| Socially Responsible Shareholdership in Canada |
Divestment
Divestment has frequently been the first and only response by investors who feel that their investment is jeopardized by lack of action on social and environmental concerns. For socially responsible shareholders, however, the selling of one's shares is considered a last resort, executable only after all other avenues for change have been exhausted.Research in the US has shown that while, over the long-term, divestment has generally not had any major affect on the long-term price of a stock, it frequently has had an impact over the short-term, as evidenced by Exxon immediately after the Exxon Valdez oil spill in Alaska. This point has not been lost on corporate managers, who understand the importance of share value in a competitive marketplace for capital.
In your ongoing dialogue with a company, as an important incentive for ongoing negotiation with management, you have made it quite clear that you intend to divest unless progress is made on the issue of concern. Once you have become convinced that no further progress is likely, it is time to sell.
Since institutional investors have fiduciary responsibility to ensure adequate returns on investment, the timing of divestment can be tricky. Offering a substantial amount of stock all at once can depress the stock price, so it may be wise to space your trades out over time.
It is very important to let the corporation know why you have sold your shares. Without such feedback, management may not realize they have had a reduction in their universe of potential stockholders. It is also important to let them know that you will reconsider putting them back in your portfolio after they have addressed the issues at hand – something they may be more inclined to do as their need for further capitalization increases.
Depending on the situation, releasing a public statement about your divestment may be in order as well. Certainly, such a release not only adds pressure to the corporation in question, but it also alerts other investors and corporate leaders to the concerns raised.
It is, of course, good to re-invest your money in companies that either have exemplary practices or in those that you feel would be amenable to improving operations as a result of your active shareholdership.
