Now is the time to unleash the power of small shareholders
Andrew Behar, CEO of As You Sow, has an ambitious mission: “to promote environmental and social corporate responsibility through shareholder advocacy, coalition building, and innovative legal strategies.” As You Sow has been executing this idea for over 30 years with notable success, turning lofty concept into operational reality in many businesses. In a recent conversation with Robert Rubenstein as part of the TBLI Talk weekly series, Behar explained how he sees shareholder power as one of the most effective tools for holding companies accountable—John Howell
What I believe, is that if you own one share of a company, you have responsibility, but you also have power to make change at that corporation because you are the beneficial owner. It’s all about aligning incentives. The board’s remit is to create a strategy and to incentivize executives to make changes. So, if you can align the incentives of these executives, you can make change.
This is what As You Sow does: We believe that environmental health and human rights can be improved by shifting corporate policies. It’s very powerful when you can get companies to make a policy shift. Because it ripples through their entire supply chain, through all of their customers, all of their employees. You have a very big leverage when you can get them to change, and you can generally do it if they’re incentivized to benefit, if the people inside the company are going to gain by getting a bonus for doing what you want them to do. We always align our incentives with those of the executives inside the company.
As corporations sow good environmental, social, and governance policy, they’re going to reap increased share value, extended employee retention, improved brand reputation, and reduced risk.
McKinsey with a conscience
When we sit down with companies, it is never to say “do the right thing.” We never use that phrase. We only talk about how we as shareholder representatives have identified material risks and we have solutions. We do a lot of research: We show the cost and the benefit of what making the change will be, and what the risk of doing nothing is. We are not adversarial with companies at all. We own the companies. We sit on the same side of the table with them. I think that’s why we’re so effective. Most of the companies we sit down with generally say, “wow, you’re like McKinsey for free, let’s go get it done.” The ones who don’t, we then escalate by filing shareholder resolutions. The resolutions we’re most known for are the third or fourth step in a process to bring about reduced material risk for these companies.
So, as our name says, as corporations sow good environmental, social, and governance policy, they’re going to reap increased share value, extended employee retention, improved brand reputation, and reduced risk. This is the core of what we do, and how I believe one can be very effective as a shareholder—that is where the power lies.
Right to file
Shareholders have legal standing to speak to corporations. If you own one share of a company, you have certain rights. If you own a certain amount – $25,000 if you’ve held it for one year, $15,000 if held for two years, $2,000 for three and beyond – you have the right to file a shareholder resolution and have it voted on by all the other shareholders. It’s very important to understand the limitations of your legal standing.
People have all this power but most abdicate their power before they realize they have it. That’s one of the things we’ve been working on a lot over the last three-four years and we’re really going to amplify this year.
Most people who own mutual funds, who have a 401(k) plan in the United States, have no idea of what they own and so they have all this power they have not used because they’re not aware of it. Abdicating your power before you even know you have it is one of the problems. We intend to empower 100 million people holding 10 trillion dollars of investment. That is our goal.
We are going through a major upheaval. This transition from an extractive economy to a regenerative economy based on justice and sustainability is a big change. All this anti-ESG activity is a response to the fact that the markets have already shifted to a new corporate purpose model: stakeholder capitalism. Those folks are just desperately realizing that the extractive economy is done, it’s over. They’re trying to claw it back. That’s why there’s so much desperation on their side.
The companies who accept, who adopt the move to a regenerative economy are the ones that are succeeding.
The companies who accept, who adopt the move to a regenerative economy are the ones that are succeeding. They’re the ones that investors want to invest in. They’re the ones that customers want to have loyalty to. Sustainable investing is where the smart money is going.
Shareholder advocacy works because there’s power in numbers. If all of UN Principles for Responsible Investment signees — representing $120 trillion of assets under management — voted in sync, then every company would have a climate transition plan, we’d have racial justice policies. I’ve spoken to the new head of UN PRI [David Atkin] and suggested that it have a voting policy. That could solve a lot of problems, if shareholders got together.
We’re at an inflection point. Technology, policy, and passion are converging. This is a rare moment in time. We must take full advantage of this alignment.
The “TBLI Talk” series is presented by the TBLI Foundation, serving the global ESG and impact investing communities through conferences, educational services, investor research and tools. Its mission is to increase understanding and awareness of the benefits of a value(s) based financial system and thus help mobilize money flows into ESG and Impact investing to ensure a brighter future.
