Friday, April 25, 2008

What is SRI? - Part III: Shareholder advocacy

While this tool presents certain opportunities, its goals can to some extent run counter to those of screening. In the case of advocacy, you use your leverage as a shareholder to encourage or pressure corporations to move their policies and practices closer to your vision of an ethical business model.

This is accomplished through a variety of means. First, simply voting on shareholder resolutions is a basic form of activism. Most shareholders toss these in the trash when they come in the mail, leaving the questions raised to be resolved without their input. Second, as an investor you can encourage your mutual fund to consider issuing a resolution for a specific company on a specific investment, and see what the fund has done in the past and ask about their voting record. Third, at the institutional level you can join with others to file resolutions through organizations such as the Interfaith Center on Corporate Responsibility. Finally, as a shareholder you can draft and submit your own resolution on improving a company's business model. Engaging in dialogue on such a proposal with the corporation can be very helpful and a learning experience for both parties.

Advocacy can potentially be effective within companies that you already support and wish to see get even better, but others also use the tool to shift the practices of more troubling industries. This strategy, of course, involves owning a portion of those companies, and so there are definitely sticky ethical questions to consider.

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