Active Engagement

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Some institutions prefer active engagement to divestment as a course of action to shift company behavior. In some situations it active engagement can be an effective mechanism of delivering positive change and outcomes. However, for engagement to work, it must also be accompanied by a robust escalation process, including the ultimate sanction of divestment. 

 

For investors seeking to engage themselves, or via their proxy at shareholder meetings, a number of ethical shareholders have started to bring resolutions to the annual general meetings of nuclear weapon producing companies. 

 

Earlier this year, shareholder proposals talking about the TPNW were brought to General Dynamics and Lockheed Martin. This Inkstick Media article goes into more depth on these resolutions and why they can support the normative efforts around the TPNW.

Lockheed Martin

In 2021, the Sisters of Charity of Elizabeth (New Jersey), School Sisters of Notre Dame Cooperative Investment Fund, and Sisters of St. Francis of Philadelphia urged Lockheed Martin to report on their human rights due diligence process. The proposal for shareholders to consider notes that “Failure to meaningfully assess the Company’s human rights impacts may expose Lockheed Martin to material risks, including negative legal, financial, and reputational risks.”  The proposal goes further and recognizes “Lockheed Martin’s business is also connected to controversial weapons that are illegal under international law and pose a legal, reputational, and regulatory risk to the Company and its investors.” Lockheed Martin Corp. is involved in both UK and US nuclear weapon production as a provider of key services and components for nuclear arms.

 

During the shareholder meeting, Lockheed Martin responded by reaffirming its commitment to continue manufacturing nuclear weapons as long as the U.S. asked for them.  Still, shareholders who supported the Catholic Sister’s proposal should keep faith. Demonstrating substantial and valuable backing of the proposal, the resolution managed to gather 31.6% of present shareholders’ votes (66.5% against, 1.9% abstained). Likewise, Lockheed once said the same thing about cluster munitions, though because of pressure from shareholders and ongoing blacklisting by other investors, it soon changed its story.

 

A similar resolution was put forward in 2022, garnering additional support from Lockheed Martin shareholders. 

 

Northrop Grumman

The School Sisters of Notre Dame Cooperative Investment Fund, Sisters of St. Dominic of Caldwell, and Sisters of St. Francis of Philadelphia brought a similar resolution to the 2021 Annual Shareholders meeting of Northrop Grumman.  Northrop Grumman actively sought to discourage shareholders from supporting the resolution, yet over 40% of those voting were in favor of language that recognizes the company has a human rights problem from producing nuclear weapons.

 

 

Northrop Grumman claimed it already ‘thoroughly’ implemented anti-nuclear weapon pointers in its human rights policy. Likewise, they do not believe that their share in the production of nuclear weapons is significant enough or that they carry some responsibility in the encouragement of governments to purchase their weapons or build new ones.

 

The Treaty on the Prohibition of Nuclear Weapons prohibits the production, manufacture and development of nuclear weapons. As well as any assistance or encouragement of the production of nukes. Companies involved with producing integral nuclear weapons components may also be required to demonstrate that they are not conducting prohibited activities in jurisdictions that ratified the Treaty, a potentially costly endeavor. Growing divestment pressure targeted at large funds, religious institutions, and universities limits the pool of potential shareholders, and may negatively impact the company’s access to capital.

 

Despite industry pressure to limit the possibilities for shareholders to submit proposals, Northrop Grumman faced similar action at their 2022 annual meetings.