Changing Corporations for the Better: Shareholder Engagement
By Kate Monahan.
CORPORATIONS ARE PART of our daily lives. When it comes to halting climate change, we need the meaningful participation of corporations. As Shareholder Engagement Associate at Friends Fiduciary, I’ve seen significant, concrete change come from a company modifying a practice or policy as a result of engagement by company shareholders. As Quaker shareholders, we can leverage our privilege and seat at the table to help make it happen.
Friends Fiduciary is a non-profit, socially responsible investment firm serving Quaker meetings, churches, schools, and other organizations by integrating Quaker values in our investment process. We don’t invest in companies that produce weapons or weapons components, alcohol, tobacco, firearms, or coal, nor in companies that run for-profit prisons or gambling operations. We then select companies who are better actors within a given sector, based on their environmental, social, and governance record.
Once a company has passed our rigorous screening process, we take an active role as shareholders. Too often the only shareholder voices a company hears are the ones that want to maximize short-term profit to the exclusion of all else. As long-term, values-based investors, we believe that it is in a company’s financial interest to operate sustainably, with respect for all stakeholders.
We reach out directly to companies when we have concerns about their policies or practices and make a case for change based on good business practices and grounded in Quaker values. When a company is unreceptive, we have the right to file a shareholder resolution. Shareholder resolutions are voted on by all shareholders at the company’s annual meeting—and companies dislike having them appear on their proxy. Sometimes a shareholder resolution is enough to bring a company back to the dialogue table, and if the company is willing to move forward, we’ll withdraw the resolution, which we see as a win.
Shareholder engagement is just one avenue for change and it is often imperfect. It is the definition of an inside strategy and involves relationship-building with company management over the long-term. But we’ve seen positive results from our engagement work. This year, we joined another socially responsible investment manager to engage the nation’s largest natural gas producer on their methane management practices. Methane is a potent greenhouse gas which is 84 times more harmful to the environment than carbon dioxide. From a business perspective, wasted methane is literally wasted product, so if a company is better at managing emissions, they can increase their profit. We made that case to the company and they ultimately agreed to publicly disclose their methane emissions, details of their mitigation program, and to set a methane emissions reduction target by the end of 2018. These are critical initial steps towards reducing harm to the environment. This change on the part of the industry leader results in greater attention and action by other natural gas companies.
Shareholder engagement can be a powerful tool. I think it’s important to ensure that as Quakers, we engage directly with our tradition of dialogue and our long history of organizational wealth in order to maximize the potential for impact. Inside and outside strategies can work together in service of the world we seek as Friends.
