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Shareholder Power for a Better World
Money holds power. To the dismay of many social investors, this is still a true statement. To their delight however, there is a key component of Socially Responsible Investing or Sustainable Investing as it is now often referred to, that brings light to that power. That is the power of the proxy vote. By leveraging the economic influence of the more than $3 trillion invested by regular people like you and me, we can be a major catalyst for change.
Back in the ’80s we saw the force behind the deconstruction of apartheid in South Africa when millions of investors began the largest shareholder action campaign to date, forcing many companies to discontinue business with the government until equality was restored. In more recent times we have seen shareholder actions against companies to address issues of climate change, genetically modified food products, and the use of BPA in product packaging. The list goes on and on.
Shareholder advocacy is a simple strategy, yet we are bound by Federal Securities laws. These state that any action that goes to a shareholder vote must be for the benefit of all shareholders. Those mutual funds, investment advisors and individuals who file the actions to go to a shareholder vote believe that by initiating reforms we are creating better companies and enhancing the long-term viability of a company. The ultimate goal is the creation of massive systemic changes, which will result in a better world for us and our future generations.
The first step in this process is that one must own shares in the company that is doing the bad deed or where there is a concern about corporate practices. For many Social Investors this might preclude some of the more egregious offenders like oil companies, but it’s important to remember that change cannot happen without some dialogue. Once a shareholder has submitted a resolution two things can happen. If the company is against the resolution, the Securities and Exchange Commission allows the company to omit the resolution for 13 different reasons. (You can read these on the Sierra Club’s web site under Corporate Accountability Committee.) The SEC will then determine if there are grounds to file legal action against the company if it doesn’t allow the resolution. If there are grounds, the company will likely allow the resolution to go to a shareholder vote rather than deal with the legal issues.
The second and more desirable path of a resolution happens if the company doesn’t have any major issues or can’t determine if there are reasons to have it omitted. It will then allow the resolution to go to a vote. There are many occasions in this process when a company will ask the filer for a dialogue about the resolution to come to a consensus rather than have it go to a full shareholder vote. Having a corporation ask for dialogue is a huge step towards change as this means it is receptive. Many companies want to do what is right and feel that these changes are good for their bottom line as well. The reality is that they would like to avoid litigation and bad publicity that can accompany this process.
As You Sow is a nonprofit organization that works to increase corporate accountability and has filed hundreds of resolutions in conjunction with individuals and advisors for almost two decades. Their web site provides information on many of these, including some interesting actions in 2011. For example, they have filed a resolution with Starbucks, already a leader in the coffee industry in using fair trade coffee to increase their recycling efforts, as they lag behind their competitors considerably. Thus far in 2011, As You Sow has filed as many as six corporation resolutions on the financial risks of coal with companies like Xcel Energy and Duke Energy. These read, “Resolved: Shareowners request that Duke Energy’s Board of Directors, at reasonable cost and omitting proprietary information, issue a report by November 2011 on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy, including an assessment of the cumulative costs of environmental compliance for coal plants compared to alternative generating sources.”
It’s time for all of us to get involved. There are companies who can help you vote your shareholder resolutions. One such organization is MoxyVote, and often times you can designate your Financial Advisory firm to do this as well. Just remember to check their web sites on their guidelines for voting proxies. Mutual funds will vote your stock proxies for you and are required to provide information on how they vote the proxies in an annual disclosure process.
With a greater understanding of the importance of proxy voting, you too can facilitate change in your little corner of the world. Vote your proxy today!
Kimberly Kiel is owner of Horizons Sustainable Financial Services in Santa Fe, an independent firm licensed in 20 states. Horizons offers securities through Cambridge Investment Research, Inc., a broker/dealer and member FINRA, SIPC. Email firstname.lastname@example.org, call 982.9661 or 877.321.3236.
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