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One proxy at a time : pursuing social change through shareholder proposals

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  • Paula A. Tkac

Abstract

Traditional economic wisdom holds that a corporation?s sole goal should be to maximize shareholder wealth. But some investors believe that firms should also act as agents for social change. Activist investors use their shareholder rights to place socially responsible resolutions on corporate proxy statements to be voted on by all shareholders. ; This article examines the controversy behind corporate social responsibility (CSR) and identifies and categorizes activist investors, their objectives, and the firms they target. Using data from the Investor Responsibility Research Center (IRRC) on 2,829 CSR shareholder proposals from 1992 to 2002, the author finds that religious organizations and individuals made the largest number of proposals, but in 2000 proposals by socially responsible mutual funds began to outnumber those by individuals. The three most common proposal topics were international conduct, environmental issues, and antidiscrimination. ; Of the 566 different corporations targeted, seventy-three were targeted ten times or more. Larger, economically powerful firms?especially those that value consumer goodwill and have the ?name? to aid in social change?were most often targeted. ; Because a withdrawn resolution usually signals an action by the corporation?dialogue, agreement to resolution, or some other compromise?the author argues that withdrawn proposals can be used as measure of activism?s success. The IRRC data and her own extensive research on the outcome of withdrawn proposals support this argument.

Suggested Citation

  • Paula A. Tkac, 2006. "One proxy at a time : pursuing social change through shareholder proposals," Economic Review, Federal Reserve Bank of Atlanta, vol. 91(Q 3), pages 1-20.
    • Handle: RePEc:fip:fedaer:y:2006:i:q3:p:1-20:n:v.91no.3
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    References listed on IDEAS

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    1. Willard T. Carleton & James M. Nelson & Michael S. Weisbach, 1998. "The Influence of Institutions on Corporate Governance through Private Negotiations: Evidence from TIAA-CREF," Journal of Finance, American Finance Association, vol. 53(4), pages 1335-1362, August.
    2. Roberta Romano, 2000. "Less Is More: Making Shareholder Activism A Valued Mechanism Of Corporate Governance," Yale School of Management Working Papers ysm140, Yale School of Management, revised 01 Nov 2001.
    3. Roberta Romano, 2001. "Less is More: Making Shareholder Activism a Valuable Mechanism of Corporate Governance," CeRP Working Papers 12, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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    Cited by:

    1. Jennifer Goodman & Céline Louche & Katinka Cranenburgh & Daniel Arenas, 2014. "Social Shareholder Engagement: The Dynamics of Voice and Exit," Journal of Business Ethics, Springer, vol. 125(2), pages 193-210, December.
    2. Emma Sjöström, 2010. "Shareholders as Norm Entrepreneurs for Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 94(2), pages 177-191, June.
    3. Vanessa Serret & Sylvie Berthelot, 2013. "Activisme Actionnarial Et Responsabilite Sociale Des Entreprises Au Canada : Analyse Des Resolutions Soumises Par Les Actionnaires Entre 2000 Et 2011," Post-Print hal-01002373, HAL.
    4. Bambang Rudito & Melia Famiola & Prameshwara Anggahegari, 2022. "Corporate Social Responsibility and Social Capital: Journey of Community Engagement toward Community Empowerment Program in Developing Country," Sustainability, MDPI, vol. 15(1), pages 1-12, December.
    5. Hadani, Michael & Doh, Jonathan P. & Schneider, Marguerite, 2019. "Social movements and corporate political activity: Managerial responses to socially oriented shareholder activism," Journal of Business Research, Elsevier, vol. 95(C), pages 156-170.
    6. Grewal, Jody & Serafeim, George, 2020. "Research on Corporate Sustainability: Review and Directions for Future Research," Foundations and Trends(R) in Accounting, now publishers, vol. 14(2), pages 73-127, September.
    7. Emma Sjöström, 2008. "Shareholder activism for corporate social responsibility: what do we know?," Sustainable Development, John Wiley & Sons, Ltd., vol. 16(3), pages 141-154.
    8. Stuart L. Gillan & Laura T. Starks, 2007. "The Evolution of Shareholder Activism in the United States," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(1), pages 55-73, January.
    9. Michelon, Giovanna & Rodrigue, Michelle & Trevisan, Elisabetta, 2020. "The marketization of a social movement: Activists, shareholders and CSR disclosure," Accounting, Organizations and Society, Elsevier, vol. 80(C).
    10. Erwin Eding & Bert Scholtens, 2017. "Corporate Social Responsibility and Shareholder Proposals," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(6), pages 648-660, November.
    11. Abhijith G. Acharya & David Gras & Ryan Krause, 2022. "Socially Oriented Shareholder Activism Targets: Explaining Activists’ Corporate Target Selection Using Corporate Opportunity Structures," Journal of Business Ethics, Springer, vol. 178(2), pages 307-323, June.
    12. Rastad, Mahdi & Dobson, John, 2022. "Gender diversity on corporate boards: Evaluating the effectiveness of shareholder activism," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 446-461.

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