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Shareholder Activism Emerging as New Path to Abortion Rights (1)

May 4, 2022, 2:52 PMUpdated: May 5, 2022, 8:45 PM

Companies stand to face increasing pressure from shareholders to protect abortion access for workers as new state laws—and a looming Supreme Court decision—threaten reproductive rights.

Walmart Inc., Lowe’s Cos., and TJX Cos. represent what’s potentially the tip of a burgeoning trend in shareholder activism in this area: All three companies will face votes on proxy proposals in the coming weeks aimed at shaping internal policies related to abortion access.

“We’ve seen this trend beginning to some extent in prior years,” said Carolyn Frantz, co-head of the Public Companies & ESG practice at Orrick Herrington & Sutcliffe LLP. “Now, there are a series of proposals asking companies to more directly discuss the availability of reproductive rights to their workforce.”

A recent Securities and Exchange Commission policy change allowing shareholders to more easily force a vote on social issues is coinciding with tightened abortion restrictions in some states.

“I suspect we will see more of that,” said Frantz, the former head of the corporate legal group at Microsoft Corp., speaking after a leaked draft of a pending opinion showed the Supreme Court potentially ready to reverse the landmark Roe v. Wade decision that legalized abortion.

Last year, the SEC shifted its policy on “no-action” letters—essentially green lights for companies to cast aside shareholder proposals without fear of an enforcement action down the line—saying it would start factoring in broader social policy considerations when evaluating corporate requests to reject proxy proposals.

An uptick in this type of activism could put businesses in a challenging position, particularly for national companies trying to avoid running afoul of state laws on abortion access, said Joanna Wright, a partner with Boies Schiller Flexner LLP who has represented clients on corporate governance issues.

“As further civil liberties, coveted rights are on the chopping block, companies are going to have less and less wiggle room, and are going to be pushed more and more by both sides to take a stance,” Wright said.

Voluntary Policies

Some companies are preemptively making changes in response to tightened state abortion access laws and the specter of a Supreme Court reversal of Roe. Citigroup Inc., Amazon.com Inc., and Uber Technologies Inc. voluntarily announced in recent months that they would pay for abortion travel benefits for workers who live in states that already limited access to abortion.

“The United States, in particular, is unique in the power that companies have over health and welfare of their employees,” said Ruth Shaber, founder of the Tara Health Foundation, which has backed proxy proposals advocating for reproductive rights, including at Home Depot Inc.

Still, taking a public stand on such a socially divisive issue is uncomfortable for companies, even as many large corporations have responded to pushes from shareholders on climate change and racial equity in recent years, said Danielle Fugere, president and chief counsel at As You Sow, a shareholder-advocacy group.

A high court reversal of Roe would be “highly destabilizing for businesses,” Fugere said. “We’re seeing so much going on at the social level, and perhaps shareholders and companies will have to make their way through uncertainty and create rules of the road.”

Proxy Season

At least 10 institutional investors that manage $11.8 billion in assets, coordinated by social impact fund Rhia Ventures, filed proposals for the 2022 proxy season that address political spending or internal policies. Of th 14 proposals three year, three were withdrawn, two held votes, and nine are pending.

But there’s nothing to stop similar pressure from shareholders who back abortion restrictions: new laws in several states would severely restrict abortion rights as the nation awaits a decision from the Supreme Court.

“In theory, these companies should reach out to lawmakers and say, ‘This is bad policy,’” said Shelley Alpern, director of corporate engagement at Rhia Ventures, which advocates for reproductive rights and has urged state lawmakers in Republican-controlled states not to pass measures restricting abortion rights. “In practice, companies are nervous.”

“They get requests to be proactive on a lot of issues, and this is a scary one for them,” said Alpern. “This is early on in our strategy and we hope over time we can expose the business case.”

Proposals at Walmart, Lowe’s, and TJX ask the companies to assess the risks they face when abortion access to their employees is restricted—and to report on ways they are mitigating the impacts of the disruption.

Lowe’s shareholders will vote May 28, while the TJX vote is scheduled for June 7. The Walmart vote is set for early June, according to Rhia Ventures.

Other proposals focus on political spending, pushing companies to not contribute to politicians whose public stances on equity and inclusion do not align with the company’s stated positions. Those proposals, which include issues of reproductive health care, were directed toward Cigna, Charter Communications Inc., AbbVie Inc., AT&T Inc., FedEx Corp., Home Depot, and UnitedHealth Group Inc.

“There’s a learning curve and a comfort curve,” said Alpern, who wants companies to cover travel costs for employees who go out of state to obtain care, insure all abortions, and provide insurance coverage for contraception.

On the Edge

In 2020, there were two abortion-related shareholder proposals that targeted internal policies, both of which were withdrawn, according to the Conference Board Environmental, Social and Governance Center. There were two such proposals in 2021 as well, one of which was withdrawn, and none of those proposals were voted on, the center said.

According to Rhia Ventures, when also factoring in proposals on political spending, there were a total of six in 2020, with five withdrawn and one vote. In 2021, there were a total of eight proposals, three of which were withdrawn, one excluded, and four received votes.

This year is shaping up to see even more action.

“We’ve seen most of the pressure for companies to take stands on social issues coming from employees, not shareholders,” said Paul Washington, executive director of the Conference Board Environmental, Social and Governance Center. “Employees are really the most likely to bring up social issues.”

Navigating social issues has always been tricky for companies, but Alpern called the leaked Supreme Court draft opinion a “wake-up call” for companies and their shareholders.

And Washington said he expects a new landscape for shareholder activism, particularly given the SEC policy changes.

“The gates are wide open,” he said.

—With assistance from Valerie Bauman.

(May 4 story updated to include more detail on the number and types of abortion-related shareholder proposals in prior years.)

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Laura D. Francis at lfrancis@bloomberglaw.com