There are many ways to pressure companies to improve their conduct. One important strategy is shareholder activism through the shareholder resolution process.
Every year concerned shareholders file resolutions on issues of concern related to important corporate practices and policies. These resolutions are an excellent way for corporate management to understand investor priorities on social, environmental, and corporate governance issues nationally and globally. Shareholder resolutions also help companies to identify reputational, financial, legal, or other risks that companies may face if the resolution is not addressed. Green America features examples of 2018 shareholder resolutions on issues like climate change and human rights, here.
Unfortunately, the shareholder resolution process is under attack by groups including the Chamber of Commerce and the Business Roundtable. They want to make it harder for investors concerned about corporate practices, especially those related to the well-being of people and planet, to be heard by corporate management. They seek to do this by making it harder for investors to resubmit shareholder resolutions over time. This means that corporate management wouldn’t have to face resolutions they typically oppose as frequently. And since the resolutions are disseminated to all shareholders, all investors would then be less informed about emerging risks to the company. The change would make it easier for corporate management to brush under the rug issues like pollution, human rights, and pay disparity.
On March 5, 2018 Green America sent a letter, excerpted below, to the Securities and Exchange Commission opposing the attack on shareholder rights and supporting of the shareholder resolution process currently in place.
We believe the rules that have successfully served the shareholder resolution process for decades continue to be effective and fair and are not in need of revision. Shareholder dialogues with corporate management and the submission of resolutions when warranted play an important corporate oversight role. The shareholder resolution process helps ensure the long-term value of US businesses by identifying potential risk and liability early on thereby supporting investor needs and the well-being of communities, consumers, workers, and the environment. Over the years, concerned shareholders have focused the attention of corporate management on crucial issues including risks associated with climate change, human rights, worker safety, corporate governance, and a wide range of other corporate responsibility and sustainability concerns.
At present, resolution resubmission thresholds of 3%, 6%, and 10% work well. Doubling or tripling these levels as requested, to 6%, 15%, and 30%, will only result in the loss of investor voice on key issues. The claim that continuing to put forward resolutions that receive under thirty percent is burdensome to companies is unproven. In fact, as of 2010, shareholders have resubmitted resolutions that earn less than 20% support for at least two years just 35 times and at only 26 corporations. Clearly there is no systemic problem or burden facing US companies on this issue.
Shareholders, as part-owners of the companies in which they invest, deserve an effective voice on the social, environmental, and corporate governance issues about which they care. Shareholder resolutions have improved corporate conduct and financial performance over the years and remain a useful tool for creating an economy that better serves us all. Green America urges the SEC to maintain the current shareholder resolutions resubmission thresholds.
As the 2018 shareholder proxy season gets underway, if you own company shares directly, be sure to vote your values on your proxies! For a quick look at how to read a proxy ballot, click here. Thank you for voting!