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Socially Responsible Investing - Shareholder Advocacy

Updated on August 31, 2014

Shareholder Advocacy

Many people that are part of socially responsible investing don't want to have just a passive impact, but a strong impact. Simple investing often doesn't achieve that. To have a real effect for change for the good they want to have options that allow for more direct impact. Shareholder advocacy is one of those direct ways to accomplish that goal, and is often seen as a confrontational method.

What I am talking about is a strategy which usually is buying stock in a company that is already a great company and advocating for improvements. With that, owning stocks gives that socially responsible investor the right to present shareholder resolutions for a vote of all the stock holders.

If you care to research it, you will find that the act of shareholder advocacy has a rather long and interesting history. Before getting too excited, know that there are often failures, though there have been some successes. Perhaps the ideas being presented in the first place are a great start. Or, you may look at it as a way to hold on to and maintain long standing values of the people that are in ownership of the stocks in a world that is continually attacking the core values of many people. Often, these are the very values that made countries like America great in the first place. I think all people need to be vigilant and strong and while listening and considering everything, not ever feel bullied by a mob type mentality or nastiness. That could be a whole article of its own.

A strong tool for effecting change

Regardless of some of the failures with this approach, shareholder advocacy is still a very strong tool in the overall socially responsible investing strategy. You will see it be the most successful performances by socially responsible mutual funds and pension funds. Not only that, you will see asset managers that have the staff and the expertise to do research, and be the advocates on behalf of many of the investors.

Many of these successes come in during conversations with management more than during the votes at annual meetings. I think this can be good or a not so good thing, depending on who is the manager of course and their views and values in life. So, we see that getting management to change policies and procedures is where a lot of the "game" takes place. If this can be done in a negotiated manner then the end results are usually better and often permanent.

Shareholder resolutions

A socially responsible investor who is looking to bring a shareholder resolution to the "floor" of a company's meeting (usually annual meeting) can find the resources to help him with the procedures that must be followed.

That investor wants to consider the company's rules and the securities' regulations before moving forward. Socially responsible investors need to make certain that their resolutions are actually heard. Sometimes, they can be disallowed because of a mere technicality in procedure. Look at everything involved, including filling out the correct paperwork, and doing all your research. My hopes are that when people are pushing special interests, that they are keeping with the better good for all people, not just certain ones.

Do you think Shareholder advocacy is a good thing to be a part of?

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