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Shareholder resolutions are formal proposals that are prepared by the shareholders of a given corporation and presented as part of the business at the company’s annual meeting. Proposals of this type are typically voted on by those involved with the meeting, but are usually not presented as binding the owners and managers of the company to take specific actions. Instead, shareholder resolutions usually present opinions of the shareholders on specific issues that impact the operation of the company, and serve as a vehicle to inform owners and managers of how strongly investors feel about those issues. While not binding, it is not unusual for owners to take the opinions of shareholders very seriously and take at least some steps to make changes that comply with their wishes.
There are a number of different issues that may trigger the creation of shareholder resolutions. One common issue has to do with what investors think about the way that the business responds to different social issues. For example, a resolution may be drafted that requests the company divest its holdings that are connected with countries that oppose human rights, or recommend to owners that they take steps to minimize the impact of the company’s manufacturing processes on the environment. Depending on the nature of the subject matter of the resolution, the document may be somewhat broad, providing a general idea for owners to consider and implement as they see fit. At other times, the content of a resolution may be very specific, providing a clear blueprint in how investors expect business owners to proceed.
While most shareholder resolutions are not binding on the company, they do tend to be more than simply polls of shareholder opinions. The resolutions represent concerns that a significant number of shareholders believe should be addressed. In the event that a given resolution is presenting at the annual meeting and receives majority support from investors in general, this is a clear sign to owners that the concern should be addressed in the near future. Failure to do so could lead to some investors choosing to sell off their interests in the business, a move that could have a negative impact on the perception of the company in the marketplace.
Acting on shareholder resolutions becomes especially important when those resolutions are made available to the general public. A decision to not respond to a given resolution that proves popular with consumers as well as the shareholders could have a negative impact on the public image of the business. This in turn may adversely affect sales, reducing the company’s share of the marketplace and possibly placing the future of the company in jeopardy.
If corporate boards (as indicated in the article) take shareholder proposals seriously, why does every corporate board reject every shareholder proposal every year?
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