Shareholder resolution

Shareholder resolution

Shareholder resolutions are proposals submitted by stockholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insistence for a vote. For publicly-held corporations in the United States, the submission and handling of resolutions is regulated by the Securities and Exchange Commission (SEC). A shareholder resolution to protest napalm manufacturer Dow Chemical resulted in a landmark 1970 U.S. Court of Appeals decision to prod the SEC toward facilitating shareholder resolutions.

Shareholders submit resolutions dealing primarily with corporate governance, such as executive compensation, or corporate social responsibility issues, such as global warming, labor relations, tobacco smoking, and human rights. [cite web|url=http://money.cnn.com/2006/04/25/magazines/fortune/pluggedin_fortune/|title=FORTUNE Magazine: Corporate America backs gay rights|accessdate=2008-03-09]

Virtually all shareholder resolutions are non-binding (or "precatory," to use the legal term of art). [Monks, Robert A. and Nell Minow. "Corporate Governance". Blackwell Publishers, 2001.] In this sense the voting on these resolutions more closely resembles a poll than it does a (binding) referendum or plebiscite. Still, media coverage of voting on shareholder resolutions tends to focus on whether the proposal received a majority of votes, which occurs in a very small but increasing proportion of cases. According to SEC rules, defeated resolutions may be resubmitted only if they pass certain election hurdles (percentage of affirmative votes).

Shareholder resolutions have been an important part of activist campaigns in several cases. For example, resolutions were effective at raising public awareness and thereby pressuring corporate management about investments in apartheid South Africa, nuclear power, and labor disputes. Given these results, resolutions have been spearheaded by several coordinating groups, including the AFL-CIO and the Interfaith Center on Corporate Responsibility. Governmental and labor union pension funds also have become involved in supporting and submitting shareholder resolutions.

References

ources

*AFL-CIO. "How to File a Shareholder Resolution" [http://www.aflcio.org/corporatewatch/paywatch/what2do/w_howshare.cfm]
*Gartman, Grant A. "The IRRC handbook on proxy voting duties and guideline development". 1999
*Gray, Hillel. "New Directions in the Investment and Control of Pension Funds". DC: Investor Responsibility Research Center, 1983.
*"Medical Committee for Human Rights v. SEC" 432 F.2d 639 (DC Cir. 1970, cert. granted) 401 US 973 (1971)
*SEC "Shareholder Proposals" Staff Legal Bulletin No. 14B, September 15, 2004 [http://www.sec.gov/interps/legal/cfslb14b.htm]
*"Shareholder Activism" IRRC
*Simon, Powers and Gunnemann. "The Ethical Investor" Yale Univ. Press
*Voorhes, Meg. "The Rising Tide of Shareholder Activism" DC: IRRC, 2005


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