Volume 91, Number 3
Third Quarter 2006
One Proxy at a Time: Pursuing Social Change through Shareholder Proposals
Traditional economic wisdom holds that a corporations 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 firmsespecially those that value consumer goodwill and have the name to aid in social changewere most often targeted.
Because a withdrawn resolution usually signals an action by the corporationdialogue, agreement to resolution, or some other compromisethe author argues that withdrawn proposals can be used as measure of activisms success. The IRRC data and her own extensive research on the outcome of withdrawn proposals support this argument.