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What is Shareholder Activism?

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  • Written By: Lainie Petersen
  • Edited By: Melissa Wiley
  • Last Modified Date: 09 November 2016
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People who own corporate stock often have the right to propose shareholder resolutions. These resolutions can address various corporate practices, and issues of social responsibility can be placed on a corporation's proxy ballot for consideration at the shareholders' annual meeting. During the annual meeting, the shareholder proposes an item on the proxy ballot and is normally given time to argue for the proposal. Other shareholders then have the opportunity to vote on this proposal. This particular shareholder privilege enables individual stockholders to engage in shareholder activism, forcing a corporation to look at its own practices and make changes in the way it does business.

The ability to engage in shareholder activism is restricted in part by a country's laws governing corporations. In the United States, as of 2010, any shareholder who owns more than $2,000 US Dollars (USD) in a company's stock for a year or more may choose to submit a shareholder resolution, and any shareholder who owns stock for more than two months at the time of the shareholder meeting is able to vote on these resolutions. In some cases, shareholder activism is a carefully coordinated campaign that includes the participation of both shareholders as well as media and public relations efforts on the part of activist organizations. If corporate executives notice that an issue is garnering a significant amount of attention, the executives may decide to investigate the matter further. In some instances, this has led to meetings between executives and shareholder activists.

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Shareholder activism has been particularly successful in areas involving environmental concerns, particularly given the considerable amount of media attention given to issues of sustainability and environmental protection. For example, one major electronics retailer in the United States responded to shareholder activism by starting a very successful recycling program in many of its stores. Activist shareholders may find it more difficult to generate interest purely on their own without the support of media-savvy policy change organizations.

Individuals who wish to engage in shareholder activism should ensure that they receive and complete their proxy shareholder ballots every year. If the stockholder relies on a brokerage firm or a financial adviser to manage his investments, he may never see his proxy ballots because he may have unwittingly indicated that he did not wish to receive materials from the companies in which he owns stock. This can easily be remedied by contacting the brokerage or financial adviser and requesting a change in preferences for receiving proxy ballots and other information.

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