The Business Ethics Blog

From today’s Financial Post:Social activists flex their muscle: Firms unprepared for rising boardroom influence (by Jason Kirby)

When Nortel Networks Corp. hosts its annual general meeting in Toronto this week, investors will have plenty to discuss, what with the company’s accounting woes, multi-billion-dollar lawsuits and red ink.
Add to that list a 1,142-km railway linking Tibet to the rest of China. The train route, which uses wireless-communications equipment provided by Nortel, has raised the ire of Tibetan activists who worry Beijing will use it to strengthen its grip on the region.
On Thursday Nortel investors will be asked whether they support a shareholder proposal calling on the telecom giant to adopt a human rights policy. If other recent company AGMs are any indication, a significant number of Nortel’s investors may vote “yes.”

This isn’t just social activism: this is activism with teeth. This sort of shareholder proposal is becoming more common, driven by fund managers for various Socially Responsible Investment (SRI) funds. The FP story notes that although such proposals seldom carry the day (so far), they generally garner enough support for wise managers to take them very seriously: in some cases such motions have been defeated at the AGM, only to be adopted later by managers.

Interestingly, of the handful of cases mentioned in the FP story, none of them involved resolutions calling for specific, concrete action. They’re all calls for enriched procedure: adopting a human rights policy, assessing the local impact of a mine, etc. The fact that companies — and those shareholders who vote against such moves — are so resistent to vague commitments of this kind is pretty interesting. On the face of it, committing to adopt a policy is a pretty small commitment: the policy could range from very strict to very permissive. Are companies so gun-shy of issues like human rights that they just don’t even want to talk about it? One wonders what percentage of these companies are merely (unwisely?) sticking their heads in the sand. You’d think that having a policy — or better, going through the process of developing a policy would be the best way for a company to prepare itself for any future controversy over its activities.

Relevant Books:
Shareholder Activism Handbook
The Emperor’s Nightingale: Restoring the Integrity of the Corporation in the Age of Shareholder Activism