Shareholder advocacy

Many shareholders of major corporations are using their investor status to lead companies down a more sustainable path, doing so by driving out poor directors and blocking key decisions.

“When someone buys a share of a corporation, they are a small minority owner of the corporation, and with that comes rights, and those rights include being able to express views about what the corporation is doing,” said Andrew Behar, CEO of As You Sow, an Oakland-based nonprofit that aims to achieve corporate responsibility through shareholder advocacy, among other strategies. “That’s a great deal of power.”

Shareholders make their voices heard by voting on a proxy—a ballot to vote on issues—that lets a corporation’s board of directors know what they want. The company can look at that resolution and either accept or reject it. Though votes are non-binding, even votes as small as 5 percent or 10 percent can move companies to make changes.

As part-owner, Behar continued, a shareholder has the responsibility to let a company know if he or she objects to an action or policy. Voting on a proxy is not unlike exercising the right to vote in a national election. Shareholders can also attend meetings to vote in person or can download As You Sow’s “proxy preview” and vote by mail. Most companies hold a vote between March and June.

Every February, As You Sow publishes an annual proxy preview that compiles shareholder resolutions for major corporations. This year’s key issues include corporate political spending, lobbying, sexual-orientation non-discrimination, board diversity, coal, fracking, supply-chain transparency and animal welfare.

As You Sow’s 2011 list included an item about the Coca-Cola company’s soda-can linings containing the hormone-altering chemical Bisphenol A (aka BPA). “As shareholders, we say that isn’t good for the company, it’s not good for general environmental health [and] we believe the company should make a move to change this liner in the can,” Behar said. A quarter of Coca-Cola shareholders supported getting rid of BPA.

The first environmental vote to get 50 percent support was a resolution for Idacorp Inc.—a holding company that counts Idaho Power as its main subsidiary. Shareholders voted to transition the company from reliance on coal to wind energy. “The shareholders wanted to see less air pollution, less mercury, fewer toxins from coal ash and fewer toxins in groundwater,” said Behar.

In May 2011, Ernst & Young released a study that showed an increase in shareholder resolutions with an environmental and social focus. The report revealed that in 2010, resolutions focusing on social and environmental issues made up the largest slice of all shareholder proposals. In 2005, according to the report, just 2.6 percent of all shareholder resolutions related to social and environmental issues received support from more than 30 percent of votes cast (30 percent is a typical threshold for many boards to take action). In 2010, more than a quarter of all proposals reached the 30 percent support threshold.

Part of writing a good proxy, Behar said, is laying out a sound economic argument for the company that highlights financial, health and environmental benefits.

A few years ago, shareholders for Best Buy took action by addressing the way the company recycled electronics. “We said you should be doing electronic-waste recycling in a good way, and by 2009, we helped them to put a plan in place. In 2010 they collected two million items,” Behar said. The company wins, too, he added, because the plan increased foot traffic into stores. “Now people associate Best Buy with electronics recycling.”

Companies that have a consumer brand are hyper-sensitive to their shareholders’ concerns—and to their public perception. After Starbucks Coffee Company received media attention for adding 3.5 billion cups to landfills, they swooped in to defend their brand and change their policies. “You have more leverage when a brand wants to maintain a green image,” Behar said.

As You Sow has amassed a series of successes thus far. It has prevented more than 500,000 tons of e-waste from entering landfills each year, helped companies find solutions for safe disposal of toxic coal ash, reduced carbon emissions from coal utilities, and worked with companies such as Coca-Cola, PepsiCo, Nestle Waters North America and Starbucks to remove some 30 billion plastic bottles from the waste stream annually.

“We’re looking to companies to raise their levels of integrity and find solutions,” Behar said. “We believe that corporations are responsible for a lot of the environmental degradation on the planet, and that they can find solutions that are both profitable and responsible.”

Christine G.K. LaPado-Breglia contributed to this story.