Do Shareholders Impact Sustainable Business Practices? (Part 2 of 2)

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What if you call your HR department or brokerage firm and discover you don’t have SRI options available with your 401(k)?  Does that mean you can’t be a socially responsible investor?  Of course not.  If you own shares in a company, you have partial ownership and certain privileges.  Corporations mail out their annual reports containing proxy statements and voting forms.  With our votes, we have the ability to help shape sustainable business in corporate America.  We can be shareholder advocates.

Vote, Vote, Vote…

As shareholders, we can submit a shareholder proposal for the company to take a certain course of action.  The corporation must include the proposal in a proxy statement and give other shareholders a chance to vote for or against it at the next annual meeting.  Don’t fret if you can’t attend the annual meeting, included with the proxy statement is a proxy voting form.  It is similar to an absentee ballot; it allows you to instruct a company representative to vote your shares for you.

Because I don’t own a lot of shares, I assume my vote is insignificant so I recycle the information.  Boy…was I wrong.  Traditionally, votes not cast by shareholders end up cast in favor of the company’s position.  So even if you think you’re withholding your vote, it may end up supporting management and defeating a shareholder proposal.  That’s pretty sneaky!  The SEC has received complaints that this system unfairly favors management and has launched an investigation.  Some brokers have already switched to a proportional voting system.

Also, many corporations are largely owned by mutual funds, and these funds get to vote according to the number of shares they have.  You can let your fund managers know how you feel about certain issues.  You can actually influence their vote!  These funds are under even greater pressure to vote responsibly, because accountability websites are beginning to pop up.  For example, you can visit ProxyDemocracy to learn how your mutual funds have voted or will vote at the next annual meeting.

Your Shareholder Impact…

Yes, that sounds all fine and dandy, but does my shareholder vote really make a difference?  Absolutely!  The Motley Fool highlighted some recent results from shareholder advocacy:

  • A third of shareholder votes supported a request that ConocoPhillips assess the environmental impact of its Canadian tar-sands operations.
  • Best Buy was encouraged by a shareholder proposal to increase its commitment to recycling. The company now takes back electronic items for recycling at all its locations.
  • Kraft and McDonald’s were petitioned to address the use of nanomaterials in foods and packaging and are now working with activist groups to develop industry standards.
  • Whole Foods and Sunoco agreed to limit their use of the chemical bisphenol A (BPA), a component of plastics that can be harmful to humans.

This was made possible by shareholders like you and me who took the time to vote.  And just like with any election, our votes (no matter how insignificant we think they may be) do count.

In my previous post, I touched on socially responsible investing…Do Shareholders Impact Sustainable Business Practices? (Part 1 of 2)

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