Shareholder action or shareholder activism, describes the efforts investors use to influence corporate behavior. Today, shareholders are more concerned than ever about how companies are being held accountable on issues such as climate change, reproductive health, political influence and human rights.
These environmental, social and governance (ESG) concerns, if not addressed properly, can create problems that harm people and the planet and that detract from shareholder value.
Investors can first share their concerns by speaking with management, but if that doesn’t work, they will often introduce shareholder resolutions, or written requests to company management, that direct investors in the company (not through a mutual fund) receive and may vote upon.
Resolutions in 2023
According to the 2023 Proxy Preview, at least 542 shareholder resolutions were filed in 2023 on environmental, social and sustainable governance issues. This is on track to match or exceed 2022’s unprecedented total of 627 resolutions.
“The big thing that has changed is there is an enormous explosion of filings since 2021,” says Heidi Welsh, executive direction of the Sustainable Investments Institute (Si2), a company that conducts impartial research and publishes reports on organized efforts to influence corporate behavior on social and environmental issues, including the 2023 Proxy Preview. “Far more resolutions are going to vote than in prior years. Right now, people feel a sense of urgency. They are concerned that nothing is going to happen given the current divide in Congress.”
Climate and Emissions
Of the 542 resolutions that have been filed, 122 relate to climate change and 72 are related to greenhouse gas emissions.
“Companies state that they are in alignment with the Paris Agreement, but what they say and do isn’t consistent,” says Tracey Rembert, shareholder engagement specialist at Interfaith Center on Corporate Responsibility (ICCR).
“Resolution-filers are looking for clear reporting on how the companies will be in compliance with the emission restrictions. If a company is in the news or elsewhere and inconsistencies pop up, their employees are not happy,” Rembert says. “They want companies to be who they say they are. This includes LGBTQ+ support, gun safety, and any other concerns in the current policy arena.”
If a company is in the news or elsewhere and inconsistencies pop up, their employees are not happy. They want companies to be who they say they are.—Tracey Rembert,
Interfaith Center on Corporate Responsibility
Another significant increase in proposals in 2023 relates to reproductive health care in response to the June 2022 US Supreme Court decision that prompted restrictions nationwide.
“The Dobbs v. Jackson Women’s Health Supreme Court decision, which overturned Roe v. Wade last June, has exposed companies to a whole new world of complication and risk,” says Shelley Alpern, director of corporate engagement at Rhia Ventures, a venture capital fund investing in women’s reproductive and maternal health innovations.
Several proposals ask companies such as Alphabet, American Express, CVS Health, Laboratory Corp. of America and Paypal, how they will handle law enforcement queries about private health information. Some proposals request an increase in digital privacy policies, others relate to insurance coverage for reproductive health care and maternal health benefits.
Other Major Investor Concerns: Human Rights, Diversity, Lobbying
Since 2021, proposals have focused on racial justice in the US, taking inspiration from the Black Lives Matter movement. Resolutions ask for transparency in how racism affects company proceedings and request a more comprehensive assessment with how race and civil rights intersect with employment practices.
In 2021, 50 resolutions were filed related to transparency of diversity in the workplace, but these numbers are trending down, with 38 filed in 2023, partially because some companies have complied with the requests.
Another large increase in resolutions relates to political influence. Over 90 resolutions ask companies to be more accountable about their efforts to influence the political arena related to lobbying and election spending. Others relate to mismatches between corporate policies and the beneficiaries of their corporate donations and lobbying.
Aside from the large increase in ESG resolutions in the last couple of years, Wall Street is facing pressure from right-wing policymakers who are pushing laws to stop investors from considering ESG criteria during their decision making. If these continue to gain traction, it could hurt progress.
Despite the increase in anti-ESG policies, Welsh isn’t concerned. “The anti-ESG proposals get a lot of attention, but it’s a small part of the bigger picture. We need to put it in perspective.”
What You Can Do
- If you own stock directly: All shareholders who have held at least one share of company stock for two months or more may vote. This can be done either in person at the company’s annual meeting or via a proxy ballot that is mailed or e-mailed to investors before the annual meeting. Green America has identified dozens of resolutions related to the green economy. You can either search by company or by issue of concern.
- If you own mutual funds: Read online or call your mutual fund managers to better understand how your mutual funds vote on shareholder resolutions. You can contact the mutual fund company directly to say how you want it to vote. The more people who voice their views to mutual fund managers about supporting ESG resolutions, the better the chance of making change.
- Other options: Write a letter to management in support of shareholder campaigns (anyone can do this). If you are an investor, attend an annual shareholder meeting and present your views. If you can’t attend in person, loan your shares and have someone attend for you. This can be arranged ahead of time by writing a letter and sending a copy of proof of ownership and identification.
Finally, if you aren’t comfortable having a company or certain industry sector in your portfolio, sell the shares. Divesting is another investing tool that can be powerful in making change.