Stock Options; How to Use Your Shares to Change Company Environmental Behavior

Article excerpt

If you own stock, whether it be a few shares or a large portfolio, you have the right to attend annual meetings and to try - like Judy Holiday in The Solid Gold Cadillac - to influence company policy. An increasingly popular tactic, shareholder activism is the muscle in socially responsible investing (SRI). It is the lever behind SRI's greatest successes, such as enlisting companies to adopt the socially responsible Valdez principles or divesting much of corporate America from apartheid-era South Africa.

Social investing pioneers Amy Domini and Peter Kinder have compared shareholder resolutions proposing a change in company policy to the fabled two-by-four whacked against a stubborn Ozark mule: it gets a corporation's attention. "Proxy resolutions [made as a shareholder] open the door to corporate management - reaching private-sector opinion-makers otherwise inaccessible to social activists," say Domini and Kinder.

Despite this power, shareholder activism gets far less attention from social investors than stock screening - that is, shunning the stocks of companies whose practices, policies, or products you disapprove of and investing in those businesses making a positive contribution. In part this lower profile is due to the counterintuitive nature of shareholder activism.

Consider: You're upset with General Electric, one of the nation's top polluters. You won't buy a GE fridge, refuse to watch the latest NBC (a subsidiary) special, and tell everyone you know to boycott the corporate behemoth. Buying GE stock is the last thing you'd think of doing. But that's exactly what you need to do to take shareholder action.

Acting Like an Owner

Every stockholder in a corporation is a part owner of that business. Even if you only have 100 shares of GE - an ownership stake that might allow you to make a claim on CEO Jack Welch's water cooler - you still have a voice. Come annual shareholder-meeting time, you can let your views on GE be known to all its shareholders.

To bring a change in policy, before GE shareholders, the Security and Exchange Commission (SEC) requires that you own $1,000 worth of stock for at least one year prior to the resolution filing date. (The one-year waiting period is waived if you own one percent of the shares outstanding.) Specific deadlines are listed in the company's annual proxy statement. …