Many shareholders and their colleagues become very concerned about how many votes their resolution receives. Although achieving a certain percentage of votes is very important in some respects (to re-file a proposal, or to send a strong message to management, for example), the objective of social shareholder resolutions is not to win a majority vote, as first-year social resolutions rarely achieve over 10%. Even if a shareholder proposal were to win a majority vote, shareholder resolutions are not necessarily binding. Rather, the goal of a shareholder proposal generally is to win access to and commitment from key corporate decision-makers who can produce change that will benefit stakeholders and shareholders alike.
Shareholder dialogue for the long process of corporate change
Corporate change, when it occurs, has always been achieved through dialogue and strategic campaigning rather than resolutions, as social proposals do not technically win. Changing a company's thought, rhetoric and behavior toward a particular issue is a long process and is more likely to occur with strategic ongoing dialogue and negotiation where the shareholder advocates for continuous progress.
Shareholder resolutions alone are generally less effective
In some cases, shareholder resolutions are used to simply allow concerned shareholders to effectively voice their concerns and increase pressure on a company. But high-profile resolutions and annual meeting actions in the absence of shareholder dialogue may not be the most productive way for the shareholder to communicate and affect change, depending on the company, situation, and goal. Using resolutions and dialogues in tandem and with other activities can generate more "mileage" from shareholder activity.
Shareholder negotiations after a resolution has been filed
After a shareholder activist files a proposal, he/she is likely to be contacted by the company and should be prepared for an(other) audience with them. Companies usually go into dialogues with the goal of getting the shareholder to withdraw the resolution, and will want to achieve this objective before the proxy materials are printed up and mailed out. Shareholder activists are often willing to withdraw the resolution if the company meets certain conditions. Advance planning on the shareholder side determines what company actions or progress will be sufficient for withdrawal. Examples of such withdrawal conditions include:
Historically, corporate representatives have been better and stronger negotiators because of their relative position of strength and training. Training is available though CERES for shareholder activists and public interest groups to improve their negotiation skills.
However, there are potential downsides of negotiating with a company. For example, in the eyes of non-shareholder colleagues, accepting a sub-optimal agreement can be worse than no agreement at all (although one should never settle for an agreement that would actually make one worse off). Or, shareholder activists also may be perceived as working too closely "with the enemy." For more pro's and con's, see Potential and Limitations of Shareholder Activism.
Back to Shareholder Activism Index
To Monitoring Commitments Resulting from Shareholder Dialogues