Shareholder Activism

The History of Shareholder Activism

Shareholder activism has a long history in the United States, where SEC rules allow for shareholder direct involvement in corporate governance processes. In a number of other countries—like the United Kingdom, France, and Japan—shareholder activism has also occurred, albeit less frequently than in the United States. The primary vehicle for shareholder activism in the United States has been the shareholder resolution.

Richard Marens has argued that the history of shareholder activism in the United States dates back to the 1940s and 1950s, when corporate “gadflies,” such as the Gilbert brothers, pioneered the use of the shareholder resolution as a means of pressing corporate managers to undertake some sort of policy change. During this period of time, shareholder activism was primarily focused on increasing the transparency of corporate decision making and improving the quality of corporate governance, although there were a number of shareholder resolutions focusing on social issues such as the inclusion of women and members of minority groups on corporate boards of directors.

Later work in shareholder activism addressed social concerns more frequently. In 1971, the Episcopal Church filed a social-issue shareholder resolution with General Motors asking that corporation to leave South Africa, which was ruled by a regime that practiced the racial segregation system called apartheid. Under apartheid, black South Africans could not vote or own businesses, mixed race individuals could own businesses but not vote, and all nonwhites were forced to live in certain areas of the country. The Episcopal Church's action marked the beginnings of religiously motivated shareholder activism, and the Interfaith Center on Corporate Responsibility was founded in the early 1970s to bring together religious organizations interested in using the shareholder resolution as a means of advocating social change. Early religious campaigns focused on issues like apartheid in South Africa, infant formula, and fair-lending practices by banks. In recent years, religious campaigns have addressed concerns like sustainability, environmental justice, global warming, and genetically modified organisms. More recently, socially responsible mutual funds, state and local pension funds, and activist groups like People for the Ethical Treatment of Animals have all used shareholder resolutions to seek policy changes from corporations.

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