Socially Responsible Investing: Shareholder Resolutions

By Siri Yellamraju, Spring 2016 Student Intern

The second strategy for Socially Responsible Investment is Shareholder Resolutions. In publicly traded companies, shareholders can introduce proposals to the board of directors pertaining to company policies and procedures. These policies can pertain to labor practices, environmental practices, corporate governance or ethics. The resolution will pass if there is a majority vote or management is persuaded to adopt it because the resolution was favored by a significant number of shareholders.

ESG issues are hard to pass as a shareholder, but can achieve an impact. Investors should research a company to determine whether past shareholder resolutions have been adopted by the board. In an article from the Atlantic Monthly called The Conscientious Investor, the author states, “The next major category of SRI, shareholder activism, is more promising than any form of screening, at least for big institutional investors.” About one third of investors seek to influence corporate policies and procedures through formal proxy votes or talks with the board of directors. Apparently, threats of proxy wars and shareholder activism are enough to force change.

Socially Responsible Investments can be a lucrative investment if investors do their research (continuously, not just at the beginning), urge the company leaders to be transparent, and understand the risks they are taking by investing in intangible assets. Intangible assets are close to becoming as important as profit when measuring a company’s success. It isn’t surprising that SRIs have become so popular as well.

SRIs are a great way to invest in the good will of the world.