In the wake of the U.S. Supreme Court's decision last summer to overturn Roe v. Wade[1] in its ruling in Dobbs v. Jackson Women's Health Organization, activist investors at several high-profile publicly traded companies are increasingly questioning corporate policies regarding abortion rights.
During this 2023 proxy season, investors are pushing for the preservation of reproductive choice by submitting shareholder proposals addressing abortion-related employee benefits, corporate spending on anti-abortion politicians and even the protection of abortion-related consumer digital data. Abortion rights have now become front and center for many activist shareholders focused on environmental, social and governance issues.
Understanding the likelihood of these proposals passing is only one piece of the puzzle. The sensitivity and politicization of ESG-related proposals demands that companies make a thoughtful and comprehensive review of the proposals to determine what steps, if any, should be taken in response to the proposal. An equally thoughtful corporate communication strategy — internal and external — will also be of paramount importance.
Each year, typically in the spring, publicly traded companies provide an annual proxy statement to their shareholders that contains information about the election of the company's board of directors and compensation of its executive officers, among other items that will be relevant to the votes scheduled for an upcoming annual shareholders' meeting.
A shareholder who wants to change something about the way the company conducts its business can submit a proposal for inclusion in the company's annual proxy statement, provided the shareholder meets certain requirements set by the U.S. Securities and Exchange Commission regarding both the value of securities held and the length of the holding period.
This proxy season, a number of shareholder proposals relate to companies' responses to Dobbs as part of such businesses' overall ESG policies and practices.
Setting the Stage: Abortion Rights and the Law
By way of background, in 1973, Roe v. Wade established a federal constitutional right to abortion services and struck down a state law that prohibited abortion. Several challenges to Roe persisted throughout the decades following that seminal decision.
However, it was not until last spring that the landscape changed, and changed in ways that fueled a very heated public argument — a debate spanning a wide array of religious, political and personal privacy considerations.
On May 2, 2022, Supreme Court Justice Samuel Alito's draft majority opinion in Dobbs v. Jackson Women's Health Organization, the case challenging Mississippi's 15-week ban on abortions, was leaked to the public. The draft suggested the court intended to overturn Roe.
Then, on June 24, the Supreme Court's opinion, with modest modifications compared to the leaked draft, was issued. The draft opinion sparked a litany of activity at the state level, since without Roe, abortion may be regulated by each state.
The overturn of Roe meant various so-called trigger laws and never-repealed pre-Roe abortion bans became immediately effective. In the weeks following the overturn of Roe, nearly half of all states either passed or introduced anti-abortion bills, including bills relating to abortion-related medication and travel.
A wide range of multistate employers reacted, with many promising to facilitate access to abortion services and preserve reproductive choice for their employees, specifically for those residing in states that do — or will — restrict abortion. State legislatures, courts, press releases and social media platforms were all flooded with responses from employers and employees alike, opining on the role and value of access to certain reproductive health care — and the role of corporate America in this matter.
In the months following the Dobbs decision, certain employers adopted or expanded access to abortion- or travel-related benefits inside or outside their group healthcare plans. Individuals with varying degrees of governmental authority became active in communication campaigns that warned employers that if they offer travel assistance or health care benefits for abortion procedures or medications, they could be sued and also face criminal charges.
As a result of all this, many multistate employers are tracking state-by-state developments to inform their strategy and risk profile in states where reproductive health care, including surgical abortion, medication abortion and travel to related abortion services, is or may become regulated.
The state law landscape remains dynamic, and abortion-related health care has continued to be debated and regulated in legislative and legal arenas; however, the spotlight was dimming on this issue — that is, until 2023 proxy season approached.
2023 Proxy Season Refuels the Fire
A large group of activist investors have directed attention to corporate policies — or the lack thereof — on reproductive rights, with a specific focus on abortion-related issues. More than 30 shareholder proposals have been filed this proxy season relating to companies' responses to Dobbs.[2]
These proposals address a wide variety of topics related to abortion rights, such as political and election spending, employee health care and welfare benefits, data privacy, and workforce recruitment and retention. Many of these shareholders are represented by Rhia Ventures, a nonprofit organization focused on reproductive health and justice.[3]
A number of these shareholder proposals concentrate on corporate spending for particular politicians, organizations or committees that have pledged to curb or restrict access to certain reproductive health care.
The Educational Foundation of America is one such activist investor that is focused on political and election expenditures at The Walt Disney Company. It claims the company's corporate political spending is misaligned with its publicly stated values on women's and reproductive rights, along with its stance on LGBTQ+, race and climate matters.
