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, which must follow guidelines set by the United States Securities and Exchange Commission (SEC).

As You Sow and Shareholder Advocacy

SEC’s Corporate Proxy Rules Need a Rewrite

SEC Commissioner Daniel Gallagher’s comments on March 27 2014 suggested that the Securities and Exchange Commission should revamp its proxy-proposal rules to make it more difficult to bring shareholder actions. His comments followed the Wall Street Journal’s Edward S. Knight’s earlier op-ed suggesting similar restrictions. It appears that there is a coordinated rhetoric storm gathering to severely limit shareholder’s right to free-speech.

We respond to these suggestions with our own – the process should be made as simple as possible, not restricted to the very wealthy. Click through to read our full response.

As You Sow’s success in using shareholder advocacy is part of a larger body of work by a broad range of organizations that invest in companies that have strong environmental, social, and governance (ESG) principles. This includes ESG screening of investments, a practice that collectively overturned Milton Friedman’s nearly universally held assumption that responsibility adversely affects a firm’s financial performance.

Shareholder advocacy efforts have resulted in an unprecedented paradigm shift in the behavior of both shareholders and company management that is creating a new environmentally sustainable economy. Over $3 trillion–nearly $1 of every $8 under professional management–is invested using ESG criteria, shareholder advocacy, and community investing strategies.

Frequently asked questions about shareholder resolutions

What is a shareholder resolution?

Shareholder resolutions are a powerful way to encourage corporate responsibility and discourage practices that are unsustainable, unethical, or increase exposure to risk. There are several hundred shareholder resolutions filed every year. Resolutions 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 that lead to policy changes on issues that may impact a company’s bottom line, and therefore the shareholder’s stock value, such as brand reputation.

These resolutions enable a formal communication channel between shareholders and management that often results in the withdrawal of the resolution through a negotiated dialogue. 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 one year prior to the filing deadline can introduce a resolution to company management to be voted on at the next annual meeting.

What is a successful shareholder resolution?

The goal of a shareholder resolution is to influence company decision making, thus success is measured by changes in corporate policy and actions. A successful proposal often leads to a dialogue that addresses the concerns raised in the resolution. Many companies seek to avoid a vote, preferring to project a positive image at the annual meeting. If a resolution is voted on, a majority vote is not required for 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, excluding the other two possible vote categories from percentage calculations, Abstentions and Broker Non-Votes.

Thus, For divided by the total For plus Against equals the percent of shareholder support.

Are shareholder proposals binding?

The vast majority of shareholder proposals are non-binding, meaning the company is not required by law to comply regardless of the level of support. A non-binding, or advisory, proposal asks, recommends, or suggests that the company take or not take a specific action.