Good Money After Bad: Understanding Shareholder Advocacy
Let’s begin with an understatement: 2020 has been a tough year. Centuries of harmful social and environmental policies and practices have culminated in the one-two punch of global pandemic and civil unrest stemming from the horrific death of George Floyd at the hands of Minneapolis police oﬃcers. As summer arrives, the weary population is just beginning to grapple with an early and aggressive hurricane season due to unusually warm ocean temperatures. Bad seems to be relentlessly followed by worse.
The consequences of systemic issues such as institutional racism, unsustainable food systems, and climate change are increasingly self-evident. Many are wondering how we got here. Regrettably, some responsibility falls on shareholders of publicly traded corporations for enthusiastically embracing shareholder primacy, a doctrine that places the financial interests of shareholders above the interests of all other stakeholders.
The Rise of Stakeholder Capitalism: a doctrine that calls for corporations to focus on the needs of all constituents
For far too long, companies have systematically paid women and people of color unjustifiably low wages, and shareholders were happy to oblige as long as they saw profits. Some companies contributed to unsustainable food systems that risk zoonotic disease outbreaks, and investors turned a blind eye while cashing their dividend checks. Shareholders reaped a century’s worth of profits with little concern for the long-term sustainability of our social and environmental systems. Now those systems are breaking down under generations of abuse, and it begs the question: Will shareholders of publicly traded companies demand better and contribute to a more just and sustainable society?
At Change Finance, we believe the answer is yes. This is how…
How Shareholders Can Effect Change
Shareholders have the right to vote on corporate governance issues by voting on resolutions by “proxy.” This is an opportunity to change corporate policies and practices by supporting Environmental, Social, and Governance (ESG) oriented resolutions, but only 27% of individual investors vote on average.1
Some investors and asset managers engage in direct dialogue with corporate management to solicit policy changes. However, only 61 asset managers, representing just 17% of professionally managed assets, engage with companies they invest in on Environmental, Social, and Governance (ESG) issues.2
FILING SHAREHOLDER RESOLUTIONS
Some investors and asset managers file resolutions that shareholders can support through proxy votes. This is a meaningful approach to eﬀect change, but only 49 investment managers, representing just 6.4% of professionally managed assets, have filed or co-filed ESG related shareholder resolutions.2
Momentum is building…
Since 2004, ESG oriented shareholder resolutions have garnered more and more votes. Such resolutions were supported by 29% of shares voted in 2019.3
…but shareholders must do more.
Increasing support is nice, but if it doesn’t pass resolutions, it isn’t enough. A report from Morningstar indicates that “mutual fund companies backed proposals addressing sustainability concerns by the widest margin yet in 2019, but a lack of support from the largest U.S. fund managers kept many just short of winning a majority of votes.”3 Fortunately, all shareholders can contribute to better outcomes.
EDUCATE YOURSELF: Learn more about shareholder advocacy from industry leader and non-profit As You Sow
JOIN THE COMMUNITY OF RESPONSIBLE INVESTORS: Become part of the Your Stake community and support shareholder advocacy on issues you care about
INVEST WITH ASSET MANAGERS THAT REPRESENT YOUR VALUES: Consult your financial advisor to learn about the asset managers and organizations that will advocate on your behalf
Disclosures, Definitions, and Footnotes
Change Finance, PBC is not affiliated with As You Sow or with YourStake.
- Egan, Matt. 2014. “Just 27% of Investors Bother to Vote.” The Buzz, June 12. https://buzz.money.cnn.com/2014/06/12/shareholders-dont-vote/
- USSIF. 2016 Trends Report: Investor Advocacy Highlights. The Forum for Sustainable and Responsible Investment. https://www.ussif.org/files/Trends/US%20SIF%202016%20Trends%20Overview_Investor%20Advocacy.pdf
- Cook, Jackie. 2020. “ESG Proxy Resolutions Find More Support in 2019.” Morningstar, February 28. https://www.morningstar.com/articles/967699/esg-proxy-resolutions-find-more-support-in-2019