Taking 'stock' of corporate behavior – using shareholder activism to defend and promote human rights



What is shareholder activism and why does AIUSA do it?

Shareholder activists include public pension funds, unions, religious institutions, universities, foundations, environmental and human rights groups, and socially responsible investment firms and mutual funds. Since the 1970s, shareholders have pressed companies on a wide range of human rights issues. These issues include doing business under repressive regimes (such as apartheid South Africa or military ruled Burma); corporate use of security forces in Nigeria and Indonesia; the conditions in factories; and the rights of the factory workers who produce a company's products. Currently, Amnesty International USA is using shareholder activism to help protect the health and environment of communities in Bhopal affected by the Union Carbide chemical disaster, and indigenous peoples in Ecuador’s Amazon impacted by irresponsible drilling practices by Texaco.

When you own stock in a company, you are truly a company owner, and the management should be working on your behalf. As such, you enjoy certain rights and privileges. Owning shares helps you: Starting in the late 1990s, AIUSA set aside a small budget to buy stock in several companies about which we had human rights concerns. We call this the "Activist Portfolio." Because it is designed wholly for advocacy purposes, it is separate from Amnesty's investments. Since establishing the portfolio, AIUSA has used its clout as a shareholder in two principal ways:

AIUSA’s use of these tactics has ranged from writing letters to filing shareholder resolutions. In 2005 we announced SHARE POWER, a grassroots campaign that helps activists around the country find their connections to powerful multinationals and use that connection to influence them to change. The campaign is built around shareholder resolutions that we have filed with Chevron (CVX) and Dow Chemical (DOW).

In its shareholder activism, AIUSA has allied itself with other concerned investors raising issues of human rights. Using shareholder pressure, AIUSA has met with top corporate executives, spoken out at shareholder meetings, been quoted in the press, and won the votes of billions of dollars worth of stock for its shareholder resolutions.

Read about our experiences at the 2006 shareholder meetings for Chevron (CVX), Dow (DOW) and Google (GOOG).

Most importantly, AIUSA has used its shareholder clout to secure greater respect for human rights in both the policies and performance of major US companies.
AIUSA does not only file resolutions at companies in which AIUSA has specifically bought stock for the purpose of activism. AIUSA has also joined other investors in co-filing resolutions at companies whose stock AIUSA bought as an investment. These resolutions have included one at TJX (parent company of TJ Maxx) on the issue of sweatshops and several others asking a variety of companies to explicitly bar workplace discrimination based on sexual orientation. For 2006 we have filed two resolutions on this issue, with ExxonMobil and Leggett & Platt. Other important issues that we have submitted resolutions on include diversity disclosure and sustainability.


How do shareholder resolutions work?

At the heart of shareholder activism is the right of shareholders to file resolutions.

A shareholder resolution is the corporate equivalent of a motion filed at an AIUSA conference. It contains several statements of fact as well as a “Resolved” clause, which specifies the change in corporate policy or disclosure sought by the resolution filers. It is moved at a company’s annual shareholder meeting and voted on by shareholders.

For example, the resolution filed by AIUSA at ExxonMobil in 2002 reads (in part):
“THEREFORE BE IT RESOLVED that the shareholders request the Board of Directors of ExxonMobil Corporation to review its policies related to human rights and its plan to implement that policy;
BE IT FURTHER RESOLVED that the shareholders request the Board of Directors to prepare a report, prepared at reasonable expense and omitting proprietary information, on this review including changes in the policy and the implementation plan and make it available to shareholders no later than November 1, 2003.”
Many shareholders voluntarily withdraw their resolutions after reaching a settlement with a corporation. For instance, in 2004, AIUSA withdrew a resolution that it had filed with ExxonMobil after the company committed to uphold fundamental worker and human rights, and we continue to monitor the company’s progress in fulfilling this promise.

Shareholder resolutions very rarely win a majority of shares voted. The resolution filer's immediate goal is to gain the attention of top management and the Board, and to get the necessary threshold level of support to resubmit the resolution the following year. In its first year a proposal must win 3% or more of the vote to be re-filed the next year. In the second year, 6% is the threshold; and in the third and subsequent years, 10% is the minimum needed. In each case when AIUSA has brought its resolution to a vote, we have won enough votes to be able to re-file the resolution the next year.

Resolutions do not have to win a majority in order to help change corporate behavior.


What is required to file a shareholder resolution?

Shareholders have to have held at least $2,000 worth of stock for over one year. This takes some advance planning. In the activist portfolio, AIUSA has stock in several companies just to be able to file resolutions in future years where it is an appropriate and effective tactic.

