When we think about ways to pressure corporations to improve their practices, we may think of petitions, street demonstrations, boycotts, or social media campaigns. Yet there’s another way that’s been used effectively for decades.
It involves those who stand to gain from keeping companies healthy over the long term. It’s called shareholder action.
Shareholders, who are part-owners of the companies in which they invest, can use their investor status to pressure companies to be better corporate citizens. You’re a shareholder if you buy stock in a company.
While not usually in the limelight, people who care about the social and environmental impacts of the companies in which they invest have helped improve corporate conduct for decades.
Shareholders pressured companies to stop doing business with the Apartheid regime in South Africa. They’ve gotten many companies to ensure that women and people of color are in present in management and on corporate boards. And they’ve gotten companies to take action on climate change.
Shareholder action consists of several approaches. Investors meet with management, file resolutions that all shareholders get to vote on, and vote in support of resolutions on social, environmental, and sound corporate governance issues.
How do we know that shareholder action is effective?
For one thing, we see companies change practices and adopt new policies. For another, when conservative groups like the Chamber of Commerce and the Business Roundtable oppose corporate responsibility initiatives, you know they’re having impact.
Indeed, corporate lobbyists are now working hard to undercut the shareholder resolution process.
For decades, the Securities and Exchange Commission (SEC) has given concerned investors a process to raise issues that might otherwise go unrecognized or ignored by company leaders. It’s let shareholders request company reports on things like board diversity, labor conditions, human rights, environmental stewardship, and climate…