Modern capitalism has ushered in the greatest era of innovation, globalization, and sheer economic output in human history. However, the incentive structure, which rewards short-term gains over long-term sustainability, has come at the expense of fair labor and fair trade practices, human rights, and our planet’s delicate ecosystems. Social scientists have long recognized these shortfalls inherent to our system, but all external efforts — government intervention, a thriving philanthropic sector, protest movements, etc. — have not done enough to curb the destruction of this capitalist machine. Even Occupy Wall Street, the largest anti-capitalist protest movement in modern history, failed because our corporations are ultimately beholden to no other stakeholder than their own shareholders.
So if corporations are doing this on the behalf of their shareholders, maybe it’s up to the shareholders to help put an end to this. Shareholder activism is a channel to create impact by influencing company policy from within. It can be a method for socially- and environmentally-conscious advocates to voice their concerns from the perspective of shareholders who want to increase the value of their ownership by promoting sustainability. As the conservationist David Brower liked to say, “There is no business to be done on a dead planet.”
Shareholder activists are bullish on sustainability because they realize the massive upside potential of infusing compassion into business practices: positive press, fewer boycotts, fewer fines, fewer lawsuits, fewer labor strikes, more productive employees, more consumer demand, and the benefits of increasingly-progressive legislation. Even Founder of BlackRock Larry Fink — a pro-market authority — praised shareholder activism in his 2022 Letter to CEOs. This letter, written from the perspective of the shareholders of Corporate America, did not attack capitalism but instead implored executives to reframe and repurpose capitalism to achieve a wider array of society’s ambitious goals. “Capitalism has the power to shape society and act as a powerful catalyst for change,” Fink wrote.
Over the past few decades, there have been a handful of organizations that have formed in order to support sustainable action through the current capitalist system. Organizations like As You Sow, Green Century Funds, and Impax Asset Management have used shareholder activism to put forward shareholder proposals that aim to push companies in the direction of environmental sustainability or social good.
Why push for change through shareholder proposals? If you own stock in a company, you are entitled to vote your shares at annual shareholder meetings. Typically, shareholders vote on anything that might affect the stock price, such as the makeup of the Board of Directors, mergers & acquisitions, stock splits, and executive compensation. But many investors are also proposing measures that support ESG (Environmental, Social and Corporate Governance) initiatives, asserting triple bottom line benefits to people, the planet, and profit. Institutional investors and activist hedge funds have leveraged shareholder activism to make great impact, such as Engine №1 who were able to vote three environmental activists onto the Board of Directors of Exxon Mobil in 2021.
Retail investors, too, can be a part of this movement. If you own stock in a publicly-traded company, you can participate in the shareholder voting process by looking up that company’s Definitive Proxy Statement, which is filed to the Securities Exchange Commission in the Schedule 14A. You may search for upcoming shareholder proposals and the proxy voting materials of your stocks through the SEC’s EDGAR database, which is free and open to the public.
Disruptive technology such as investing apps have democratized access to the stock market, increasing stock trading by retail investors from diverse socioeconomic backgrounds. Thus, it is exceedingly important for retail investors not to leave their power on the table but to exercise their rights as shareholders and vote at these meetings. ProxyMonitor.Org has a watchlist of the upcoming votes of Fortune 250 companies and allows users to sort by social impact.
It is famously theorized that capitalism has within it “the seeds of its own destruction.” Under a capitalist system, social classes are defined in their relation to their control over the means of production. But in the context of shareholder activism, democratized stock ownership and proxy voting allow for a more inclusive control over the means of production. Shareholder activism will allow more people to negotiate the value of corporate sustainability — a perspective that has been stifled in the past. This movement can bring about a new notion of what capitalism is and who it serves. Every vote in favor of ESG goals is another seed planted in the unemotional, hyper-rational capitalist paradigm, so that future generations can reap the benefits of a protected natural ecosystem and a compassionate corporate culture.
The views expressed are those of the author at the time of writing, are not necessarily those of the firm as a whole and may be subject to change. The information contained in this advertisement is for informational purposes and should not be regarded as an offer to sell or a solicitation of an offer to buy any. It does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of specific investors. Investing involves risk, including the loss of principal. Past performance is not indicative or a guarantee of future performance. We do not provide tax, accounting, or legal advice to our clients, and all investors are advised to consult with their tax, accounting, or legal advisers regarding any potential investment. The information and any opinions contained in this advertisement have been obtained from sources that we consider reliable, but we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. This is particularly true during periods of rapidly changing market conditions. Securities offered through Fennel Financials, LLC. Member FINRA SIPC.
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‘Tis the season — the season where some of the largest public companies have their annual general meeting (AGM) and shareholders get to vote on important business decisions.
Let's take a look back at some of the things that happened during last year's AGM season.