To be filed successfully, shareholder resolutions must meet several requirements laid down by the Securities & Exchange Commission (SEC). The resolution must not exceed more than 500 words. The resolution must also meet several other exact procedural and content requirements. To avoid the SEC excluding the resolution, shareholders seek expert legal advice. In writing and filing its resolutions, AIUSA obtains the advice of experienced shareholder activists versed in these complicated legal requirements.


Do shareholder resolutions really work?

Yes! By using shareholder resolutions, Amnesty, in coalition with other investors including AFL-CIO and the Teachers’ Retirement System of New York City, has been able to engage ExxonMobil in a dialogue about the company’s human rights obligations. This coalition has succeeded in pressing the company to incorporate human rights language into its corporate citizenship report. In May 2002, ExxonMobil published its report “Corporate citizenship in a changing world,” which included the statement that “ExxonMobil condemns human rights violations in any form.” In 2004, ExxonMobil further amended their citizenship report to indicate their intent to uphold the core labor standards set forth by the ILO Declaration, to which they later added a statement of support on Labor and the Workplace. Moreover, ExxonMobil agreed to join the contact group for the Voluntary Principles on Security and Human Rights, a commitment that the company had earlier refused to make.

In addition to the example of ExxonMobil, Amnesty and coalition partners including Walden Asset Management won two victories with ALLTEL and Carlisle in 2004. In the case of ALLTEL, we co-filed a resolution two years in a row along with other concerned investors, supported by grassroots activism, pressing the company to adopt and implement a written sexual orientation non-discrimination policy. In October of 2004 ALLTEL adopted a policy and we were able to withdraw our 2005 resolution.

Similarly, we co-filed a resolution at Carlisle in October 2004, only to withdraw it a couple of weeks later when the company quickly responded by amending its Business Code of Conduct. While we welcome both ALLTEL and Carlisle’s policy revisions as first steps, we will continue pressing them to report on their implementation.

How can I support shareholder activism as an owner of stock or a mutual fund?

If you own stock in a company, you can express your concerns directly to the company, and vote your shares for a shareholder resolution. If you employ an investment manager or broker, you can instruct them to vote your shares.

Many people own stock indirectly through mutual funds. Portfolio managers for mutual funds have the responsibility for voting on resolutions filed at companies in which their funds own stock. As the owner of a mutual fund, you do not have individual voting rights. However you can exert pressure on the fund managers of your investments to vote in favor of a resolution filed by Amnesty.

Because of new regulation by the Securities and Exchange Commission (SEC), mutual funds are now required to disclose how they vote on resolutions. When you write letters to your fund manager, let them know that corporate accountability for human rights is an important issue for you and that you will be paying attention to see which way they vote. Ask them for their policy and record of voting on shareholder resolutions. Our new SHARE POWER Campaign provides you with step-by-step instructions on how to use your power as a mutual fund investor to start pushing for change on important human rights issues facing companies.

How can Amnesty members and other activists support this type of activism if they are not stockholders?

The best way to get involved is to join SHARE POWER, Amnesty’s new grassroots shareholder activism campaign. SHARE POWER provides you with all of the materials and support you need to design and carry out a local campaign, including simple to follow 4-step guides, sample letters, petitions, and more. No matter who you are, where you work, where you study, or where you live, you can find your connection to multinational corporations, and use that connection to influence them to change.

For instance, even if you own no shares in a company you can write a politely worded letter expressing support for any resolution submitted by Amnesty International USA, explaining that you are part of a worldwide movement supported by 1.8 million members. You may also want to mention that you are a consumer who takes human rights concerns into account in your purchasing decisions. Note that this is much different than threatening a boycott, which Amnesty as a rule does generally not support.

Another route is to write letters to large institutional investors. For instance, if you are a student, you can research your university or college’s investments. If they own stock in a company at which Amnesty has filed a resolution, you can lobby them to vote their proxy votes in favor of the resolution. This is frequently a very successful tactic.

Similarly, you can research the holdings of investments held by large public employee and/or teacher pension funds in your city or state and lobby them to a vote in favor of the resolution. The first and best step to do this would be to write to your city and state treasurer or comptroller. These officials are often directly elected and responsive to letters from constituents.

Further to that, as an Amnesty member you have a role to play in educating the public about the corporate impact on human rights issues and how people can take action. The more public awareness and advocacy that there is, the harder it will be for any company to deny its responsibilities. We have tons of resources available to help you raise awareness, including films, reports and posters. Visit our SHARE POWER resources and information page to learn more, and contact the Corporate Action Network at corpaction@aiusa.org if you have questions or would like to request materials.

Where can I learn more about shareholder activism?

To get started with Amnesty’s new SHARE POWER Campaign click here.

For further information on shareholder activism, we recommend these resources: