A Social Perspective On Shareholder Activism

With the explosion of corporate social responsibility in recent years, many corporations have been asked to be more accountable for their actions by social groups, governmental bodies, special interest organizations, and paradoxically, their own shareholders. While the first three have always been present in some form, the latter is a new development that is growing in power and influence.

A prime example is what occurred over the last few days, with a small group of BP’s shareholders staging a public campaign to prevent BP from moving forward with its investment in and development of their oil sands assets. Specifically, an organization called FairPensions (www.fairpensions.org), backed by well-funded charities such as OxFam, WWF, and GreenPeace, engaged BP on behalf of various institutional and individual investors (http://www.fairpensions.org.uk/news/tarsands/080210). On behalf of these investors, FairPensions tabled a Shareholder Resolution for BP’s annual meeting on April 15th requesting more accountability on their oil sands activities. On the surface, this appears to be a daunting task in terms of taking on such a large corporation head-on; however, FairPensions recently had success in influencing Royal Dutch Shell to disclose more information on its oil sands operations. To me, this clearly shows that this nouveau method of social activism is the beginning of a long-term trend that is taking hold in the markets, and is having real and measureable effects.

In addition, this campaign really highlights how activism, whether it is social or shareholder, has progressed over time. Initially, activists had to “scream and shout” at shareholder meetings or make high-impact demonstrations repeatedly in order to get what they want. Although this still occurs to an extent, new paradigms and processes have emerged for activists to voice their concerns and have an impact on what matters to them.

Finally, this example also highlights a structural shift in activism towards large, institutional investors taking the time to research CSR issues, and to voice their perspectives to management teams and boards, whether this is through themselves or through other organizations. This has typically not been the case in the past, as institutional investors own hundreds of securities, which makes it difficult to keep up with anything more than quarterly and annual reports as well as proxy materials. Pension funds such as CALPERS, CALSTERS, and OTPP have been on the cutting edge of these industry changes, and I would expect that it becomes a larger shift within the markets as a whole over time. The simple fact is that CSR is a priority of upcoming generations, and therefore, is not going away anytime soon. As such, financial institutions will be forced to incorporate it into their decision-making process going forward.

While I cannot always agree with social activist’s viewpoints, I have the utmost respect for their methodologies. Activism is activism, whether it is on behalf of shareholders or the environment, and I respect the bias for action and support the push for change.