Calvert News & Commentary

The Annual General Meeting: That Other Great American Pastime

Calvert highlights four shareholder advocacy efforts for the Spring 2012 Proxy Season

5/15/2012

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"Take me out to the ball game, take me out to the crowd..." Ask most Americans to provide the next lines to Jack Norwoth's seminal song about America's favorite pastime, and most of us would immediately think peanuts and crackerjacks. We might not know exactly how the song goes, but we certainly have an idea. Contrast that with the average American's knowledge of another great American Springtime tradition—the Annual General Meeting (or AGM) of a corporation. Many of us wouldn't have the first clue as to what happens in these meetings or why these meetings matter. Moreover, even those who understand the linkage between a shareholder's rights and the act of attending a meeting may not be exercising those rights.

At Calvert Investments, we not only understand why the Annual General Meeting is a crucial part of our springtime rituals, but we never miss an opportunity to participate. This spring Calvert is bringing a bevy of issues to corporate leaders in an attempt to keep the environmental, social and governance issues that can have a real impact on both profits, people and the planet front and center.

Below you'll find a link to our primer on the basics of Shareholder Advocacy, but here are four corporate engagements we're keeping an eye on:

Fossil–Supply Chain Risks from Water Scarcity and Pollution

Fossil is a global retailer of fashion lifestyle and accessory products such as Fossil watches, handbags, jewelry and clothing.

As we continue to see a steady increase in population and water demand, coupled with the effects of worsening water quality and climate change, we understand that fresh water scarcity is becoming a global problem. Like many apparel companies, Fossil relies on water-intensive inputs such as cotton and leather and water risk in the supply chain presents financial risk from production shortfalls, price volatility, higher energy costs, regulatory action and competition. Additionally, Fossil's supply chains employ energy-intensive processes and create significant water demands and detrimental effects, particularly in leather tanning and finishing.

Fossil lags industry peers such as Nike and Nine West with regard to sustainability policies, programs and performance. Additionally, they seem to lack understanding of the strategic significance of water risk and pollution in the supply chain.

On May 23, Calvert Investments' proposal will be presented to the Board of Directors at Fossil asking them to prepare a report addressing their risks associated with water scarcity and pollution and their supply chain environmental standards.

Urban Outfitters–Board Diversity

Parent company to familiar women's retail brands Anthropologie and Free People, it might be surprising to learn that Urban Outfitters does not currently have any women or minorities on its Board of Directors.

In addition to the fact that women and minorities—both as employees and consumers—are increasingly accounting for a larger portion of the profits and revenues of many companies, we believe that diversity, inclusive of gender and race, is an essential measure of sound governance and a critical attribute to a well-functioning board. In fact, we believe that in an increasingly complex global marketplace, the ability to draw on wide range of viewpoints, backgrounds, skills and experiences is critical to a company's success.

At Calvert, we understand that by combining competitive financial performance with high standards of corporate governance, including board diversity, companies are better positioned to generate long-term value for their shareholders. As such, on May 22, Calvert Investments will be asking the Board of Directors at Urban Outfitters to broaden its pool of candidates and publicly commit to taking steps to establish an inclusive board.

Gentex–ESG Reporting

Gentex develops and manufactures high-quality products for the automotive, aerospace, and commercial fire protection industries.

For a number of years, sustainable investors have been asking Gentex to begin reporting on sustainability issues. According to a recent study by KPMG, 95% of Global Fortune 250 companies now provide sustainability reporting. However, Gentex provides no data to investors regarding any improvement of company operations, efficient use of resources or reduction of environmental impacts.

On May 17, the shareholder resolution asking Gentex to begin sustainability reporting will be presented at the AGM. Calvert Investments is joining Walden Asset Management, the lead filer, which has been filing shareholder resolutions on this issue for the last few years.

Sustainability minded investors are in good company. Some of Gentex's own key clients such as Daimler, BMW and Ford Motor Company are expecting more from suppliers around sustainability reporting.

Smuckers–Climate Change and Sustainable Sourcing

In addition to their well-known jam and jelly business, The J.M. Smucker Company includes household names such as Dunkin Donuts, Pillsbury and Folgers Coffee. In fact, it's one of the four largest coffee companies in the world, which provides for approximately 40% of the company's revenue. It's an equally important business to the 25 million coffee farming families worldwide.

With climate change impacting temperature, rainfall patterns, frequency of severe weather events, as well as other effects, Smuckers is presented with a number of important risks and opportunities to their coffee business. While their competitors—Nestle, Kraft, and Sara Lee—are making strides to address coffee sustainability issues and provide for a reliable supply chain of quality coffee, Smuckers is lagging on this issue.

As a result, at the August AGM, a shareholder resolution co-filed by Calvert Investments and Trillium Asset Management will be presented asking Smuckers to develop and publish an enhanced green coffee sustainability plan that addresses quantitative goals for purchasing quantities of certified coffee. Additionally, management will be asked to define a method for evaluating the success of the plan to address the challenges of climate change in order to determine their plan is beneficial to the farming communities and ecosystems from which it sources its coffee.

How Shareholder Resolutions and Proxy Voting Work

Anyone with at least $2,000 in stock in a public company, held for at least one year, can file a resolution calling for the company to take a specific action.

When you invest in a mutual fund that holds stock, you convey this important responsibility to your mutual fund manager, along with the right to vote your shares on corporate resolutions—a process called proxy voting. Accordingly, it's important to know if your fund managers exercise their shareholder rights by engaging companies through the resolution process and how they vote their proxies.

Read more about shareholder advocacy and Calvert's efforts from the most recent proxy season in our Shareholder Advocacy Brochure.

Calvert Investment Management, Inc., 4550 Montgomery Avenue, Bethesda, MD 20814.



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