Internet Issues Achieve Breakthrough Shareholder Votes; Privacy and Censorship Emerge As Critical Concerns

First-time investor resolution garners 30% of vote at CenturyTel, 9.2% at EarthLink;
Vote is seen as a signal to other Internet Service Providers

Investors in two major U.S. Internet Service Providers – CenturyTel, Inc. and EarthLink, Inc. – voted in substantial numbers in favor of a first-time shareholder resolution that highlighted the importance of Internet management practices and their impact on Internet privacy and freedom of expression.

The resolutions, which were filed and voted on for the first time this year, attracted 30.49% of the vote at CenturyTel and 9.25% at EarthLink.   Taken together, the votes mean that investors controlling stock worth more than $900 million voted in favor of the resolutions at the two companies.

A third Internet Service Provider, Knology, Inc., has agreed that it will revise its Internet privacy policy, following the filing of a shareholder resolution.  As a result of the agreement, the shareholder resolution has been withdrawn.

“These votes, at CenturyTel and EarthLink, and the agreement at Knology, are important because they signal to media and technology companies that investors believe Internet privacy and freedom of expression are important – comparable to social issues confronting other sectors where investors have successfully pressed for greater transparency and accountability,” said Michael Connor, Executive Director of the Open Media and Information Companies Initiative, or Open MIC (, which led development of the investor coalition that formulated and filed the shareholder resolutions.

Connor noted that the votes in favor of the resolutions regarding Internet privacy and freedom of expression compared very favorably to those on proposals regarding other social and environmental issues, in which companies have agreed to adopt carbon emission targets, adopt equal benefit policies for all employee families and disclose political donations.   For example, a current campaign led by the Center for Political Accountability, seeking to require corporate disclosure of political spending, started in 2004 with an average 9.1% vote in favor.   Since then, 52 large companies, including 35 in the S&P 100, have agreed to disclose and require board oversight of their political spending with corporate funds.

“This is the kind of vote that grabs the attention of corporate management.” said Jonas Kron, Senior Social Research Analyst at Trillium Asset Management Corporation, which filed the resolution at CenturyTel.  “When almost one out of three shareholders expresses this kind of concern, it’s time for the Board to re-examine how it will attend to the policy challenges, and opportunities, it faces. We hope CenturyTel will take this occasion to become a leader on privacy and freedom of speech.”

Connor said the strong investor concern demonstrated by the CenturyTel and EarthLink votes might explain why some major U.S. ISPs – including AT&T, Verizon, Comcast, Qwest Communications, Sprint Nextel and Charter – fought not to include the proposals in their 2009 proxy statements and permit their shareholders to vote on them.

“Our coalition fully intends to continue pressing these issues, and we will be raising them with ISPs individually and in future shareholder forums,” Connor said.  He added that “CenturyTel and EarthLink are to be commended for placing the proposal before their shareholders and enabling shareholder democracy.   We also look forward to seeing Knology’s revised privacy policy.”

“Shareholders are concerned about the financial risks these issues present, but this is also an issue of systemic importance.” said Kron. “The vitality of the Internet and the critical role it plays in the health of our economic, social, political and cultural lives is unprecedented. ISPs have an obligation, as gatekeepers of the Internet, not to behave contrary to the interests of society.”

The investor coalition includes the New York City Pension Funds, which filed the resolution at EarthLink and Knology, and leading socially responsible investment firms Boston Common Asset Management, Calvert Asset Management Company, Domini Social Investments, Harrington Investments, Trillium Asset Management Corporation and the As You Sow Foundation.  In the lead-up to the shareholder votes, the coalition sought and obtained support from additional state and municipal pension funds in voting for the resolutions.

The Open MIC proposal asked the boards of ISPs to issue a report examining the effects of the company’s Internet network management practices in the context of the significant public policy concerns regarding the public’s expectations of privacy and freedom of expression.

Connor said the Open MIC coalition was formed in response to network management practices which have come under public scrutiny by consumer and civil liberties groups and regulatory authorities, including committees of the U.S. Congress, the Federal Communications Commission and the Federal Trade Commission. “Internet network management is a significant public policy issue” said Connor. “Failure to fully and publicly address this issue poses potential competitive, legal and reputational harm to the companies.”

The shareholder resolution cited recent consumer surveys which found 72% of Americans are concerned that their online behaviors are being tracked and profiled by companies; 53% of Americans are uncomfortable with companies using their email content or browsing history to send relevant ads; and 54% of Americans are uncomfortable with third parties collecting information about their online behavior.  

In 2008, two of the companies addressed by the current shareholder proposal –CenturyTel and Knology – joined other ISPs as the subjects of national controversy and targets of a major Congressional investigation.   The companies had entered into partnerships with an online advertising company, NebuAd, which allowed for targeted advertising to customers based on which Web sites the customers liked to visit.  Importantly, customers were required to “opt-out” of a program in which many were not aware they were enrolled.