These days, it can seem as if corporations have virtually unlimited power. Regulations are being dismantled. Our political system is awash in corporate contributions. And some states have criminalized protest against the fossil-fuel industry. Yet, there is a method that has been successful in holding corporations to account on issues such as racial equity, renewable-energy commitments, sexual-harassment protections and much more: shareholder proposals.
Shareholder proposals give the owners of shares in a company a significant point of leverage in conversations with corporate management. They also bring attention to public concerns that corporations would rather not address. As the power of the shareholder proposal has grown, and shareholders are increasingly winning votes, corporations and trade associations are lobbying hard to shut them down.
In November, the Securities and Exchange Commission, the agency that the federal government relies on to protect investors, released a set of proposed rules that, if enacted, will drastically curtail shareholders’ ability to use this mechanism. This comes fast on the heels of the Business Roundtable’s announcement redefining the purpose of a corporation and affirming a commitment to effective engagement with shareholders.
For years, the Nathan Cummings Foundation has successfully used shareholder proposals to further its mission and advance catalytic solutions to climate change and inequality while simultaneously protecting the long-term value of its endowment. This year, for instance, a shareholder proposal that the foundation led sparked a conversation with Walmart that prompted the company to agree to screen its domestic supply chain for the use of prison labor. Importantly, in instances where prison labor is used, Walmart also committed to engage for conformity with its own standards on things like compensation and working conditions.
We also worked with the Action Center on Race & the Economy to use the shareholder proposal process to highlight concerns about the sale of products that promote hate speech across Amazon’s various platforms.
The potential of shareholder proposals is so compelling that activists and corporate employees are increasingly adopting this tactic to push for change. This year, for instance, Amazon employees filed a shareholder proposal asking for a comprehensive approach to climate change as part of a broader employee-led climate campaign. The proposal, which was backed by more than 7,500 Amazon employees, helped galvanize support from both employees and shareholders for the climate campaign. In September, Amazon committed to achieve net-zero carbon emissions by 2040 and to use 100 percent renewable energy by 2030.
Shareholder proposals are increasingly effective at reining in corporate power, and the SEC’s proposed changes will weaken one of the last remaining mechanisms of corporate accountability. They are a capitulation to corporate demands, and corporations are pushing hard to get them across the finish line.
When SEC Chair Jay Clayton announced the proposed changes, he cited the influence of letters that a recent Bloomberg investigation revealed as a coordinated effort from an advocacy group funded by corporations that support dismantling shareholder rights.
The commission has invited comments on the proposed changes until late January 2020 — and you can be sure that corporations and their trade associations will continue to make their views known. As powerful shareholders, philanthropy must push back on this plan to undermine our ability to influence corporate behavior. One of the easiest and most effective ways to do so is to submit written comments to the SEC outlining why shareholders’ ability to use this important tool must be preserved.
Those in philanthropy who want to use every available tool to make a more just and equitable world must join Nathan Cummings Foundation in letting the SEC know that we oppose these changes. As SEC Commissioner Robert Jackson Jr. pointed out in his dissent, “Whatever problems plague corporate America today, too much accountability is not one of them.”
James K. Cummings is a trustee and investment co-chair of the Nathan Cummings Foundation. Laura Campos is director of corporate and political accountability there.