Shareholder Advocacy, Resolutions and Corporate Democracy

What is shareholder advocacy?

Shareholder advocacy harnesses the power of shareholders as the ultimate owners of companies to change companies.  It starts by researching the issue and then engaging with the company(s).  ACCR as a research organisation may be able to help here.

When this doesn’t work then shareholder advocates can take their issue to all shareholders, the company and the world at the company AGM.  You can ask questions, distribute statements or move resolutions.  If you move a resolution then experience in the USA, UK and Australia shows that it is not necessary to get anything like a majority to have a significant impact, 3% of the shares voting in the first year is usually sufficient to get some change, a vote of 10 to 15% will likely result in the change sought being agreed.

Moving a resolution at an AGM also means that other shareholders will consider the issue.  This is especially relevant for the large institutional shareholders such as super funds that own a large part of large Australian listed companies.  These institutional investors all have members (for super funds) or investors and they are sensitive to their concerns.  This means they will probably give your resolution serious consideration and while they may not vote for it, their concerns may mean that companies respond to your issues.

ACCR has facilitated shareholder advocacy and resolutions about climate change with the big banks, and  the power companies, AGL and Origin. It is now working on corporate political expenditure.

Our Guide to Shareholder Advocacy in Australia covers how to do it in Australia.  Here is a brief summary.

Quick Guide to Shareholder Advocacy

  1. Research your issue and companies involved
  2. Engage with company (letters, face to face etc).  If your issue is not resolved, ask others to engage with the company by contacting other interested people, bodies and the media
  3. If this does not resolve the issue, you could find like-minded shareholders in the company or become a shareholder yourself, and start to ask questions at an AGM.  You could discuss next steps with the ACCR.
  4. Table a statement or resolution at an AGM.  To do this you will need to find 100+ shareholders, to word your statement or resolution in accordance with company law and lodge it before the due date.
  5. Communicate progress appropriately with your shareholders, the media and ACCR.

Is shareholder advocacy the same as divestment?

No. The divestment campaign is primarily about encouraging people to sell their ownership of shares in polluting companies. Shareholder advocacy and resolutions give those who own shares in companies a way of expressing their desire for change and making companies accountable for their conduct.  

What is a shareholder resolution?

There are two kinds of shareholder resolutions: ordinary and special.

  • Special resolutions, for example, resolutions to amend the company’s constitution and require 75% support from shareholders.
  • Ordinary resolutions require a simple majority of 50% and can cover a broader range of issues.

Overseas, social and ethical resolutions are typically not resolutions to amend the Constitutions. Ordinary resolutions avoid the need to change governance rules of the company when shareholders simply want a single issue better considered. International practice shows that institutional investors are much more comfortable supporting ordinary resolutions than amending company constitutions.

ACCR has been involved in a test case against the CBA to establish better rights for Australian shareholders to move ordinary resolutions at company AGMs.  Unfortunately this has been unsuccessful.

Have any shareholder resolutions been considered in Australia?

Shareholder resolutions are relatively rare in Australia.  During this century there have been 13 environmental or socially focused shareholder resolutions put at AGM's of the top 200 ASX companies.  However no resolution was put multiple years in a row as is standard US practice and  no resolution was sponsored by a church or religious group. 

What are the rules in other countries?

Corporate democracy is an important part of responsible corporate governance in most developed countries. In the area of shareholder resolutions, Australia is far behind the rest of the world in recognising shareholder rights this report shows.  This report focuses on company reaction to environmental and social issues in other countries.

Most other developed countries allow some form of shareholder resolution. The US, UK and Canada, in particular, have strong cultures of shareholder engagement, and shareholder resolutions are a longstanding and effective way for concerned shareholders to achieve change in the way a company does business.

Placing resolutions on the agendas of very large companies' AGMs promotes awareness of issues, and helps to change corporate behaviour. Resolutions on issues from climate change to child sex trafficking have been considered by company general meetings. Even when a majority of shareholders do not vote in favour of the particular resolutions, companies will often change their practices in response to the continued public pressure brought about by shareholder resolutions.

In 2006 the UK amended their laws to make it explicit that shareholders can direct the conduct of the board of directors. The case against CBA is about clarifying that shareholders can express an opinion about the conduct of the company rather that about being able to direct the board. What the experience overseas shows is that shareholder democracy can be an important part of good corporate governance and does not impose an undue burden on companies but rather helps to ensure that the are responsive to the interests and values of their shareholders.

