Woman raising her hand in a seminar or vote

How to Incite Change, even as a Small Shareholder

Have you ever wanted to influence Verizon’s decision on net neutrality or McDonald’s recycling policy but didn’t know how? Social media and petitions only get you so far. There is another way to have real impact.

If you’ve ever looked at a large corporation’s power, it may seem impossible to nudge them in a socially-conscious direction. Sure, Amazon, Berkshire Hathaway, and JP Morgan Chase are getting together to work on healthcare. That’s amazing, but how can you influence other companies who aren’t taking those kinds of initiatives? You don’t have to be Google’s largest shareholder to be influential. Your stock ownership and proxy votes could do just that.

How does stock ownership work?

Publicly-traded companies offer pieces of ownership, or shares, in their companies in exchange for money. Selling pieces of their ownership “pie,” their stock, allows them to raise money as a corporation. Each share may only be a small piece of a company’s total ownership “pie”, but people with a lot of money can buy a lot of shares in one company.

Once you own a share (or many shares) in one company, you might get paid a little money for each share you hold (these are called dividends). You can also hold onto your shares for a long time and wait for the value of the company to skyrocket. Then you can sell your shares at a higher price than when you bought them and make some money that way, too. Most people understand company ownership as a financial tool for shareholders, but company ownership can include some other perks, too.

Related: introduction to investing

Your Voting Rights as a Shareholder

Some stocks include voting rights, and this is where you can really create your impact. Large publicly traded companies will have boards that they have to answer to. The largest shareholders usually sit on these boards. While you may own .0001% of a company’s stock, these board members may hold 5-15%. The board is the group that provides oversight to the CEO and drives the company in a direction that they believe is best. They will periodically call meetings where they will vote on important issues like CEO changes or new sustainability goals. However, not every shareholder can meet to vote on these issues every time, and now, almost 400 words into this article, we’ve gotten to why you (yes, you personally) are so vitally important.

Related: making real money with sustainable investing

Every Vote Counts!

If shareholders can’t attend a shareholder meeting, they can cast proxy votes instead. Proxy votes are shareholder votes that are cast remotely outside of the shareholder meeting. They are sent to every shareholder with voting rights, so they can vote on the issues that’ll be covered at the shareholder meeting. These may seem like tedious things to take care of, but they can be tremendously important.

Let’s say you care about net neutrality and you own a few shares in Verizon. You can make your voice heard through your right to cast a proxy vote.  You may only hold a few shares of common stock, but each one of those shares may be worth one vote each. Your vote could be the tipping point on important shareholder issues. If you’ve purchased company stock and you’ve got voting rights that come with it, you can vote with more than just your dollars. You can literally cast votes!

Only 29% of retail investors use their power to vote on shareholder proposals. Yet more and more investors are realizing the power they have to impact change through the investments they own. It’s time to make your voice heard.

Related: the new landscape of sustainable investing

But I own a tiny sliver of a GIANT pie!

A lot of you reading this, if you even own stocks, may not be massive shareholders who wield material power over a CEO. However, there may be a bunch of other shareholders like you who own tiny pieces of ownership. Collectively, the tiny shareholders may make up a relevant piece of the pie and carry weight on important issues. You may own .01% of a company, but if there are 5,000 other people who share your values and your ownership percentage. Suddenly, you all own 50% of the company and can vote your values.

Even if your vote doesn’t win a majority vote, you can get the board’s attention and create real change.

Case in point: McDonald’s held a shareholder meeting in 2011 to vote on whether they should eliminate styrofoam cups. Even though the proposal was supported by 30% of shareholders, this demonstrated huge acceptance for an environmental proposal. The result: McDonald’s launched a pilot program to eliminate styrofoam cups.

Related: Read our article on whether an sustainable roboadvisor is right for you

Back in the real world though…

You won’t have 50% ownership unless you’re putting some big money into a startup. If a company even offers 50% of it’s company to the public, large financial firms will take the big pieces and leave slivers for the rest of us to squabble over. However, there could still be 1-10% of the company that’s ripe for squabbling. That’s still a significant piece of the pie in tight votes. The few hundred stocks of Google could be the tie-breaker that decides on a major sustainability initiative. You wouldn’t want to throw that opportunity away, would you?

Remember, getting critical mass of votes, even if they are not the majority vote, will get the board’s attention. Boards hate headline risk. If consumers start posting their views via proxy votes (which is their right as owners in the company), the brands will listen.

Related: what we can learn from cheapskates on the internet (probably the same ones buying stocks with voting rights.)

The Future of Business

Sustainability is the future of business. As consumers care more deeply about the impact they have with their purchases, businesses are moving to meet those demands. Industries like green energy are young and growing, making them breeding grounds for entrepreneurs and promising opportunities for investors. The link in my inbox that spawned this article actually lists upcoming shareholder votes on a wide range of sustainability and ethics initiatives. If you or someone you know has voting rights in these companies, they can cast proxy votes on these issues.

If you have even a passing interest in investing, you should understand the power of shareholder votes (aka proxy votes). You may not be the one shareholder who owns half the company. But you may be a part of the group of shareholders that turns the vote. Don’t throw those proxy votes away. Many votes can be cast online, so it’s convenient. Shareholder votes can influence big companies to do right by the planet and the people living on it.


Photo by Dylan Hikes

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2 Comments. Leave new

Are there any efforts to help shareholders communicate with each other on proposals, in a forum that is independent of company control? I learned that a few years ago a company called Moxy Vote tried to persuade shareholders to award it the right to vote their proxies. The idea was, accumulating enough proxies of proxies, the third party organization could approach the shareholders’ meeting with a sizeable block of votes and have some real negotiating power. But without the support of the SEC the idea went nowhere and the organization’s website shut down as they went out of business. https://www.reuters.com/article/moxyvote-shutdown/shareholder-website-closing-cites-complex-voting-rules-idUSL2E8IA8XU20120710
Still, why cannot shareholders register to communicate with each other on a platform that simply coordinates their individual efforts rather than replaces them? Need resources, please comment.

Reply

    Mark, great question. The good news: there is a fintech (financial technology) company working on a new direct-to-consumer friendly app that will facilitate the whole proxy voting process. They are in the development stages. We will cover them as soon as they launch and keep you posted.

    Reply

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