Shareholder activism By Claude Morgan
Greenpeace, the environmental group best known for colorful demonstrations and the occasional ramming of seagoing polluters, is taking a slightly different tack these days. The international organization has been buying publicly traded stocks in companies it once boycotted, picketed or otherwise harassed at sea.
But don't worry: Greenpeace isn't selling out. The environmental group, like hundreds of other groups that promote environmental and social change, hopes to make an even bigger splash inside the corporate boardroom than on the open sea.
The strategy is called "shareholder activism." Activists buy stock in companies they hope to influence, leveraging their ownership to engage corporate executives and stockholders in a meaningful dialogue about the environment and social responsibility.
"Companies do have a legal obligation to listen to their shareholders," says Iain MacGill, a senior energy policy analyst at Greenpeace. MacGill is also spearheading a fight with the British-owned petroleum company, BP Amoco. The company wants to drill for oil on Northstar Island, a sensitive piece of the Arctic wilderness off the Alaskan coast. So Greenpeace has bought a piece of BP Amoco.
"We think, in the long run, it's far better to be on the inside talking to these companies than on the outside," says MacGill.
Since 1934, the U.S. Securities and Exchange Act has guaranteed shareholders with a $2,000 stake in any publicly traded company the right to file so-called "shareholder resolutions." By law, companies must include these resolutions as ballot questions in their annual reports to shareholders. Even if a resolution fails to pass, if it garners at least 3.5 percent of the vote the companies must offer it on the ballot the following year.
For activists like MacGill, winning a majority of votes on a resolution has never been a feasible goal. On the other hand, exposing shareholders to environmental ideas could be worth its weight in gold.
Ariane van Buren, who directs the energy and environmental programs at the Interfaith Council on Corporate Responsibility, one of the pioneers of shareholder activism, says that part ownership in a company offers activists a number of useful new tools for social and environmental change.
"One of the interesting things about shareholder resolutions is the leverage," says van Buren. "Most companies don't want these resolutions on the ballot. So often, they'll bend over backward to work out something with the activists."
"If they want you to withdraw the resolution," she says, "they'll sit down with you in private, and that's where you have a chance to make the real strides forward."
Consider just a few of those historical strides. Various activist-shareholders forced 160 companies to divest ownership in South Africa in the 1980s and '90s, toppling that county's apartheid regime. In the late 1990s, shareholders persuaded a number of large corporations to sign on to environmentally and socially responsible business practices, the CERES principles.
Success stories like these have convinced many environmentalists that ownership and activism don't need to be mutually exclusive.
"This is a fairly new tactic for us," admits Athan Manuel, director of the Public Interest Research Groups' Arctic Wilderness Campaign.
In 1999, PIRG's Arctic-protection resolutions garnered 10 percent of the shareholder vote at oil-giant Chevron and 5 percent at ARCO - enough to guarantee that both resolutions will reappear on next year's ballots.
"At some point these companies will have to treat us as serious players," says Manuel.
Like Greenpeace, PIRG has historically used a combination of activist strategies to bring about social and environmental change. But in 2000, after informally tallying the votes in Congress for and against the Northstar project, PIRG jumped at the option to buy stocks, says Manuel.
"The beauty of shareholder activism is that, essentially, we're able to cut out the middleman," he says. "We don't have to fight Congress. We don't have to fight Trent Lott. We go directly after the bad guy."
As the successful campaign to divest in South Africa shows, shareholders and consumers do pay attention to company policies and investments, says Manuel. "Now, we're trying to do the same thing for the Arctic," he notes.
And for companies that don't pay attention to the resolutions of their shareholders, warns van Buren, beware: The wake-up call can be as jolting as a collision at sea with Greenpeace.
"Companies will never admit in public that they like a shareholder resolution," says van Buren. "But in private, they'll say they're glad for it. It gives them an opportunity to deal with important issues before they get hit by public opinion." Or rammed in the pocketbook.