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14 May 2008
Dow Jones: Individual Investors Can Seek Change, Too
Source: www.ceres.org
Dow Jones Newswires
By Jilian Mincer
14 May 2008
Dow Jones News Service | (c) 2008 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)--The Rockefellers aren''t the only ones flexing muscle with shareholder resolutions.
Individuals with far fewer shares and far less name recognition are influencing companies by engaging in dialogue, voting proxies, attending shareholder meetings, and, in some instances, filing resolutions.
"You are starting to see more shareholders take responsibility for the shares they own," says Tracey Rembert, a governance consultant. "It''s trending upward, especially on social issues."
More investors, she says, are trying to influence decisions about everything from executive compensation and human rights to global warming and toxic chemicals. "Even if you''re a small shareholder, you can have a significant role because your concerns still go to vote," says Rembert.
Last year, about 1,200 resolutions were filed, a record number, says Patrick McGurn, special counsel to proxy advisory firm RiskMetrics Groups.
Timothy Smith, senior vice president and director of socially responsive investing at Walden Asset Management, says some of the key shareholder issues in 2008 are climate change, sustainability reporting and CEO compensation.
Indicative of this trend, the Rockefeller family announced in May that the majority of the 300 adult members of the family voted to support four shareholder resolutions at the Exxon Mobil Corp.''s (XOM) annual meeting later this month.
The proposals include urging the company to create an independent chairman post, cutting greenhouse-gas emissions and examining whether Exxon should be more active in developing sustainable energy technologies.
A record 21 resolutions have been introduced in the 2008 proxy season on toxic chemicals and product safety in response to recent toy and pet-food recalls and the growing awareness about chemicals in baby bottles, cosmetics and other products.
Role For Individuals
But you don''t have to be a Rockefeller or a large institutional investor to make a difference. "What works for large investors can be right for mom-and-pop investors," says McGurn of RiskMetrics Group.
Any share owner can contact company management, the board or investor-relations department to express concerns.
Another powerful tool is to vote the proxies, which typically arrive this time of year.
Filing your own resolution takes a lot more time and effort. A shareholder needs to have at least $2,000 in stock for at least a year prior to the deadline for filing proposals. The Securities and Exchange Commission overseas the process and has other requirements.
Power Of The Ballot
"Shareholder resolutions are a very useful way of getting company attention," says Ellen B. Kennedy, a senior social investment research analyst at Calvert Asset Management Co. in Bethesda, Md. "It''s not that they''re legally bound to do something, but they will consider it."
Rembert says companies recognize that there is a lot of shareholder apathy so it doesn''t take a majority of votes for it to take the resolution seriously.
The resolutions do resonate with the boards, especially when they are approved by the majority of shareholders, according to ongoing research released in March.
Boards are taking much more notice of these winning votes, says Fabrizio Ferri, an assistant professor at Harvard Business School and a co-author of the study. The study found that boards were almost twice as likely to make changes now than in the 1990s. The authors found that the
rate of implementation of shareholder proposals approved by the majority of voters almost doubled to 40% in 2003-2004 compared to 22% in 1997-2002.
The numbers also don''t reflect the impact of resolutions that were withdrawn before a vote. McGurn says about 30% of the resolutions were pulled last year as companies began to make sought-after changes.
He says a lot of the large pension funds and socially responsible funds have used the vote as a carrot-and-stick approach. The goal, he says, "isn''t to get a majority vote, it''s to get the board to act without a vote."
For example, in April shareholder groups withdraw resolutions on climate change at Ford Motor Co.''s (F) annual meeting because the auto maker had agreed to reduce greenhouse-gas emissions.
Mindy S. Lubber, president of Ceres - a coalition of investors, environmental groups and public interest organizations - also encourages mutual-fund investors to contact companies and vote their proxies.
"There''s a huge opportunity for individuals investors to be involved," she says.
She says that thousands of investors sent postcards and letters in 2006 and 2007 to Fidelity Investments, American Funds and Vanguard to encourage them to support climate-related resolutions instead of opposing them. This year, the first shareholder resolution was filed against Fidelity, asking it to prevent funds from doing business with companies linked to genocide.
Confused about the proxies? Contact the company, the SEC, your financial advisor or a number Web sites including Fundvotes.com and ProxyDemocracy.org.
Mary Jane McQuillen, director of the socially aware investment program at ClearBridge Advisors, a unit of Legg Mason Inc. (LM), says the firm tries to help investors by providing them with information if they want to vote themselves or by voting on their behalf using information investors provide about their views.
Either way, the voting "sends a message to management on an issue," she says.
Helga Bilik of Cabin John, Md., has been investing for more than two decades and voting her proxies.
The former teacher admits that the documents can be tedious to read and difficult to understand.
She says that finding out who brought the resolution often helps a shareholder decide whether they would support it.
"I feel very strongly about this," says Bilik about voting the proxies. "I''m very lucky to have to make the choice."
(Jilian Mincer is a Getting Personal columnist, who writes about personal finance; she covers topics including pensions, insurance, and college and retirement savings.)
-By Jilian Mincer, Dow Jones Newswires; 201-938-4042; jilian.mincer@dowjones.com [ 05-14-08 1147ET ]
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