How Shareholder Resolutions Influence Corporate Behavior
It's that time of year when shareholders get their say - by asking a question at a corporation's annual meeting or voting on resolutions. But resolutions don't appear out of thin air. Corporate officials and activist shareholders can spend months hashing over an issue such as pollution or labor practices. For a peek at that process, the Monitor's Laurent Belsie talked with Shelley Alpern, director of social research and advocacy at Trillium Asset Management, and Meredith Benton, research associate with Walden Asset Management. Here is an edited transcript of their conversation.
What trends are you seeing in shareholder resolutions?
Ms. Benton: One of the most exciting trends we're seeing right now is the level of responsiveness from the companies. They've gone from being resistant or unaware ... to working with us.
Ms. Alpern: There's a lot of activity around climate change. Ten years ago, companies could treat you like you were a little bit crazy for bringing up the issue. But now, it's taken very seriously as an economic issue.
Are there other trends?
Alpern: Political contributions have become a real issue over the last couple of years. There's an outfit in Washington called the Center for Political Accountability that has worked very closely with a shareholder coalition to put resolutions on company ballots that ask companies to disclose the kinds of contributions they're making. Although there's some kind of public disclosure already required by government, it doesn't tell the whole story.
Are you telling companies who to contribute to?
Alpern: No. At this point, we just want to know what they are doing and how they are handling the risks associated with political giving - the reputation risks when they might find out that some of their money has been diverted to some candidate or political independent 527 [group] whose views would alienate their employees, their customers, or their shareholders.
How do you work with a company to persuade it to do something?
Benton: The process begins when there's an issue of concern for our clients. We look at what the issue is and how it may impact the companies in our portfolio. Once we've determined what that impact might be and believe there's a long-term business case for why one of our companies should be concerned about the issue, we approach the company. We say, as an example, "We're concerned that your nondiscrimination policy doesn't include sexual orientation. We believe that this is something you should pay attention to because you're not going to be able to attract the best employees. You may be alienating your customer base. You may be breaking local laws depending on where your operations are."
Then what happens?
Benton: They have a couple different ways they can respond to us. They can ignore us, which happens sometimes. They can constructively engage with us and sit down with us. If they're ignoring us or strongly disagreeing with our viewpoint, we have one more option, which is the shareholder resolution.
So you'd prefer not to get to the resolution stage. …