Shareholder advocacy and corporate democracy elsewhere

One of the dominant forces in climate shareholder activism in the US has been the work of the Sisters of St Dominic. They authored and supported a  climate change resolution, which has been put to numerous companies, 'to adopt quantitative goals, based on available technologies, for reducing total greenhouse gas emissions from the company's operations'. In 2011, eight companies (ConocoPhillips, Dominion Resources, Portland General, Kimco Realty, Lennar Corp, Ryland Group, Norfolk Southern and Exxon Mobil) had ‘industry customised’ variants of this resolution placed on their AGM: average shareholder support was 18.6%.

Human Trafficking and Slavery
Since its inception the Interfaith Centre for Corporate Responsibility has had a focus on human trafficking and slavery issues. In 2011 it published an investor statement outlining the material and reputational risks of supply-chain involvement in trafficking and slavery violations. The report focused on risk factors, studying over 20 companies. It identified those with less risk-prone policies.

Using this research the Presbyterian Church and a group of orders of Catholic nuns filed resolutions with two companies in the travel sector, the cruise line operator Carnival and Delta Air Lines, requesting they adopt an industry code of conduct to reduce the possibility of their involvement in child sex tourism incidents. Both resolutions were withdrawn prior to the AGMs because the companies were keen to negotiate withdrawal agreements. In 2012 a similar resolution was lodged by Catholic Health Care East with US Airways.

Delta Airlines works to stop child trafficking (2011)

After a long campaign including shareholder resolutions, Delta Airlines agreed to implement policies condemning child trafficking, and train its employees to identify and report trafficking activities.

Bristol-MyersSquibb allows affordable drugs for HIV/AIDS (2013)

After shareholder resolutions, pharmaceutical giant Bristol-Myers Squibb agreed to share the patent for its HIV/AIDS drug Atazanavir with the Medicines Patent Pool, allowing the drug to be offered at low cost in more than 110 countries.

Exxon accounts for its carbon emissions (2014)

A group of activist shareholders put forward a shareholder resolution to oil giant Exxon. The company agreed to provide information to shareholders on the risks that their carbon-producing assets pose to their business model, their plans for a carbon constrained world, and how climate risks affect capital expenditure plans. In return for this commitment, the shareholders withdrew their resolution.

ACCR Publications on Corporate democracy and shareholder advocacy

Public Policy:

Financial Services Industry:

Stakeholder advocacy

If you are not directly a shareholder of a company, its actions may well affect you.  You are a stakeholder.

In Australia, many people are members of superannuation funds and these are often invested in companies. So if you are a superannuation fund member then you are probably an indirect shareholder in a large number of companies that you are probably not aware of.

As a super fund member you can advocate with your fund for it to become a shareholder advocate on your behalf.  And you can advocate for it to invest or divest as appropriate.  The  recent decision of Norway's $900bn sovereign wealth fund to divest from large coal investments came about from pressure by stakeholders - the Norwegian parliament and people plus stakeholders all round the world.

Another example of successful stakeholder engagement is the demise of apartheid. The efforts of US States (such as Connecticut and Massachusetts), combined with the two biggest pension funds in America (those for the staff of New York City and the state of California) plus some other investors, effectively cut South Africa out of the global debt market.  It was one of the most effective sanction efforts of all! The story is told more fully in Socially Responsible Investment A Global Revolution, by Russell Sparkes (Wiley and Sons 2002).

Examples of stakeholder advocacy in New Zealand

The Council for Socially Responsible Investment (CSRI) established in New Zealand in 2003 has similar aims to that of ACCR. In 2002 the New Zealand Government had set up the NZ Superannuation Fund, designed to grow to around NZ$100-120 billion, a sum even greater than the total of all the managed funds in the country.  Hence it made sense for the CSRI to focus on government rather on corporate investment.

CSRI has had a number of successes including encouraging the government to pull out of its investment in tobacco and landmines.   It also demonstrated the inadequacy of the legislated criteria for suitable investment by NZ Government funds.  It exposed the irony that its funds were actually investing in nuclear weapons, despite the fact that, for over three decades, the New Zealand Government had campaigned against the French and USA governments about their involvement with nuclear weaponry.  The Accident Compensation Corporation in NZ has subsequently ceased such nuclear weapon investment although the New Zealand Superannuation Fund still persists in this practice.



  • published this page in ACTION 2015-06-17 17:01:34 +1000

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