Morgan: 'Sustainability' proposals don’t pass
“Sustainability” permeates our world. But what is sustainability?
Consider this comment from new Albuquerque Public Schools superintendent Raquel Reedy: “The fact is that our students move many times. Consequently, there is very little sustainability, very little consistency where children stay at one school the entire time.”
Likely, whatever Reedy means by “sustainability” and APS sustainability measures is different from the meaning of the people who proposed sustainability resolutions for consideration at the annual meeting of PNM Resources Inc., parent company of Public Service Company and a Texas utility.
PNM’s board of directors wisely recommended voting against the proposals.
For those not owning stock, a brief primer is that a corporation divides ownership into shares. People can buy those shares. I bought 1.5 shares of Disney for my new grandson, Christopher. Shareowners have a slight say in what a company does, depending in part on the number of shares owned. But shareholders can also ask the company to do things through proposals at the annual meeting or by asking questions at the annual meeting.
Besides Christopher, many other children own small numbers of Disney shares. During the annual meeting, the children can ask questions and they do. I saw this when Disney held its annual meeting in Albuquerque a few years ago. The children got serious answers from Disney’s boss. Christopher could ask questions once he learns to talk.
The proposals came to PNM shareholders via the proxy statement, a document telling shareholders about the past year’s performance and plans for the coming year and asking that management be delegated to vote the shareholder shares. I voted my 165 shares online, following management’s recommendations, because the May 17 meeting is in Lewisville, Texas, home to PNM’s Texas operations.
Some will claim I’m a management lackey. Hardly.
Sustainability Proposal One said “shareholders of PNM request” that “measures of sustainability metrics including reductions of annual greenhouse gas emissions” be part of setting executive pay. The proposal said, “Sustainability is defined as how environmental, social and financial considerations are integrated into corporate strategy over the long term.”
Proposal Two, another “request,” sought a “sustainability report” about “key environmental, social and governance (ESG) risks and opportunities.”
Look at Proposal One. It’s all politics and process, about “how considerations are integrated.” One could be sustainable by saying, “We talk a lot about this stuff.”
Supporting arguments were big on conditional words drawn from studies. The conditional words were along the lines of “firms that operate in a more responsible manner may perform better financially.” Or they may not. The meaning of “responsible” may go back to the mystery metrics, which I did not see in the proposal. A cited study from the United Nations, that paragon of impartiality, said CEOs “expect” or “believe” or “regard” certain things. But nothing definite.
Proposal Two claimed “investors increasingly request” such reports. As usual in such uses, “increasingly” was not specified. Going from one-tenth of one percent to half a percent could be “increasingly,” however trivial. Proponents reference a report from an apparently expert firm, MSCI, Inc., without providing an Internet source.
PNM’s response is that the company already does and reports what is proposed without the bureaucracy of added reporting.
PNM puts up with this stuff partly because, as a public company, it must. More important, PNM has long since made the environmental commitment mostly because that is the right thing to do. As regulated utility, PNM operates in a political environment. Sensible risk control approach for any organization is minimizing public hassles with people disliking you. While PNM certainly won’t say so in public, logically, going with the sustainability flow is an appropriate strategy.