Introduction

For thirty-six years the Interfaith Center on Corporate Responsibility (ICCR) has been a leader of the corporate social responsibility movement. ICCR's membership is an association of 275 faith-based institutional investors, including national denominations, religious communities, pension funds, foundations, hospital corporations, asset management companies, colleges, and unions. Each year ICCR and its members press companies to be socially and environmentally responsible by sponsoring over 300 shareholder resolutions on major social and environmental issues.

>This issue of the Corporate Examiner will help guide you through the proxy voting process, describe the nature and importance of shareholder action, and give you an inside look at the 2008 issues and companies that matter most to socially responsible investors.

Your Proxy Right   

For investors, spring means the onset of the corporate annual shareholder meeting season and the arrival of proxy ballots. These often lengthy documents include information that the Securities and Exchange Commission (SEC) requires corporations to provide to their shareholders prior to voting by proxy. The information included relates to matters to be voted on at the next shareholders' meeting, typically involving corporate governance and financing issues, such as approval of the board of directors, any proposed new incentive structures, or capitalization plans. In addition, the proxy statement lists all the resolutions to be voted on at the meeting, even those submitted by minority shareholders.

ICCR members are often these minority shareholders, filing resolutions which call to account the social responsibility of the corporation in question. As people of faith, ICCR members are invested morally and ethically in the actions of these companies and the dignity of all who work for them. As institutional investors, ICCR members are financially invested in a corporation's long-term financial performance. Both perspectives keep ICCR members engaged and call on the company to be a positive agent of change. 

The proxy resolution is an important mechanism for submitting proposals to corporations on issues of social significance. In the thirty-six years since the Episcopal Church became the first religious institution to file a shareholder resolution, the corporate responsibility movement has grown to include unions, foundations, universities, investment firms, and public and private pension funds with over $2.1 trillion in invested portfolio worth. When you purchase stock in a corporation you not only gain the right to participate in the growth and success of that corporation, you also have the right to vote on important matters concerning corporate policies and governance.  

Many shareholders will gloss over and discard these sometimes daunting packages in favor of noting only a company's stock performance and returns. By doing so, those shareholders may have simultaneously discarded their right to vote as they see fit - forfeiting their voice on issues of corporate responsibility issues they deem important. When that happens, shareholders give their right to vote their shares over to the board of directors. That's what a proxy is -- a written power of attorney by which a shareholder authorizes a specific vote. While this is common practice among busy shareholders, what voter would surrender their Presidential ballot? 

What Is Shareholder Action?
Shareholder action, also known as shareholder advocacy or shareholder activism, is an assortment of activities undertaken by shareholders of a corporation that are designed to change corporate policies or practices. These activities may include:  

-filing of shareholder resolutions;
-dialogues with corporate management;
-outreach to other shareholders, investment advisors, and consumers; -media campaigns;
-divestiture (selling the stock); and
-corporate boycotts.

As one of the three main strategies of socially responsible investing (the other two being screening and community investing), shareholder action is a powerful tool for encouraging corporations to improve their social and environmental records. 

What Is A Shareholder Resolution? 
As owners of a corporation, shareholders have the right to take part in a firm's management by participating in annual meetings. A company's management proposes issues to be voted on at these meetings, and shareholders have the right to place their own proposals on the ballot. These proposals, or written requests to management, are filed with the SEC and placed on the ballot.   

The SEC has broad power over corporate practices, including the way in which proxy votes are solicited and when a company must include a shareholder proposal in its proxy statement. These rules can be found in the Code of Federal Regulations.  

Resolutions can request reports from management or propose that the company consider changes in practices or policies. Shareholder resolutions deal with a variety of issues, including diversity, environmental practices, and sweatshop labor.  

Here's where the power of the individual comes in.  All shareholders who have held at least one share of company stock for at least two months or more may vote on resolutions either in person at the company's annual meeting or via a proxy ballot that is mailed or e-mailed to all investors before the annual meeting.

Proxy ballots arrive together with the proxy statement, which is a booklet that presents the details of the proposals that must come to shareholders for a vote. Proxy voting is the primary forum where management seeks affirmation of what it is doing, and where shareowners weigh in on important issues.

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