Early in 2017, an extraordinary example of shareholder influence benefiting the environment took place at the annual meeting of Occidental Petroleum Corporation, one of the world’s largest oil companies.
With 67% of votes cast, shareholders at Occidental’s meeting adopted a resolution calling on the company to make a detailed report on how their operations impact climate change. Marking the first time a major oil company has adopted more environmental reporting in the US due to shareholder action, the resolution is considered historic by some.
While backed by big shareholders, including investment firm BlackRock, the resolution was the work of a corporate governance advocacy organization called As You Sow, which has been pushing for progress on a range of social and environmental issues for 25 years.
The nonprofit communicates directly with corporate executives, using shareholder influence to develop business models that increase corporate profits while simultaneously benefiting environmental and social change. “It is critical for corporate leaders to address the impact of their policies and actions,” As You Sow stated. “By ignoring this impact, they are creating risk for their customers, employees, shareholders, and themselves.”
After the success of its shareholder engagement initiatives at Occidental, a similar resolution was introduced at the annual meeting of Akron, Ohio-based electric utility FirstEnergy. The measure, which called on the utility to respond to the growing release of carbon, received 42% of shareholder votes. “With the strong showing of support at FirstEnergy, investors are resoundingly appealing to our energy leaders to step up to the plate with respect to decarbonizing and protecting people, the environment, and a stable economy,” said Danielle Fugere, As You Sow’s president.
The organization has also engaged with restaurant chains to phase out the use of polystyrene foam in cups and packaging globally, as it pollutes soil and water after disposal. A shareholder resolution to end the use of polystyrene was introduced at a meeting of fast food chain McDonald’s and was supported by a third of the votes cast.
As You Sow’s successful actions don’t always come to a vote. Putting pressure on a corporation can encourage them to act before meetings come to pass. For example, the As You Sow agreed to withdraw a resolution about polystyrene foam from the annual meeting of Target Corporation after the company agreed to work with its supply chain to replace foam with less harmful alternatives.
These initiatives demonstrate that investors may be able to use their voices to affect change at the companies they invest in. Engaged shareholders are often able to advocate for measures that improve a company’s financial performance while simultaneously promoting ethical actions that matter to them.