Engagement and voting strengthen each other in the Monsanto case
Cristina Cedillo Torres
Robeco has been engaging with Monsanto since 2012. Following the approval of a shareholders’ proposal for proxy access which grants shareholders the right to nominate board directors, we had constructive talks with Monsanto, making suggestions for the implementation of this new procedure.
US biotech company Monsanto produces seeds for fruits, vegetables and crops such as corn, soybeans, and cotton. It is the subject of controversy for the production of genetically modified organisms (GMOs) and pesticides, such as its proprietary Roundup, which are accused of endangering the food chain. Robeco has an active dialogue with Monsanto on this and other topics since 2012.
Monsanto gives minority shareholders the right to nominate directors. At this year’s annual shareholders’ meeting, 53% of the shareholders, including Robeco, voted in favor of a shareholder proposal to change Monsanto bylaws and allow for ‘proxy access’. As a result, eligible Monsanto shareholders are now allowed to nominate their own directors, in addition to the candidates nominated by Monsanto’s board of directors.
After our review of the 2014 sustainability report released at the end of May 2015, we sent a set of questions to Monsanto and asked to discuss their plan to implement the proposal. The company was keen to hear our views on how such measures should be designed, and we shared our views during a call in June 2015. We discussed conditions for shareholders’ eligibility such as the period of their share ownership and the amount of shares they own.
Ultimately, the company decided that a single shareholder or a group of up to 20 shareholders, owning 3% of Monsanto’s outstanding stock continuously for at least three years may submit director nominees for up to 20% of the board.
The fact that we had been in talks with the company for three years strengthened the mutual trust and allowed us to contribute to an optimum outcome of the voting process.
Our engagement with Monsanto
Our engagement with Monsanto shows good progress. We encourage the company to develop a comprehensive policy on their efforts to support biodiversity conservation. Meanwhile, the company is increasingly transparent on sustainability issues. It has opened up to external stakeholders, has enacted an integrated Sustainability department and has committed to develop a biodiversity policy as part of the new sustainability framework, which is expected to be released in 2016. However, we will continue to exert our influence through the dialogue with Monsanto on product stewardship. WHO research published in March 2015 labels glyphosate, the active component of Roundup, as probably carcinogenic. These publications are a cause for concern for shareholders and the way in which the company manages the health risks of its products is a material factor in our analysis.
Voting and engagement are two tools that, when combined, can strengthen each other. A long-standing relationship resulting from a multi-year engagement process inspires trust. Voting then becomes much more than simply casting a vote, and evolves into an important element in a continuous mutual exchange of views.