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18 August 2011
SRI-Adviser: FairPensions Publishes Guide to Shareowner Resolutions
Source:
www.sri-adviser.com
by Robert Kropp
Building on the success of shareowner action over oil sands development, FairPensions guides NGOs and institutional investors through the process of filing resolutions in the UK.
The practice of submitting of shareowner resolutions is still rare in the UK, especially compared to the US, yet it has met with success in recent years. In 2010, for example, an international coalition of investors which included the UK-based Fair Pensions targeted the controversial practice of oil sands development at a number of companies, including BP and Shell.
After the resolution at Shell received more than 10% of shareowners' votes, Duncan Exley, Director of Campaigns at FairPensions, stated, "Today sent a clear signal that shareholders are concerned about the risks associated with tar sands, and need to see greater transparency from Shell."
However, despite isolated successes, "It is likely that many NGOs (nongovernmental organizations) and socially responsible shareholders will continue to be deterred from utilizing this important shareholder right," FairPensions stated in its recently published Guide to Shareholder Resolutions in the UK, in large part due to "the onerous, complex and ambiguous provisions of the Companies Act 2006."
Still, FairPensions pointed out, the filing of shareowner resolutions provides NGOs and institutional investors with opportunities to influence corporate behaviors, especially when it can be demonstrated to investors "that the company has made or is about to make a poor decision, one which could have financial consequences either now or in the future."
FairPensions also observed that the relative scarcity of shareowner resolutions in the UK could lead to greater media coverage when one is submitted.
The easiest path to complying with the Companies Act 2006, the Guide states, is to form a coalition of 100 investors, the average holdings of each having a value of at least 10,000 pounds ($16,500). Once the coalition is formed, a resolution directing the company's board of directors to take a specific action may be filed. FairPensions recommended that the resolution focus on a single issue, direct the company to act within a reasonable timeframe, and protect shareowner value.
The Guide then proceeds to advise activists on mobilizing support through such means as investor briefings, media engagement, and cooperation with investors located in other countries. The oil sands campaign was noteworthy for its cooperation between investor groups in the UK and the US.
In the UK, FairPensions noted, a shareowner resolution is referred to as a special resolution, and requires the support of 75% of voted cast in order to be passed. Unlike shareowner resolutions in the US, the resolution is binding upon the company when that threshold is reached.
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Sustainable Investment Research Platform
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