A Shareholder Asks Some Inconvenient Questions

By Jerry Bowyer

Wednesday, May 05, 2021

In addition to being a financial journalist, I work in money management, where I help design and manage funds that invest in stocks and bonds. My focus has always been on choosing securities based on investment quality, not on the political positions that a company may take. That practice has been rooted in the expectation that the companies in which we invest are focused on delivering shareholder return, and that any political involvement it may have is subordinated to that end. It has become readily apparent, however, that such an assumption is no longer safe to make.

With this in mind, over the past several days I’ve taken time out of my schedule to attend shareholder meetings. I registered for each of them using proper procedures and was admitted into each web page as the meetings commenced. Generally, our stakes in these companies have been on the order of magnitude of millions of dollars. In other words, I am not an activist who buys one share so I can speak up at the annual meeting.

In recent months, I have been especially concerned by corporations’ endorsing legislation that undermines religious liberty — particularly the Equality Act. This legislation goes further than simply expanding federal statutory civil-rights protections against discrimination on the basis of sexual orientation or gender identity — it specifically and explicitly precludes appeals based on the Religious Freedom Restoration Act. NPR put it this way:

The bill also explicitly says that it trumps the Religious Freedom Restoration Act (commonly known by its acronym RFRA). The law, passed in 1993, set a higher bar for the government to defend laws if people argued those laws infringed upon religious freedom.

Under the Equality Act, [a business] couldn’t use RFRA to challenge the act’s provisions, nor could it use RFRA as a defense to a claim made under the act.

RFRA is a mainstream and bipartisan product of the American political system. It was introduced in the House by then–congressman Chuck Schumer and in the Senate by Ted Kennedy and passed by overwhelming majorities. Bill Clinton signed it into law. To create a potentially large new class of cases in which it cannot be relied upon is to greatly diminish religious freedom in our country. That is probably why the legislation’s supporters have not been able to get it passed. Moderates, some of whom are philosophically inclined to support this bill, such as Maine’s Susan Collins (who co-sponsored the bill in 2019, but is not doing so this time around), have expressed reservations specifically about the weakening of religious and conscience protection.

The question that I, as an investor, would like answered is: Why in the world would large publicly traded companies endorse such divisive legislation that is clearly incompatible with the sincerely held beliefs of half of the country? Is it mainstream to force girls to compete in sports with athletes who identify as females, but are, biologically, boys? Is it mainstream to force shelters for battered women to accept biologically male applicants? Is it mainstream to compel churches into accepting new gender ideologies in their hiring practices?

My firm, Bowyer Research, created a database of the companies in which we are invested that were listed by the Human Rights Campaign as Equality Act endorsers. I then signed up for the annual meetings of those companies and have been attending them. I have been asking each company in turn, via the proper, formal question-submission processes at the start of each meeting, to explain their support for this law. So far, I have attended and asked that question of Exelon, Cigna, Ameriprise, and Corning. What happened? My questions were simply ignored. It’s actually worse than that. In the case of Exelon, after several other shareholder questions were read and addressed, it was suggested that there were no more questions. And in the case of Cigna and Corning it was stated, at least arguably (the forthcoming release of meeting records will allow readers to decide for themselves), that there were no further questions, even though mine was still unaddressed. In other words, not only was my question thrown down the memory hole, the memory hole was thrown down another memory hole.

I reached out to the investor-relations departments of each of these companies via email and phone and, as of this writing, only one company has responded. I am currently in off-the-record conversations with that company and will report later on that discussion. Suppression of shareholder speech, if intentional, is egregious. To mislead attendees into believing that all questions had been heard is doubly so. I understand why companies would not like to take the question. It is likely that these companies simply saw the word “equality” and were cajoled by the usual suspects, and probably were not informed that this was not just a pro-gay bill, but also an anti-religious one. But these CEOs did not have to endorse it. They didn’t have to drag the companies, and us shareholders, into a culture war. They could have just stayed out of politics.

For the historical record, below you can find slightly edited versions of the suppressed questions that I offered to each company. They differ slightly from the exact questions that I submitted because of space considerations in the proxy process — and because of my desire to keep colleagues out of the tussle for the moment.

To Exelon:

We are increasingly concerned about the hyper-politicization of publicly traded corporations that get pulled into divisive and polarizing political debates. For example, Exelon is reported as endorsing the Equality Act, a piece of legislation that sides with one party and set of interest groups against another party and set of interest groups. Of special concern is that the legislation explicitly denies citizens the right to appeal using the Religious Freedom Restoration Act. It goes out of its way to diminish appeals to religious freedom and conscience.

Is it really a priority for you to embrace legislation that is hostile to religious freedom? Why not stay focused on business, and not risk alienating half the country and half of Washington? Why not stick to generating electric power for all of us instead of playing around with political power for half of us?

To Cigna:

Recent press reports reveal that you have subjected employees to ‘diversity training’ that accuses “a certain religion” of conferring “religious privilege.” In addition you have endorsed the Equality Act, which severely curtails religious freedom. The current proxy statement claims that “Cigna supports fundamental human rights for all.” How do you square that statement with the endorsement of actions that sideline and unfavorably label certain religious views?

To Ameriprise:

We are increasingly concerned about the hyper-politicization of publicly traded corporations that get pulled into divisive and polarizing political debates. For example, the Equality Act, which you endorsed, a piece of legislation that sides with one party and set of interest groups against another party and set of interest groups. Of special concern is that the legislation explicitly denies citizens the right to appeal using the Religious Freedom Restoration Act. Why meddle in politics this way and alienate half of the country?

To Corning:

Corning Inc. is to be commended for including political viewpoint and religion in its diversity statements. However, you publicly endorsed the Equality Act, which includes language that specifically precludes appeals based on the Religious Freedom and Restoration Act, demoting religious freedom. How do you square your statement protecting religious diversity with this support? Related: Is it really necessary to entangle our company in such divisive political issues?

As of now, none of these questions have been addressed.