What is Shareholder Activism?
In the 1980s, a mass investor movement stood in solidarity with anti-apartheid South Africans by selling shares of companies operating in South Africa, prompting many corporations to cease doing business in the country. This coordinated campaign helped topple the racist government and make way for democratic elections.
You can be a shareholder activist, too.
So, you have set up your retirement savings contributions, and you are on your way to investing enough to have a dignified retirement. Congratulations! Now, we have another ask of you: will you join us in leveraging our collective investments to build power and build a just future?
Shareholder activism, also known as shareholder engagement or shareholder advocacy, encompasses a broad range of activities we can carry out to push actors in the investment chain — for example, asset managers and companies — to use our money in ways that promote social, racial, and environmental justice.
If you have retirement investments with Just Futures, you are already participating in shareholder activism by saving in our funds which we believe are less extractive compared to mainstream options. But we can do so much more!
Examples of shareholder activism strategies
Fund screening: We do this at Just Futures. Our investment team uses independent research from grassroots groups and assessment technology, such as YourStake, to apply negative screens. This means we evaluate whether funds are especially damaging with regard to social justice issues. For example, we try to minimize investing in private prisons and immigrant detention centers, fossil fuel production, weapons manufacturing, and companies with labor rights violations. Further, we exclude all funds proprietary to Blackrock, Vanguard, or Fidelity because of their documented history of extractive activity. For example, according to Action Center on Race and the Economy reporting, “Fidelity trustees are tied to numerous fossil fuel operations perpetuating climate and environmental injustice against BIPOC and frontline communities.” (For more receipts, see here and here. Oh, and here….aaand here). While more challenging with the investment products available, our team also uses positive screens to try to include progressive funds, such as those centering renewable energy and affordable housing. Our positive screens extend to asset managers, too. For example, Adasina Social Capital is an asset manager that partners with grassroots organizations to choose fund holdings while campaigning for systemic progress. So we include their exchange-traded fund (ETF), Social Justice All Cap Global (JSTC), in our lineup.
Divestment: This is a more direct form of negative screening – usually a campaign targeting specific companies or industries. A shareholder can withdraw funding from projects. The 1980s divestment from companies operating in apartheid South Africa is a powerful example.
Proposal: Also known as a resolution. A shareholder can submit recommendations for broader shareholder vote at annual company meetings. For example, in 2024, nonprofit United for Respect worked with Walmart workers and shareholder activists to put forth a proposal addressing racial inequity and workplace hazards.
Proxy voting: Shareholders can vote on various topics that affect an enterprise, for example, progressive proposals to change company policy (such as the example mentioned above), board member diversity, executive compensation, and mergers and acquisitions. Campaigns can encourage shareholders to try to achieve favorable outcomes. For example, Majority Action releases proxy voter guides to inform eligible shareholder voters and encourage them to vote in ways that support racial, social, and environmental justice.
Takeover: This can be a powerful outcome of proxy voting. Specifically, it involves electing enough board members to take control of the enterprise. To our knowledge, no shining social justice examples of this tactic yet exist; though, in 2021, then emergent fund manager Engine No. 1 made shareholder activism history when, despite owning only 0.02% of Exxon, they managed to organize enough shareholder votes to seat three new board members, ostensibly to influence Exxon’s behavior in the climate crisis.
Shareholder activism challenges
- Getting shareholders to vote in support of a proposal can be hard. As a result, most shareholder proposals do not pass. In 2022, only 10.5% of the 437 proposals submitted to S&P 500 companies received majority support, according to data from ESGAUGE. And passage may decrease, as the Securities and Exchange Commission (SEC) tightened rules. Still, company leadership sometimes makes changes in accordance with proposals that fail to reach majority support. They might do this because they recognize that a significant number or group of shareholders wants change; whereas the votes against a proposal may only represent a small number of investors who own a large proportion of shares.
- If we manage to pass a shareholder proposal, it is nonbinding. The board of directors can choose to ignore it. Or, if they want to preserve the image of listening to shareholders, they can “implement” the resolution in a superficial way that undercuts the spirit of the project. Nonetheless, making an on-the-record case for change - and forcing a company’s leadership to publicly respond - can be meaningful.
- Shareholder proposals only affect one company at a time. But there are millions of companies globally of which more than 55,000 are publicly listed. To change the system, reforming through one proposal at a time, one company at a time seems wildly inefficient. However, showing that a company can successfully implement a proposal strengthens the case for industry-wide oversight by regulators and legislators. Indeed, Majority Action recommends engaging the SEC to implement regulations that would improve all publicly traded companies.
Shareholder activism is at its best when historically marginalized communities lead.
Our vision is for shareholder activism to support work that exploited communities are already doing to build power and a brighter future. We will discuss this further in future articles.
If you don’t have retirement savings or your employer contracts with a different retirement plan administrator, we’d love to show you the advantages we at Just Futures can offer! You can reach us at info@justfutures.com.