November 28, 2001
Shareowners Increase Social Activism Significantly in 2001
by William Baue
Research released by the Investor Responsibility Research Center reveals upward trends for
shareowner activism on social issues.
This year has been the busiest in a decade for shareowner social activism, with 158 social issues
proposals going up for proxy vote. In addition, average shareowner support per social policy
resolution has increased significantly, rising an entire percentage point over last year to 8.6
percent in 2001. And the number of proposals receiving more than 10 percent support also increased
substantially, with almost 28 percent of the results so far this year topping this important
The Investor Responsibility
Research Center (IRRC), a Washington D.C.-based independent organization that researches
corporate governance, proxy voting and corporate responsibility issues, reported these statistics
as of November 15, with results for 147 of the 158 proposals. Even with some of the results still
outstanding, the percent of votes garnering more than 10 percent support already surpassed last
year’s results, rising from almost 17 percent in 2000 (25 proposals of 150) to almost 28
percent so far in 2001 (41 of 147.)
While 10 percent support may seem minimal, it
represents the dividing line between life and death for proposals. The Securities and Exchange
Commission established this percentage as the benchmark for continued resubmission of a proposal,
regardless of how many times it has appeared on a company’s proxy statement in the past. A
10 percent vote may not effect corporate change, but the continuing presence of social issues on
proxy ballots may exert an accretive effect, reminding companies that shareowners do not ignore the
social bottom line.
Indeed, many of the issues responsible for this current rise of
shareowner interest in social policies have been around for several years, slowly gaining support.
Whereas previous highs correlated specifically to concern over the apartheid regime ruling South
Africa in the early 1990s, the factors responsible for the current highs are more diffuse,
according to IRCC Director of Social Issues Service Meg Voorhes.
global labor standards, genetically modified organisms (GMOs), and board diversification the hot
topics fueling this recent rise in shareowner activism. But if these issues have been around for
several years, why are we seeing such significant increases now? Voorhes relates this effect to
the educational process, like a collective learning curve—we have now reached a critical mass
of understanding about how to advance these causes.
For example, Voorhes points out that
institutional investors are more comfortable tracking global labor standards now that more
monitoring mechanisms, such as the Social Accountability 8000 program, exist. And socially
responsible investors have adopted, in Voorhes’ words, a “more achievable and more
reasonable” goal of simply labeling GMOs, as they came to understand the economic
impossibility of phasing them out altogether. And the diversification of boards is now considered
not only a social issue but also a governance issue, as more representative boards are seen as a
key to business success.
Three of this year’s most popular social policy proposals
resolutions called for board diversification: it was supported by 28.2 percent of shareowners at
Affiliated Computer Services (ticker: ACS), 27.5 percent atAmerican Power Conversion (APCC), and
27.2 percent at Bed Bath and Beyond (BBBY). As for global labor standards, 23.4 percent of Unocal (UCL) shareowners voted to
implement International Labor Organization (ILO) standards.
Of the fifteen social issues
IRCC tracks, 12 increased in the percentage of their average vote from 2000 to 2001. The only
three categories experiencing decreases were banking/insurance, charitable contributions, and
military. As more and more resolutions top the 10 percent mark, socially responsible investing is
becoming a permanent fixture on proxy ballots and in the minds of shareowners, not to mention the
increasingly diversified boards of directors.