Techniques Activists Use to Influence Corporations

By Harvy Lipman

As nonprofit groups seek shareholder support for resolutions designed to force a company to make changes

that benefit the common good — such as reducing the amount of pollution it produces or stopping its use of sweatshops — the key to success lies in convincing shareholders that such changes are good for business.

That is one of the lessons learned by the Coalition for Environmentally Responsible Economies, in Boston. Since 1990, the coalition, along with the Interfaith Council on Corporate Responsibility, in New York, have coordinated a campaign to win over shareholders at dozens of companies to support efforts to control global warming.

To be successful, the campaign has needed to demonstrate not only that global warming is a real environmental threat, but also that it can affect a company’s bottom line.

Chris Fox, director of investor programs at the coalition, says that making that pitch is getting easier. “There’s a lot of understanding in the wake of Katrina that there are actual physical risks that include potential massive property losses and insurance issues,” he said. “We don’t need to frame it as an environmental cause any more. We can actually appeal to the more mainstream investors.”

Leslie H. Lowe, the energy and environment program manager at the Interfaith Council, said the campaign, which has seen resolutions win growing percentages of shareholder votes, has persuaded eight electric-utility companies to issue reports about the ways that they have been affected by government regulations and negative publicity concerning their emissions of the greenhouse gases that cause global warming.

Duke Energy, in Charlotte, N.C., has gone even further, committing to reducing its emissions and calling on the federal government to develop a formal policy for controlling global warming and taxing the emissions of carbon pollutants.

Emphasis on Studying Issues

Demonstrating the business impact of a social or environmental issue, however, is not the only hurdle that nonprofit groups and others seeking to influence companies must overcome.

Under the rules of the Securities and Exchange Commission, shareholders cannot tell corporate management how to run the “ordinary business” of the company; so, for example, a resolution telling an automobile company that it should start producing more fuel-efficient cars could not be submitted to shareholders. That is why many resolutions ask a company’s managers to prepare a report or examine the costs of creating a policy related to a social issue, rather than dealing with the issue directly.

Even if they succeed in framing the issue in a way that allows it to be included in a company’s annual proxy statement, the odds that shareholder resolutions will win a majority vote are slim.

“If you’re lucky you get 10 to 15 percent,” said Conrad MacKerron, director of the corporate social-responsibility program at the As You Sow Foundation, a San Francisco group whose mission is to ensure corporations behave in a socially responsible manner.

In 2004, As You Sow and Rockefeller Philanthropy Advisers published a handbook, “Unlocking the Power of the Proxy,” showing foundations how they could both promote their philanthropic missions and protect the value of their endowments by more actively supporting shareholder resolutions.

Mr. MacKerron added that getting even 15 percent of shareholders to vote for a resolution is often enough to change corporate policy.

“If you look back in the 70s and 80s when shareholders pressed companies to divest from South Africa, many of those resolutions only got 10 to 15 percent,” he said, “yet they were enough to move companies to divest.”

The reason such relatively small percentages are enough to make a shareholder resolution successful, advocates of shareholder resolutions say, is that corporate executives do not want the bad publicity that can arise from a campaign on a social issue, and often will agree to sit down with groups that are pushing new approaches to negotiate changes that are acceptable to both sides.

Relatively small percentages of shares also can account for very large amounts of stock. For example, at many major corporations, attracting votes from 15 percent of shareholders might represent shareholders with several billion dollars worth of stock.

In other cases, executives simply become convinced that the policy change being requested in a shareholder resolution makes good business sense.

Sister Patricia Wolf, executive director of the Interfaith Council on Corporate Responsibility, said that is what happened with many companies that operate in Africa when they were confronted with resolutions asking them to do a better job of providing health care, education, and job protection for workers at risk of contracting HIV.

Coca-Cola’s managers went so far as to endorse a shareholder resolution on AIDS, and put it on the proxy ballot with a recommendation that all shareholders vote for it. The ballot measure was approved by 98 percent of shareholders who voted. Coca-Cola, which employs more people than any other nongovernmental institution in Africa, has established a nondiscrimination policy, guaranteeing continued employment to workers infected with the disease as long as they are able to work. It has also established programs to prevent and treat HIV/AIDS for its bottlers’ 60,000 African employees.