Shareholder
engagement
In this lecture
Shareholder dialogue is the set of practices whereby
shareholders (i.e. equity investors) try to influence
corporations by communicating directly with their
executives, often by filing resolutions for proxy votes
on ESG issues.
It is a key tool if the goal is to influence corporations.
But, how to do it successfully? What are the
challenges?
Activism
https://www.alamy.com/protesterssitting-on-the-ground-blocking-theroad-during-the-demonstrationclimate-change-activists-fromextinction-rebellionimage439904545.html
A recent protest in the UK by Just Stop Oil.
Jan 2023
Shareholder engagement
Tim Smith at GM’s Annual
Shareholder Meeting, 1971.
Source:
http://www.iccr.org/abouticcr/history-iccr
Resolution withdrawal avoids
reputational threat
Resolution
filed
Corporation
open to
dialogue?
No
dialogue
Annual shareholder
meeting
Shareholder dialogue
If there is dialogue,
resolution withdrawn
Habermas
Why is engagement effective?
Reputational threat
Dialogue
Shareholder
resolutions covered by
the media pose a
reputational threat,
increasing investors’
perception of
company risk
Shareholders use resolutions to
engage in dialogue with
management. This works if it is
mutually meaningful, parties
develop flexibility, and
understand each other’s
constraints
“
Influence can take the place of strategic
action, or action oriented to success in
influencing the actions of other rational
actors.
Or, it can take the place of communicative
action, which transmits and renews cultural
knowledge, in a process of achieving
mutual understandings.
Jurgen Habermas
(1929- )
Habermas
Why is engagement effective?
Reputational threat
Dialogue
Shareholder
resolutions covered by
the media pose a
reputational threat,
increasing investors’
perception of
company risk
Shareholders use resolutions to
engage in dialogue with
management. This works if it is
mutually meaningful, parties
develop flexibility, and
understand each other’s
constraints
Strategic action
Communicative action
Engagement: key question
Question: How can engaged parties switch
from strategic to communicative action?
Answer: Through a process that includes trust,
common ground, and deliberation
Based on Logsdon and Van Buren (2008), Ferraro
and Beunza (2018)
“
Common ground is the set of
presuppositions that actors, as a result of
their ongoing sensemaking and interaction
with others, take to be true—and believe
their partners also take to be true.
Surprisingly, very little research exists on
how common ground is established in and
through repeated interactions
Cornelissen and
Werner (2014)
Common ground
49 Stroud Green Road
London N4 3EF
A belief held in common
Inter-faith Center on Corporate Responsibility
• Founded in 1971, headquartered in NYC.
Includes 275 institutional investors with more
than $100 billion under management.
• Primarily faith-based institutions such as the
United Methodist Church, the Evangelical
Lutheran Church in America.
• Secular asset managers such as Domini
Social Investments
Sister Patricia Daly
• A nun who as a leader in the field of
socially responsible investing took on
corporate behemoths like General
Electric, Ford and ExxonMobil
• Executive director and galvanizing force
of a group of religious orders that used
the ownership of shares by their
pension funds as an entree to challenge
corporate executives to act more
responsibly on a range of issues,
including environmental protection,
climate change and social justice.
1997-99: Establishing dialogue
Sister Daly filed
resolution against
funding of Global
Climate Coalition
Resolution:
Under Bill
Ford… positive
steps
98
Ford
Resolution
withdrawn
99
“Sister, I’m
completely
supportive of what
you’re doing.”
1999 Ford’s
Citizenship Report:
“we contribute to
greenhouse gas”
“We’re leaving
GCC”
GM: No action
GM: No action
GM: Last to leave
Trust
2004: Climate risk as Common Ground
Resolution:
Climate change
is an emerging
business reality
04
Withdrew
Ford
resolution
05
Publishes Climate Risk
Report, with business
implications of reducing
emissions
Launches
Escape hybrid
SUV
Climate change a “public policy” issue
Common ground
“
Common ground facilitates a process of
deliberation that can yield solutions to
disagreements without requiring full
consensus. It turns the problem of
overcoming disagreement on its head:
instead of submitting an issue to rational
debate, our model calls for the
reconfiguration of the actors’ positions
around shared elements, which then form
the basis for experimentation and further
deliberation.
Ferraro and
Beunza (2018)