Shareholder Advocacy
Shareholder advocacy leverages the power of stock ownership in publicly-traded companies to promote environmental, social, and governance change from within.
This advocacy can take the form of a dialogue between shareholders and the company or shareholders may file a resolution under guidelines set by the U.S. Securities and Exchange Commission (SEC).
As You Sow And Shareholder Advocacy
These rule changes are being challenged in court, on behalf of shareholders generally, by ICCR, As You Sow, and Jim McRitchie.
The rule changes currently in effect are as follows:
1: Dollar value of stock needed to file has been raised to $25,000 if shares have been held one year prior to filing; $15,000 if held two years; and $2,000 if held three or more years. There is a transition mechanism in effect for 2022 such that, if a shareholder has held $2,000 worth of stock since before January 4, 2020, they will be allowed to to file a proposal to be heard at an Annual General Meeting in 2022.
2: Resubmission thresholds have been increased. Effective immediately, to proceed with the same proposal in a following year, a proposal will need to have earned a vote of 5% support in its first year; 15% in the second year; and at least 25% in year three. These requirements are an increase from the prior resubmission thresholds of 3%, 6%, and 10%.
3: Representative filings. Effective immediately, shareowners wishing to authorize an issue expert, financial advisor, attorney, or other person or organization to represent them in a 14a-8 filing must provide a statement that they (the shareholder) are willing to meet with the company and must provide dates when they are available to meet with the company during a specified time frame post-filing.
4: Effective immediately, any single person or entity is limited to filing only one shareholder resolution at a given AGM, even if they represent separate shareholders.
As You Sow’s success in using shareholder advocacy is built on a larger body of work by a broad range of organizations that have, over time, created environmental, social, and governance (ESG) principles for investing in companies. These principles are built on a stakeholder-centric view of capitalism which recognizes that negative company impacts to people and planet will generally increase company risk and reduce its value over time. ESG and stakeholder capitalism have been endorsed by the World Economic Forum’s 2020 Manifesto and Blackrock’s 2020 CEO Letter.
Shareholder advocacy efforts have resulted in an unprecedented paradigm shift in the behavior of company management toward achieving an environmentally and socially sustainable economy. According to US SIF Trends report more than $18 trillion — nearly $1 of every $3 under professional management — now is invested using ESG criteria and community investing strategies.
As You Sow’s success in using shareholder advocacy is built on a larger body of work by a broad range of organizations that have, over time, created environmental, social, and governance (ESG) principles for investing in companies. These principles are built on a stakeholder-centric view of capitalism which recognizes that negative company impacts on people and the planet will generally increase company risk and reduce its value over time. ESG and stakeholder capitalism has been endorsed by the World Economic Forum’s 2020 Manifesto and Blackrock’s 2020 CEO Letter.
Shareholder advocacy efforts have resulted in an unprecedented paradigm shift in the behavior of company management toward achieving an environmentally and socially sustainable economy. According to US SIF Trends report more than $18 trillion — nearly $1 of every $3 under professional management — now is invested using ESG criteria and community investing strategies.
Frequently asked questions about shareholder resolutions
+ What is a shareholder resolution?
A shareholder resolution is a 500 word request submitted to a company by a shareholder asking the company to address an issue of concern. Resolutions are a powerful way to encourage corporate responsibility and discourage practices that are unsustainable, unethical, or increase exposure to risk.
There are approximately 400 environmental, social, and sustainability governance resolutions filed by shareholders every year. Resolutions that are to be voted on are placed on the company’s proxy statement and all persons and institutions that own stock in the company can vote on the issue. The terms “resolution” and “proposal” may be used interchangeably.
Shareholder resolutions often call for reports and material disclosure that lead to policy changes with the goal of reducing risk on issues that may impact a company’s brand reputation and bottom line, and therefore the shareholder’s stock value
The resolution process creates a formal communication channel between shareholders and management that often results in a negotiated withdrawal of the resolution in exchange for action by the company. If agreement is not reached, the resolution is placed on the company’s proxy statement and voted on by all stockholders.
Shareholders holding at least $2,000 worth of stock in a publicly-traded company for at least three years prior to the filing deadline can introduce a resolution to company management to be voted on at the next annual meeting.
+ What does stakeholder capitalism mean?
Investors are also stakeholders. Most investors want their investing strategies to make life better for their grandchildren, their communities, and the health of the planet. Stakeholder capitalism asks companies to take non-shareholder (i.e., stakeholder interests) into account when conducting their business including workers, fence line communities, and the environment. The right to engage with companies as investors allows investors to advance these fundamental stakeholder interests and their own interest in financial returns. The World Economic Forum published a Manifesto in 2020 putting stakeholder capitalism as the new center of corporate purpose.
Investors have a right and a responsibility to speak up when the companies in which they invest engage in antisocial behavior such as pollution or human rights violations. The shareholder resolution and engagement process is both the opportunity and the right to do so. It’s like expressing your First Amendment rights as investors.
+ What is a successful shareholder resolution?
The goal of a shareholder resolution is to influence company decision making; success is measured by changes in corporate policy and actions. The filing of a resolution often leads to a dialogue that addresses the concerns raised in the resolution. Many companies seek to avoid a shareholder vote, preferring to project a positive image at their annual meetings. If a resolution is voted on, a majority vote is not required to convince the company to make the requested change.
Votes with more than 10% support are difficult for companies to ignore. Resolutions with 20% or more support send a clear message to corporate management that the current company policy is too risky or not beneficial to shareholder interests. Only the least responsive company would ignore one in five of its shareholders.
+ How are shareholder votes calculated?
After the annual meeting, companies must report the votes cast to the SEC. Only For and Against votes are counted in determining support level for a resolution. Abstentions and Broker Non-Votes, the other two possible vote categories, are excluded from percentage calculations.
“For” divided by the total of “For” plus “Against” equals the percent of shareholder support.
+ Are shareholder resolutions binding?
The vast majority of shareholder resolutions are non-binding or “precatory,” meaning the company is not required to comply regardless of the vote results. A non-binding (advisory), resolution asks that the company take or not take a specific action but no level of shareholder support, even 100% support, can make the resolution binding on the company. As noted above, it is a rare, however, for a company to ignore the concerns of even 10% or 20% of its shareholders.
+ What are other shareholder resources?
- Interfaith Center on Corporate Responsibility (ICCR)
- The Forum for Sustainable and Responsible Investment (USSIF)
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As You Sow is not an investment adviser nor do we provide financial planning, legal, or tax advice. Nothing in our communications or materials shall constitute or be construed as an offering of financial instruments or as investment advice or investment recommendations. Please see our full disclaimer