So What Have Shareholder Activists Ever Done For Us?

Props to Dan Jubelirer, a climate change student activist for 350.org through “Tufts Divest For Our Future,” for posing the following question to me after reading my last blog.  Dan asks:

“What specific climate victories have been won through active shareholder engagement, beyond measures asking companies to report GHG emissions? Since we know fossil fuel companies have way more oil, coal, and gas in their reserves than they can burn, the only way we can avoid catastrophic warming is to make sure the largest FF companies keep about 3/5ths of their reserves underground.  Is it realistic to think that a shareholder resolution could pass asking, say, Exxon to leave a majority of their oil reserves underground, or to have them cease all new exploration for fossil fuels?”

This is an excellent question.  The shareholder demand of the fossil fuel companies is indeed a very high one. The ask is for the companies to value their reserves accurately by writing down the booked value of their unburnable reserves. More importantly, it is to stop investing capital in developing further unburnable reserves and instead invest that money in renewables and/or, more realistically, return the cash to shareholders in the form of higher dividends.

Those are very high – but logical – demands for shareholders to make of fossil fuel companies.  Of course, the higher the demand, the more pressure required to force it.  It will take time and organizing to build that pressure. However, what will reduce that pressure is if shareholders, who currently take action on climate change, instead divest and sell their stock to investors who don’t care about climate change.

The fact is that – up till now – those investors that have taken action on climate change have done so with a good combination of both divestment and shareholder advocacy. Socially responsible investors have traditionally limited their investment in fossil fuel companies that in effect constitutes partial divestment.  At the same time, social investors have used shareholder advocacy with those companies in which they have maintained a holding.

Both public divestment and shareholder advocacy have fueled the political action to achieve a price on carbon.  For instance, using shareholder resolutions at ExxonMobil, investors have helped successfully press the company to stop funding climate denial groups and even publicly advocate for a carbon tax.

Noted progressive pundit, David Sirota illustrated this very well in his book “The Uprising: An Unauthorized Tour of the Populist Revolt Scaring Wall Street and Washington.”  In the chapter “Blue Chip Revolutionaries,” Sirota recounts his trip to the 2007 annual shareholder meeting of ExxonMobil in the company of shareholder activists, including the noted Sister Pat Daly.  I can’t recommend the book highly enough for Sirota’s incisive assessment of the impact of shareholder advocacy.  (So buy it!)

Sirota concludes:

“[T]he enormous size that makes multinational companies like ExxonMobil seem so immovable is precisely why these seemingly minute victories are actually huge.  If you get a giant corporation with global reach to change even a tiny bit, you have made a global impact.  If, like these activists did today, you force the company that has produced 5 percent of all the human-created carbon emissions in history to even vaguely acknowledge that global warming is occurring, you have potentially started changing the planet.”

Since that 2007 annual shareholder meeting, ExxonMobil has significantly cut back on its donations to climate change denial groups and even come out publicly in favor of a carbon tax.   These small but very significant changes are due in principal part because shareholders have organized pressure on the company through direct dialogue with the company, filing and campaigning for shareholder resolutions, and intervening publicly at ExxonMobil’s annual shareholder meetings.

I strongly argue that, for investors doing active shareholder advocacy, it makes more strategic sense for them to hold onto their shares.  Isn’t that better than if they divest their stock and throw away their leverage?

In my next piece, I will explain why – for strategic reasons – I strongly support Dan Jubelirer and “Tufts Divest For Our Future” in their campaign to press Tufts University to divest its fossil fuel stocks.

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2 thoughts on “So What Have Shareholder Activists Ever Done For Us?

  1. Hi there, Thanks for this post (and to Dan for the great question!). I appreciate that you take seriously the magnitude of the climate crisis and the solutions necessary, as evidenced by this quote: “The ask is for the companies to value their reserves accurately by writing down the booked value of their unburnable reserves. More importantly, it is to stop investing capital in developing further unburnable reserves and instead invest that money in renewables and/or, more realistically, return the cash to shareholders in the form of higher dividends…” I have often found CSR advocates unwilling to make such a high (and necessary) demand of the fossil fuel companies.

    I have a follow-up question: though I don’t know a huge amount about the details of shareholder engagement, it seems that a resolution to write down the value of unburnable carbon would likely be thrown out by the SEC’s “ordinary business operations” clause. Am I completely mistaken? I’ve seen far meeker resolutions thrown out, such as this one: http://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2012/greencentury012312-14a8-incoming.pdf

  2. Thank you for your thoughtful comment and excellent question. I also appreciate that you recognize that this is a discussion of tactics among different actors within the movement to stop climate change. I am very impressed with the work of you and your friends at Swarthmore Mountain Justice.

    To answer your question, shareholder activists have already successfully brought resolutions this year on the carbon bubble at Consol Energy and Alpha Natural Resources. (See this article at Socialfunds.com.) Wearing my Unitarian Universalist Association hat, I am part of the initiative by Ceres to file many more resolutions of this type at the fossil fuel companies this Fall. (That is in addition to a number of other initiatives to step up shareholder advocacy at the fossil fuel companies that will be unveiled publicly soon.) That is not to say that the fossil fuel companies will not try to find a way to exclude those resolutions in the future. Chevron and ExxonMobil are particularly aggressive in challenging any resolution using any argument that might work. But there is no sign at present that the SEC will accept the corporations’ arguments and allow them to exclude those resolutions.