Is shareholder activism right for the causes and campaigns you're concerned about? In and of itself, a shareholder's expression of social concern(s) is an important exercise in corporate democracy; but what can realistically be achieved through shareholder activism? This section provides some guidance on the potential and limitations of shareholder activism.

Potential of shareholder activism – what it offers

Access to corporations:

• Direct access to top management
• Constructive dialogue with management
• Possibility of affecting corporate culture
• Voluntary changes by corporations
• Potential to change company policies and practices

• Media attention for resolutions
• Investor education
• Partnership with shareholders

• Growing attention and participation by socially responsible investors (SRIs)- Currently about 1 in 8 dollars under professional management is in socially screened investments. Since many traditional financial firms now offer social funds, many social investment firms are now offering shareholder activism to set themselves apart.
• Support from SRIs - Not only are socially responsible investors more likely to sponsor social resolutions, but they are more likely to vote for them as well.  In contrast, traditional investors may require costly or time-intensive efforts to win their votes because social/environmental issues may be regarded as marginal or detrimental

Limited Objectives:

• Cannot address the validity of company's product or line of business
• Achieves only voluntary change (versus legal or regulatory means)
• Sometimes is lengthy and legalistic
• Content strictly limited by SEC rules/history. For example, the SEC has regulations on "mootness," and "ordinary business"
• Incremental change. Activists must break down desired changes into objectives that can be done step by step. Shareholder activism operates on making incremental progress every year. But even modest change in one company may dislodge overall resistance to change in an industry. For example, it can be very effective to get one company to take a public position on an issue, (especially if they see it as creating a competitive advantage) because other companies may follow suit.

• In some cases, may require adjustment of confrontational strategies
• Invalidated by simultaneous litigation (one can't file a resolution if one is in a suing a company)
• Need to think through implications of publicity strategies. For example, company conversations may need to be confidential. So, in order to get a better result from shareholder negotiations, publicity efforts may need to be scaled down or up
• Need to think through implications of resolution. Although uncommon, some companies have stopped talking to shareholder activists after a resolution has been filed.

• Necessity of communication between campaigners, communities, shareholders, etc.
• Complexity of having to set objectives and strategy jointly, or ensuring that co-filers agree with lead filer's objectives
• Negotiating different thresholds for acceptable results (For example, at what point would the coalition be willing to withdraw a resolution?)

• Requires ability to translate demands into concrete yet significant annual steps for companies
• Can require defending resolutions on short notice, participating in meetings with companies, and evaluating copious amounts of corporate material.
• May incur legal costs to defend resolutions
• Possible costly (if a professional is hired) or complex solicitation effort to increase votes
• Time-intensive

Back to Shareholder Activism Index

To "Shareholder Dialogue: The Objective of Shareholder Resolutions"