Shareholder activists are nothing new. But increasingly these stockholders are focused on addressing social issues, from climate change to gun violence.
By Betty Wong
Shareholder activism was a different animal in the 1980s.
That was the time I was a reporter for the Wall Street Journal, and corporate raiders like T. Boone Pickens, Kirk Kerkorian and Carl Icahn struck fear in the hearts of targeted chief executives. A corporate raider would amass a large stake in a company deemed undervalued and then try to force change using shareholder votes.
The key focus of shareholder activism in the 1980s was corporate governance — how a company was structured and how it paid its executives. That gave way in 1989, after the Exxon Valdez oil spill in Alaska, when shareholders allied with environmentalists to convince companies to adopt and publicly share environmental principles and practices.
Now, shareholders as owners of a company seek to influence corporate behavior on matters including diverse leadership teams, environment, animal welfare, political campaign contributions and health care, in addition to wanting strong corporate performance and governance.
“Companies must benefit all of their stakeholders.”
Shirley Westcott of Alliance Advisors LLC noted some significant trends during this year’s “proxy season,” when many companies hold their annual shareholder meetings.
“Calls for various types of climate action have resonated strongly with investors as have social initiatives on gun violence, sexual misconduct and the opioid epidemic,” Westcott wrote.
“Pay programs have faced more frequent rebukes and even auditors, in isolated events, have been challenged over independence and performance.”
U.S.-style shareholder activism has also featured in Europe and Asia, according to experts at Lazard, a financial advisory and asset management firm.
A powerful instigator for better corporate behavior is Larry Fink, chief executive officer at BlackRock — the world’s largest investor, which manages $6.4 trillion in assets.
“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” Fink wrote in January in his an annual letter to CEOs. “Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
Also supporting the social responsibility agenda are activist millennial employees.
After the mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida, in February, BlackRock wrote a client note saying it was time to take action on guns.
This month, Fink withdrew from a big investment conference in Saudi Arabia after dissident Saudi journalist Jamal Khashoggi was killed in Turkey. But the BlackRock chief executive made it clear there are limits to his outrage, saying he would not sever financial ties with the Saudis.
“We do business in 80 different countries,” Fink told CNBC television. “There are many countries where we may disagree.”
Other executives have taken a stand on corporate activism. They include Apple CEO Tim Cook on protecting the environment and LGBTQI rights, and Starbucks founder Howard Schultz, who denounced hate after a white nationalist rally in Charlottesville, Virginia.
Nike is featuring in advertisements National Football League quarterback Colin Kaepernick, who to highlight racial injustice was the first to kneel during the U.S. national anthem at the outset of games.
Also supporting the social responsibility agenda at companies are activist millennial employees who don’t leave their politics at the door and expect their CEOs and employers to be more vocal and take action on major social issues, according to a new study.