7. Shareholder activism or advocacy
Shareholders can participate and be active in different ways: some shareholders attempt to influence the management team whilst others attempt to influence the policies of the company with writing to the directors of the company and by their participation at the Annual General Meeting (AGM). At the AGM, individual shareholders can make formal proposals to all of the shareholders which could, as a result of a vote, require the company directors to implement socially just and environmentally responsible policies. Shareholders can also oppose or make amendments to resolutions put forward by the board of directors. Regrettably the responsible shareholders’ holdings in the company, and therefore number of votes, generally only represent a very small proportion of the total number of shares in large companies.
NGOs can also exercise influence on a company by either becoming shareholders themselves or by putting pressure on shareholders who have a large stake in the company. Votes on the various issues can often be submitted online through the Internet. Active shareholders, who wish to influence the proposals submitted at the AGM, need to be fully informed on the company’s policies and developments prior to the AGM.
The various ways in which a shareholder can exercise influence on a company will often depend on the country where the company has its headquarters.
In canada,the shareholders of a company can ask questions during the time devoted to questions during the AGM. Shareholders can also submit written proposals according to the established procedure under Canadian law (article 137 and following of the 1985 Canada Business Act). To be eligible to submit a proposal, a person 1 :
A contradictory amendment to a resolution proposed by the Board of Directors can be proposed. This is more difficult as this depends on the agenda of the AGM:
The adoption of one
- must be, for at least the prescribed period, the registered holder or the beneficial owner of at least the prescribed number of outstanding shares of the corporation; or
- must have the support of persons who, in the aggregate, and including or not including the person that submits the proposal, have been, for at least the prescribed period, the registered holders, or the beneficial owners of, at least the prescribed number of outstanding shares of the corporation.
If the information to be provided 2 and the proof required have been given 3 , the company must include the proposal either as an appendix or a separate document in the notice of the meeting according to article 150 4 .
In the United States, shareholders participation in the activities of a company has been a part of the national business culture for longer than in most other countries; the rules governing shareholders’ rights in the US tend to be more flexible than in other countries. Shareholders can submit resolutions’ proposals more easily in the US. For more information, go to the website of the “Securities and exchange Commission” 5 .
Shareholder activism in action
In December 2015, 20 institutional investors managing over £352 billion in assets under management joined forces to call on some of the world’s largest companies to commit to using 100% renewable power.
The investors called on companies to demonstrate their commitment to clean energy by signing up to join RE100. 6 RE100 is a collaborative business initiative that supports companies that make a public pledge to switch to 100% renewable electricity for their international operations by an agreed date.
The RE100 initiative is being coordinated by ShareAction, a UK-based Responsible Investment charity. The initiative’s founding members include Aviva Investors, Strathclyde Pension Fund, Environment Agency Pension Fund, French pension fund ERAFP, Norwegian fund KLP and Menhaden Capital. Companies from all over the world and from a wide range of industrial sectors – from telecommunications and IT to retail and food have joined the initiative, including Google, Pearson and BMW Group at the end of 2015.
The new investor engagement programme, supported by ShareAction, sees investors engaging with companies through letters, meetings and AGMs, to encourage them to switch to 100% renewable energy. ShareAction has also developed an online platform through which savers can E-mail the person managing their savings at their pension fund, asking them what they are doing to support renewable energy. 7
The British oil company BP sees its annual report rejected by a coalition of “socially responsible” investors 8
An international coalition of 10 minority shareholders refused to approve the annual report of BP during one of their general meeting held on 14 April 2011. These investors consider that the reaction of the company to the explosion of the oil platform Deepwater Horizon, which it was operating, is insufficient. They also oppose the re-election of certain directors of the committee who deal with corporate security questions. According to the investors of the coalition, this Committee does not communicate seriously on the strategy of the company, especially on the oil exploration in sensitive zones, which requires strict control measures that must be presented to the shareholders.
Concerning the annual report, the “responsible investors” coalition considers that it does not allow to estimate to what extent the risk management was evaluated, enhanced and controlled following the catastrophic oil spill in the Gulf of Mexico. Finally, the report does not address in detail the “transition to a low carbon economy”, while, according to the oil company, this is an aim at the heart of its strategy. Thus, they regarded the report as “incomplete”.
Shareholder participation can prove to be a useful and influential tool. Although it is not an easy task, companies can be forced to react and modify their policies with respect to human rights as a result of the financial pressure that shareholders can exercise. The results of this kind of activism is often more efficient if it is combined with advocacy actions.
Following closely the work of institutional investors and advocating for greater inclusion of ESG (environmental, social and governance) criteria in their investment strategy, can also represent a powerful point of leverage. NGOs are increasingly using this strategy to call on companies to take measure to address human rights and climate change issues.