareholders.

APPLE

Apple faced a union-backed proposal asking the company to report on its use of AI in its business operations.¹¹⁴ The union voiced concerns about “mass layoffs” that could ensue if AI automated jobs, arguing that the report would advance a “significant social policy” by forcing the companies to pay attention to the ethics of AI use.¹¹⁵

In Strive’s view, such reports are unlikely to generate long-term financial value. The proposal was anti-innovative, as it asked Apple to self-regulate a fast-growing division of its company. The proposal was also devoid of any evidence that the requested reports would benefit the company’s bottom line.¹¹⁶ For these reasons, Strive voted against this proposal.

CHINA RISK
AUDITS

A significant number of proposals asked companies to assess China risk. From day one, Strive has been clear that China risk is investment risk.¹²⁰ These risks stem from the country’s Communist government structure, geopolitical tensions, and unpredictable regulatory environment.¹²¹

The SEC’s materiality standard legally requires all companies to publicly disclose risk information to prospective investors and shareholders, yet enforcement of this standard has been lax as it pertains to China risk.

Strive therefore generally supported shareholder proposals aimed at encouraging companies to disclose and mitigate China risk where the company appears to have significant operations, dependencies, or concentration risk in the region.

MCDONALD'S

McDonald’s received a request for a China risk report.¹²² The proponent cited concerns about the company’s “zeal to grow to 10,000 [China-based] stores by 2028” at a time when “many U.S.-based businesses increasingly exercise caution due to uninsurable risks.”¹²³ The proponent further highlighted that “the Company is more than just a restaurant operator in the country; McDonald’s is in a minority partnership (48%-52%) with Chinese state-owned CITIC Capital,” presenting additional financial and operational risks, particularly as geopolitical tensions rise.¹²⁴

Because Strive agreed that the company’s China strategy presents material financial risk to shareholders, and because Strive believed a report would help both the company and its shareholders assess and mitigate such risks, Strive supported this proposal.

STARBUCKS

Strive's Engagement on China Risk

Strive engaged with nearly a dozen companies about China risk.

Despite significant geopolitical risk, Starbucks has been aggressively implementing a strategy to expand its presence in China, already its second largest market after the United States. We believe that the company is overexposing itself to the risks of doing business in China without adequately considering the financial risks or disclosing them to shareholders. Accordingly, we wrote a letter to Starbucks urging the company to undertake a full and clear-eyed assessment of their exposure to China-related risks, develop a mitigation strategy, and disclose all relevant information to their shareholders. Our engagement was highlighted by Semafor, which cited our concerns over the company’s “bet-it-all-on-China strategy.”¹²⁵

Read: Strive to Starbucks: ‘Bet-it-all’ strategy in China is too risky

POLITICIZED
DEBANKING RISK

Last season, Strive saw a number of proposals aimed at convincing banks to make lending decisions based on financial considerations alone, rather than dropping clients because of their disfavored political or social views.

We agree that banks should not discriminate in this way, and that, when they do, they create unnecessary legal and financial risks. For that reason, Strive generally voted for these proposals when we saw evidence of a bank engaging in such politically motivated conduct. When we didn’t see specific evidence of discrimination, Strive generally abstained from the proposal.

BANK OF AMERICA

Bank of America faced a proposal seeking a report on the “risks of politicized de-banking.”¹²⁶ The proponent cited instances of alleged politically motivated de-banking activities, such as allegations that Bank of America de-banked a religious nonprofit “with little explanation other than the nonprofit no longer aligned with Bank of America’s risk tolerance policies.”¹²⁷

Because Strive believes that a report on politicized debanking would likely cause Bank of America to address and mitigate these risks, and because Strive believes such mitigation would likely improve long-term shareholder value, Strive voted for the proposal.

SOCIAL OTHER

PATENT FENCING - ABBVIE

AbbVie faced a proposal urging the company to report on its patent policy and how that policy impacts patient care.¹²⁸ More specifically, the proponents complained that AbbVie’s practice of strategically patenting its medications to extend patent life, while legal, keeps out generics for too long, making drug prices high and inaccessible.¹²⁹ The company opposed this proposal, explaining that it follows all applicable laws, including intellectual property laws, and that patenting its medical discoveries allows the company to recoup its research and development costs.¹³⁰

Because Strive agreed that asking AbbVie to voluntarily relinquish its patent rights was unlikely to create long-term shareholder value, Strive voted against the proposal.

SMOKEFREE POLICY

CAESARS ENTERTAINMENT

Last season, Caesars Entertainment received a proposal asking the company to report on adopting a smokefree policy for its casinos.¹³¹ The company opposed the proposal, explaining that its decision to ban or allow smoking in any given casino was a “complex business decision” and its “current policies strike the appropriate balance in appealing to both smoking and non-smoking customers.”¹³²

Because the proposal was targeted at a social issue, and because the proponent failed to provide any persuasive evidence that a company-wide smokefree policy would generate financial value for Caesars shareholders, Strive voted against the proposal.¹³³   

CODE OF ETHICS - NETFLIX

Netflix faced a proposal asking proposal asking the company to expand its code of ethics and then report on how its directors live up to this new code, “including outside of their roles as Netflix board members.”¹³⁴ The proponent complained that several years ago, one of Netflix’s outside directors did not fire an employee of a different, privately-held, foreign company quickly enough after that employee was accused of harassment, even though an independent law firm had cleared the employee of wrongdoing.¹³⁵ The proponent stressed that Netflix should adopt a “zero tolerance” approach in the wake of the “#MeToo movement,” implying that this board member was unfit to serve.¹³⁶ Netflix opposed the measure, explaining that it believes that all of its directors have acted ethically and that the proposal “would not be in the best interests of Netflix or our stockholders.”¹³⁷ Strive agreed and voted against the proposal.¹³⁸