Here are the most Frequently Asked Questions about shareholder activism.
I get proxy ballots in the mail (or e-mail). What do I do with them?
Your proxy ballot will arrive before a company's annual meeting, which usually happen in the spring, so look carefully at any correspondence from the companies in which you hold stock, or from your financial adviser. If you invest in mutual funds, you automatically delegate your proxy voting rights to the fund managers, so it is important to invest in funds that share your values.
Vote your proxy by filling out the form you receive and mailing it back before the due date; phoning your results in, if there is a call-in option listed on your ballot; or voting online using a link on your ballot. Mark all votes on your ballot, even if the instructions don't specifically tell you to do so, because ballots returned unmarked count as votes for management's position. For a look at a sample ballot, click here.
I heard that some shareholder resolutions get less than 10 percent of the vote. How could such a small proportion make a difference?
Historically, very few resolutions achieve majority votes at annual meetings. Many votes come in at the 5–25 percent range. Even those low numbers represent a significant number of unhappy shareholders. Since shareholder action campaigns are often accompanied by coordinated consumer and media campaigns, resolutions can damage a company's reputation and branding, and a potential loss of revenue through negative publicity, consumer boycotts, and loss of investor confidence.
Some companies have amended policies after a proposal is filed and before a vote, to avoid the conflict. When a resolution succeeds like this even before it comes to a vote, whomever filed it will usually withdraw it from the ballot.
If a resolution comes to a vote and the company doesn't respond, shareholder activists will often keep the pressure on by re-filing the proposal the following year. According to the newest rules of the Securities and Exchange Commission (SEC), approved in 2020, a resolution must receive 5 percent of the vote the first year it is filed, 15 percent the second year, and 25 percent every year thereafter to continue to be included on the proxy ballot.
I own stocks, but I’ve never seen a proxy ballot. Why?
Your financial adviser may be receiving your proxy ballots and voting on your behalf. When you hired your financial adviser, you may have signed paperwork saying you didn't want to receive these materials. Ask your financial adviser if you can get the proxy ballots so you can vote—or if you can give him/her instructions on how you want the votes cast and let him/her do the paperwork.
Warning: Many money managers or advisory groups have policies dictating that they automatically vote on the side of the management of the company in which the stock is owned. If this is the case, ask your adviser for a guarantee that s/he will follow your instructions. Otherwise, take voting into your own hands, since company management almost always recommend voting against social and environmental concerns.
If you invest in mutual funds, you automatically delegate your voting rights to fund managers. To find out how your mutual fund is voting on proxy resolutions, call the fund's investor relations department, request this information, and express your views on the position you want the fund to take. Mutual funds have been required to disclose how they vote their proxies since 2004.
Why does my socially responsible mutual fund invest in companies I don’t agree with, or that have questionable practices? How do I know if it is engaging in shareholder activism?
If you already have a socially responsible mutual fund, it could be investing in questionable companies and engaging in shareholder activism. Socially responsible mutual funds promote corporate responsibility by:
- targeting exceptional companies for investment,
- avoiding the most irresponsible companies, and
- putting their investment clout behind shareholder campaigns targeting companies that need to do better but aren’t the worst of the lot.
All mutual funds are required to provide investors with information about how they are voting all their proxy ballots. If you have a concern about a company included in your mutual fund, call the fund's investor relations department and ask for its proxy voting information.
Can I introduce a shareholder resolution?
In 2020, the SEC increased the shares that investors must own if they wish to file shareholder resolutions. Currently, if shares are owned for one year, $25,000 worth of shares must be owned in order for the investor to be able to file a shareholder resolution; if shares have been owned for two years, then $15,000 worth of stock are needed; shareholders must wait three years before they can file if they own at least $2,000 worth of shares (and below $15,000.) Institutional investors tend to dominate the resolution filing process because they have resources for multi-year follow up and time to spend pressuring companies.
There are individuals who file resolutions, but it's less common than those filed by institutional investors. It is most helpful for individuals to vote their proxies, as many never return their ballots. But if an individual is intent on filing a resolution, it can be advisable to do that in with institutions that have likely been working on the issue for many years.
Often, the first thing a company will do upon receiving a resolution is to present it to the SEC and ask that it be thrown out; institutional investors or existing coalitions with experience introducing shareholder resolutions have the resources and legal backing to ensure that their proposals are written correctly and make it onto the ballot. An easier way to get involved in filing a proposal is to join an existing group of filers and be a co-filer, lending your shares to the coalition, being updated on its progress, and providing input when asked.
Individuals interested in co-filing or lending their shares to can contact an organizations that works on an issue to ask if it is are engaged in shareholder action and if they are interested in having co-filers, or is in need of someone to attend a shareholder meeting.