In its filed shareholder proposal, the EFA states that while Disney has instituted companywide efforts to promote women's advancement within its ranks, it also donated $1.6 million in the 2020 and 2022 election cycles to politicians and organizations that are actively trying to weaken women's access to abortion-related services.[4]
The EFA recommends that Disney establish clear policies and provide enhanced reporting on the alleged incongruities between its corporate values and political spending. Disney countered in its response to the proposal that
alignment with any organization or politician on every matter of importance is unlikely to be achieved. Companies routinely engage with those with whom they do not agree on any number of topics.[5]
The EFA has submitted a similar shareholder proposal regarding political spending misalignment on ESG issues, including abortion rights, for the 2023 annual shareholder meeting of UnitedHealth Group Inc.[6]
Other shareholder proposals from EFA and other groups focused on corporate political and electioneering expenditures have also been filed at public companies with household names like AT&T Inc., Coca-Cola Co., Comcast and The Home Depot Inc., among others.[7]
In addition to these alleged incongruities with political spending, a more popular topic related to Dobbs this proxy season is abortion-related data privacy. The U.S. does not have a federal privacy regime, outside of the Health Insurance Portability and Accountability Act applying to certain entities like self-insured group health plans. Instead, like abortion rights, privacy rights are governed by a patchwork of state laws.
The concern raised by activist investors such as Arjuna Capital is that personal digital data, such as location history, user data on apps, web browsing history and searches, could be used by law enforcement in jurisdictions where access to abortion-related health care has been severely restricted or eliminated.
In separate shareholder proposals at Meta Platforms Inc., the parent company of Facebook and Instagram, and Alphabet Inc., the parent of Google, Arjuna has claimed that these technology companies are not sufficiently protecting personal data that concerns abortion-related matters.[8]
Recommendations proposed by Arjuna include having the company prepare a public report on
reducing the risks of abortion-related law enforcement requests by expanding consumer privacy protections and controls over sensitive personal data.[9]
Allowing users to have deletion rights for their messages, location history and web searches is further recommended by these shareholder proposals.
American Express Co. has also been confronted with a similar data privacy shareholder proposal from Change Finance PBC, which has submitted three abortion rights proposals at financial companies so far this 2023 proxy season.
Change Finance alleges that American Express collects and stores sensitive consumer information related to abortion, such geolocation data, browsing history and financial activity, that could be requested by law enforcement. The proposal specifically calls out a concern for providing law enforcement or government agencies with
evidence of consumer acts that are inappropriate for the bank to voluntarily share — for example, evidence of a customer's financial activities that were legal in the state where they occurred, such as purchasing abortion pills.[10]
American Express has sought confirmation from the SEC that it may properly omit the proposal in its 2023 proxy statement because it deals with matters relating to ordinary business operations in which the shareholder is improperly trying to interfere.[11]
By contrast, in 2022 there were only 11 shareholder proposals centered on abortion rights submitted for votes at annual shareholder meetings, including at companies such as Walmart Inc., TJX Companies and Lowe's Companies Inc.[12] Since these proposals predated the final ruling that overturned Roe, but may have been in response to the earlier leak of Dobbs, the success rate of the proposals was middling.[13]
The 30-plus shareholder proposals in this 2023 proxy season that focus on abortion rights, whether via issues of political spending, data privacy or otherwise, indicate that abortion rights have continued to grow into a prime ESG priority for activist investors.
What's Next? Reproductive Health Care as an ESG Issue
Given the stark politicization of this issue and the strongly held feelings held by many, it's clear that these shareholder proposals are almost certain to fuel continued conflict over appropriate corporate strategy on reproductive health care, and specifically abortion-related care and services.
As a preliminary matter, a company receiving a proposal should assess whether it intends to negotiate with the entity representing the shareholders or request an SEC no-action relief letter for omitting the proposal from its proxy statement. This may be unnecessary for proposals unlikely to pass.
Even for proposals unlikely to pass, or those that seem likely to be withdrawn, investors will probably still expect a cohesive and thoughtful position from a company on its strategy, how that strategy addresses the current landscape and what impact it will have on investors and employees. Whether these proposals will also result in any new best practices surrounding the complex issues entangled in the post-Dobbs world remains to be seen.
Moving past the 2023 proxy season, the bar has been set for the inclusion of more ESG — and, specifically, social — proposals in years to come.
Corporate America should be prepared to see ongoing dialogue on pressing ESG issues and to continue balancing potentially sympathetic proposals with obligations to shareholders, compliance with corporate law and conducting ordinary business operations.
How will ESG, or related HR, benefit or DEI policies, be implicated? How will communication of any current or modifying policies be handled? How will compliance efforts be coordinated?
Now more than ever, alignment across organizations will be imperative.
To read the entire Law360 article, please click here.