Fact Sheet #4:  What is Shareholder Advocacy?

Shareholder Advocacy is the process of using shareholder influence to help bring about positive social and environmental change in corporations. Institutional investors such as foundations, mutual funds, trusts, investment pools and pension funds usually initiate change. However, individual investors can also be “active shareholders”. The process usually includes one or more of these steps:

• Corporate Dialogue. Individual investors and institutions can engage directly in dialogue with companies around issues of concern.   Investors can identify areas of improvement for individual companies and then try to persuade these companies to commit themselves to improving their performance. Through telephone calls, letters and meetings, social investors press management to address issues of concern to them.

• Proxy Voting Policies. Institutional investors such as pension funds and mutual funds can also develop proxy voting guidelines which reflect their position on key issues for social change. Mutual fund companies such as Meritas and Ethical Funds have socially responsible proxy voting guidelines and post them on their websites.

• Shareholder Proposals. In cases where companies are not responsive or where dialogue breaks down, social investors can take their concerns directly to other shareholders through the shareholder resolution process. In recent years, shareholder proposals have been presented on sourcing of lumber products for Home Depot and establishing codes of conduct for vendors of Sears Canada and HBC. [See Fact Sheet #5] Recent changes to the law governing corporations in Canada will make it easier for shareholders to submit proposals on social and environmental issues in the coming years.

• Divestment. If corporate management is adamant that it does not want to heed your wishes as a shareholder, you may want to consider selling your shares as a way to show the managers your displeasure with their lack of action. Divestment is also a means to ensure that the portfolio is ethically consistent with the views of investors or other stakeholders.