Frequently Asked Questions
(click on an item to expand it)
Shareholder engagement, or shareholder advocacy, is often described as being the third leg of the 3-legged stool of social investment. The first leg is screening investments, the second is community investment (or micro-credit lending), and the third is shareholder engagement. Shareholder engagement achieves its lasting impact by filing shareholder resolutions.
An item for inclusion in a company’s proxy for a vote of all shareholders, that is submitted by a shareholder (as opposed to put forward by management).
A shareholder resolution and a shareholder proposal are the same thing.
For more information, read our article “What is a Shareholder Resolution?”
There is no question that shareholder engagement is at the more beneficial, “high impact” end of the social investment spectrum.
Publicly traded companies desire to be seen in a positive light, as knowledgable and forward-looking in all arenas related to their business. Because a resolution raises an issue and is printed in the proxy for a vote of all shareholders, it is placed squarely in front of management. This makes shareholder resolutions a tremendously powerful tool that can focus management’s attention on important issues.
Outcomes of shareholder resolutions vary widely, depending on the desired impact. For examples of the types of outcomes our work has had, please visit our Successes page.
The most basic requirements are to:
- Hold at least $2,000 worth of company stock.
- Have held those shares for a year by the time of the filing deadline.
- Continue to hold the shares from the time of filing a resolution through to the time of the annual general meeting (AGM) of shareholders.
- Formally present, or move, the resolution at the AGM.
The resolution itself must:
- Not exceed 500 words in length.
- Be germane to shareholders at large.
- Relate (with certain exceptions) to an issue that represents more than 5% of a company’s business.
- Not concern itself with the “ordinary business” of matters that might be considered under management’s routine, day-to-day purview.
The deadline by which a shareholder must file a resolution with a company, in order for it to be considered for inclusion in the company’s proxy materials.
A letter from the SEC stating that the Commission will not take action against a company if it omits a shareholder-sponsored resolution from the proxy. See: What is an SEC challenge? below.
The document sent by a company to its shareholders, that contains items on the formal agenda for consideration and a vote at the annual meeting of shareholders.
An attempt by a company to avoid including a shareholder-sponsored resolution in the proxy.
It is a submission to the SEC with a recitation of reasons (based on SEC rules, precedent, and case law) why the company feels it can omit or exclude the proposal.
The submission explicitly asks the SEC for a No-Action Letter, which is a letter from the SEC stating that the Commission will not take action against the company if the resolution is left out of the proxy.
Equity is very important in the context of shareholder engagement.
When a company first goes out to raise money to start operations (and at some other times), its most basic choices are to either borrow money or sell stock.
Borrowing money creates a debt and is an obligation that the company owes back. Debt, however, does not confer any ownership right to the company – only a claim against the assets of the company.
Selling stock (or equity) represents letting go of a portion of the ownership and control of the company.
Collectively, the stockholders together own the company.
Stock (or equity) represents ownership in the company, and carries with it the right to file shareholder resolutions (at publicly traded companies) for inclusion in the proxy for the consideration and vote of all shareholders.
Bonds = Debt (no ownership)
Stock = Equity (ownership)
There are three legs to the stool of Socially Responsible Investment (SRI):
- Shareholder Advocacy
- Community Investment
Though most people think of SRI as simply applying avoidance screens to their portfolios (to exclude tobacco, for instance), screening is an entry-level, least-impact activity, while community investment and shareholder advocacy are the higher level activities that can lead to much greater benefits.
For a more detailed description of SRI:
- Listen to an audio clip of Bruce Herbert describing the 3-leg stool of SRI
- Read our article “What are SRI & ESG?”
Environmental, Social and Governance (ESG) are the three main areas of concern in measuring the impact of SRI.
For more information, read our article “What are SRI & ESG?”
A Social Purpose Corporation (SPC) is a new form of business incorporation that was passed into law by WA State and became effective on June 7, 2012.
An SPC is explicitly chartered to serve more than its shareholders – by taking into consideration the long-term impact of company operations on clients, community, the environment, employees, and the common good of society.
Investor Voice is proud to be the nation’s 10th SPC; a sister company established by Chief Executive Bruce Herbert was the nation’s 1st SPC.