Shareholders, Embrace the Power of the Proxy
You and I are mere mortals, so how do we do battle with the most powerful entities of our time? These behemoths control much of our everyday life, more than governments or religious institutions. Who are they? Corporations, of course.
Of the 100 largest economies in the world in 2016, 69 were corporations. They control most of our members of Congress, and thus our public policy. It’s why our gun control laws are as anemic as they are, even though two out of three Americans want tighter regulations. It’s also a big reason why we don’t have Medicare for All when 70 percent of Americans want it.
So how do we confront that power in order to make a better world? As Andrew Behar explains in “The Shareholders Action Guide: Unleash Your Hidden Powers to Hold Corporations Accountable,” it is possible with a little ingenuity.
While almost half of adult Americans hold some stake in companies, few take advantage of the power they have as shareholders. Did you know, for example, that if you own just one share of stock, you can vote for the Board of Directors and critical issues, including CEO pay? If you have at least $2,000 worth of stock that you’ve held for one year, you can file a shareholder resolution on corporate behavior. Or you can join a coalition of investors who’ve owned three percent of the stock for three years and have the right to nominate a Board candidate. The corporation must then place the nominee’s name on the annual proxy for a shareholder vote.
The intent of this kind of shareholder advocacy is to improve the company’s environmental, social or governance issues. We’ve seen how the tobacco industry and apartheid have been impacted by joint shareholder action. Together we can move mountains — unless we remain inactive and maintain the status quo.
Marching in a protest or writing letters to representatives is worthwhile, but hardly as effective as becoming an active stakeholder and demanding positive change. We can blame corporations for any evil they incur, but we must remember that we share responsibility. As former Supreme Court Justice Louis Brandeis once said, “There is no such thing…as an innocent stockholder.”
Corporations may attempt to avoid responsibility. They may move physically from one location to another to avoid local laws. But they must pay attention to their stockholders.
Many times, I have thrown out a proxy I received in the mail because I didn’t understand how to vote. What I didn’t know is that if I don’t vote, the management votes for me. It is far better to mark the box “abstain,” because then the vote does not count.
Here are some steps to help bring about corporate change:
- Call the company and read their Corporate Social Responsibility report. If you don’t think they are moving toward positive change, then contact the CSR department. Or, you can contact their CEO. It’s best if you have a coalition of like-minded investors who will also send letters or contact the company.
- If you get no response, you may file a shareholder resolution. First, however, you should check www.proxypreview.org to learn if anyone else has filed a similar resolution. You can also search the web for the company’s proxy statement. If someone has filed a resolution, you may join their effort, since it’s always more effective to work with other advocates.
- If contact and resolutions fail, you can plan a divestment strategy. This should cite research that shows how corporations that are responsive to shareholders and enact good ESG policies tend to be more successful.
A friend has been singlehandedly trying to get Vanguard to be fossil fuel-free in their Social Index Fund, which she assumed was the case when she originally invested. Now she is trying to collaborate with other shareholders to urge the fund to make changes voluntarily.
Along the same line, I found that my Social Choice Equity Fund at TIAA-CREF still invests to some degree in fossil fuels. I was hoping that my pension fund, like that of the City of New York, which recently divested $5 billion from fossil fuels, would divest. My dilemma now is whether I want to change to a fossil fuel-free alternative fund and take on more risk.
It’s not easy being green.