Wednesday, August 22, 2007

We resolve

An editorial in the latest issue of Catholic New York has an important editorial on a proposal that could severely limit and possibly eliminate the right of shareholders to sponsor advisory resolutions.

FOR YEARS, socially responsible investment groups—many of them faith-based—have used shareholder resolutions to bring to the attention of corporate boards their views on various issues aimed at nudging companies to do the right thing.

Most of the resolutions these days deal with issues such as climate change, executive pay and human rights and other social justice concerns. In the 1970s and 1980s, there were many resolutions calling for corporate disinvestment in South Africa over its apartheid policies. Others pressured companies to reject Northern Ireland hiring practices that discriminated against Catholics.

Resolutions that are accepted (and not all of them are) are placed on a corporation's annual proxy statement for a vote, which every shareholder receives. In that way, every person who holds a share in the company has a chance to weigh in on the issue.

Many of these resolutions have received overwhelming support from shareholders. They are, however, advisory only. Corporate boards do not have to address them.
Even so, shareholder resolutions have become an important way for small investors to have a say in the policies of companies in which they hold stock, and to hold them accountable for their practices. They are also a good way to raise corporate and public awareness of troubling issues.

The resolutions also, apparently, have opened a much-needed dialogue between corporate boards and their shareholders. John Wilson, director of socially responsible investing for Christian Brothers Investment Services in Manhattan and a member of the board of governors of the Interfaith Center on Corporate Responsibility, says that a quarter of a century ago, no one wanted to listen to what CBIS had to say in board rooms and corporate annual meetings.

Today, the group is a respected force for positive change in corporate America and has encountered more and more instances where the management of major corporations—including Tyco and Newmont Mining— have actually encouraged shareholders to vote for CBIS-sponsored resolutions.

Clearly, more companies are seeing the value of dialogue with shareholders and have become more engaged and involved. To socially responsible investment groups, this is progress. Progress that would not have been made without the key tool of the shareholder resolution.

To learn about the threat to shareholder resolutions, go here.