How to change corporations

Shareholders impact environmental policy with small, sometimes meaningful votes

Corporations aren’t typically too hot at balancing the bottom line and eco-friendliness. Enter shareholders—they have more influence over a company’s green policy than you might think.

Corporations aren’t typically too hot at balancing the bottom line and eco-friendliness. Enter shareholders—they have more influence over a company’s green policy than you might think.

Many shareholders of major corporations use their investor status to lead companies down a more sustainable path—and they do so sometimes quietly, by driving out poor directors and blocking key decisions with proxy votes.

“When someone buys a share of a corporation, they are a small minority owner of the corporation, and with that comes rights,” said Andrew Behar, CEO of As You Sow, a California nonprofit that aims to achieve corporate responsibility through shareholder advocacy, among other strategies. “And those rights include being able to express views about what the corporation is doing, That’s a great deal of power.”

Shareholders make their voices heard by voting on a proxy, or a ballot to vote on issues, that signals to a corporation’s board of directors what they want. The company can look at that resolution and either accept or reject it. Votes are nonbinding, though, but even votes as small as 5 percent or 10 percent can move companies to make changes.

Every February, As You Sow publishes an annual proxy preview that compiles shareholder resolutions for major corporations. As You Sow’s 2011 list included an item about the Coca-Cola Co.’s soda-can linings containing the hormone-altering chemical bisphenol A, a.k.a. BPA. “As shareholders, we say that isn’t good for the company, it’s not good for general environmental health [and] we believe the company should make a move to change this liner in the can,” Behar said. A quarter of Coca-Cola shareholders supported getting rid of BPA.

The first environmental vote to get 50 percent support was a resolution for Idacorp Inc.—a holding company that counts Idaho Power as its main subsidiary. Shareholders voted to transition the company from reliance on coal to wind energy. “The shareholders wanted to see less air pollution, less mercury, fewer toxins from coal ash and fewer toxins in groundwater,” said Behar.

In May 2011, Ernst & Young released a study that showed an increase in shareholder resolutions with an environmental and social focus. The report revealed that in 2010, resolutions focusing on social and environmental issues made up the largest slice of all shareholder proposals. In 2005, according to the report, just 2.6 percent of all shareholder resolutions related to social and environmental issues received support from more than 30 percent of votes cast (30 percent is a typical threshold for many boards to take action). In 2010, more than a quarter of all proposals reached the 30 percent support threshold.

Part of writing a good proxy, Behar said, is laying out a sound economic argument for the company that highlights financial, health and environmental benefits.

A few years ago, shareholders for Best Buy took action by addressing the way the company recycled electronics. “We said, ’You should be doing electronic-waste recycling in a good way,’ and by 2009, we helped them to put a plan in place. In 2010, they collected 2 million items,” Behar said.

Companies that have a consumer brand are hypersensitive to their shareholders’ concerns—and to their public perception. After Starbucks Corp. received media attention for adding 3.5 billion cups to landfills, it swooped in to defend its brand and change its policies. “You have more leverage when a brand wants to maintain a green image,” Behar said.

As You Sow has amassed a series of successes thus far. It has prevented more than 500,000 tons of e-waste from entering landfills each year, helped companies find solutions for safe disposal of toxic coal ash, reduced carbon emissions from coal utilities, and worked with companies such as Coca-Cola, PepsiCo Inc., Nestlé Waters North America and Starbucks to remove some 30 billion plastic bottles from the waste stream annually.

“We’re looking to companies to raise their levels of integrity and find solutions,” Behar said. “We believe that corporations are responsible for a lot of the environmental degradation on the planet, and that they can find solutions that are both profitable and responsible.”