With respect to public companies in the United States, a shareholder resolution is a proposal submitted by
shareholders
A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...
for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insistence for a vote. "Voting has long been recognized as one of the primary rights of shareholders."
For publicly held corporations in the United States, the submission and handling of resolutions is regulated by the
Securities and Exchange Commission
The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...
(SEC).
Shareholders
A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...
submit resolutions dealing primarily with
corporate governance
Corporate governance refers to the mechanisms, processes, practices, and relations by which corporations are controlled and operated by their boards of directors, managers, shareholders, and stakeholders.
Definitions
"Corporate governance" may ...
, such as
executive compensation
Executive compensation is composed of both the Salary, financial compensation (executive pay) and other non-financial benefits received by an Senior management, executive from their employing firm in return for their service. It is typically a mix ...
, or
corporate social responsibility
Corporate social responsibility (CSR) or corporate social impact is a form of international private business industry self-regulation, self-regulation which aims to contribute to societal goals of a philanthropy, philanthropic, activist, or chari ...
[ issues, such as ]global warming
Present-day climate change includes both global warming—the ongoing increase in global average temperature—and its wider effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes ...
, labor relations
Labour relations in practice is a subarea within human resource management, and the main components of it include collective bargaining, application and oversight of collective agreement obligations, and dispute resolution. Academically, employe ...
, tobacco smoking
Tobacco smoking is the practice of burning tobacco and ingesting the resulting smoke. The smoke may be inhaled, as is done with cigarettes, or released from the mouth, as is generally done with pipes and cigars. The practice is believed to hav ...
, human rights
Human rights are universally recognized Morality, moral principles or Social norm, norms that establish standards of human behavior and are often protected by both Municipal law, national and international laws. These rights are considered ...
, and animal welfare
Animal welfare is the quality of life and overall well-being of animals. Formal standards of animal welfare vary between contexts, but are debated mostly by animal welfare groups, legislators, and academics. Animal welfare science uses measures ...
.
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
A referendum, plebiscite, or ballot measure is a Direct democracy, direct vote by the Constituency, electorate (rather than their Representative democracy, representatives) on a proposal, law, or political issue. A referendum may be either bin ...
or plebiscite
A referendum, plebiscite, or ballot measure is a direct vote by the electorate (rather than their representatives) on a proposal, law, or political issue. A referendum may be either binding (resulting in the adoption of a new policy) or adv ...
. 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
Apartheid ( , especially South African English: , ; , ) was a system of institutionalised racial segregation that existed in South Africa and South West Africa (now Namibia) from 1948 to the early 1990s. It was characterised by an ...
South Africa
South Africa, officially the Republic of South Africa (RSA), is the Southern Africa, southernmost country in Africa. Its Provinces of South Africa, nine provinces are bounded to the south by of coastline that stretches along the Atlantic O ...
, nuclear power
Nuclear power is the use of nuclear reactions to produce electricity. Nuclear power can be obtained from nuclear fission, nuclear decay and nuclear fusion reactions. Presently, the vast majority of electricity from nuclear power is produced by ...
, and labor disputes. Given these results, resolutions have been spearheaded by several coordinating groups, including the AFL–CIO
The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) is a national trade union center that is the largest federation of unions in the United States. It is made up of 61 national and international unions, together r ...
and the Interfaith Center on Corporate Responsibility. Governmental and labor union pension funds
A pension fund, also known as a superannuation fund in some countries, is any program, fund, or scheme which provides retirement income. The U.S. Government's Social Security Trust Fund, which oversees $2.57 trillion in assets, is the world' ...
also have become involved in supporting and submitting shareholder resolutions.
A shareholder resolution to protest napalm manufacturer Dow Chemical resulted in a U.S. Supreme Court case called SEC v. MEDICAL COMMITTEE FOR HUMAN RIGHTS, 404 U.S. 403 (1972). The court decided that the case was moot due to Dow's agreeing to include the resolution on its proxy statement.
References
Sources
*AFL-CIO. "How to File a Shareholder Resolution
*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, 200
*''Shareholder Activism'' IRRC
*Simon, Powers and Gunnemann. ''The Ethical Investor'' Yale Univ. Press
*Voorhes, Meg. "The Rising Tide of Shareholder Activism" DC: IRRC, 2005
{{Corporate titles
Corporate governance
Resolutions (law)
Resolution