The Power of Proxies and Shareholder Resolutions

On October 15, Lance E. Lindblom, President and CEO of The Nathan Cummings Foundation, gave a presentation at Harvard Law School on shareholder activism. Based in New York City, The Nathan Cummings Foundation is a grant-making body committed to democratic values, social justice, and building a socially and economically just society. With an endowment of over $500 million, the Foundation uses its shareholder status to vote proxies and file shareholder resolutions in a manner consistent with achieving its mission and discharging its fiduciary obligations.

In his presentation, Mr. Lindblom explained why the Foundation has adopted an activist role as shareholder, drawing links between social justice and long-term shareholder value. Since January 2007, the Foundation has cast 536 votes on 155 proxies, including 417 on company resolutions and 119 on shareholder proposals. The Foundation casts its votes in accordance with its own proxy voting guidelines and using information supplied by Institutional Shareholder Services.

Mr. Lindblom explained the circumstances under which the Foundation will vote on–and raise–shareholder proposals. He noted that a shareholder proposal drawing substantial support is more likely to encourage management to engage shareholders on the issue. Since 2003, the Foundation has filed over 30 shareholder resolutions with 22 corporations. Mr. Lindblom noted that shareholder resolutions have resulted in change at companies including General Electric, The Home Depot, Anadarko Petroleum and Apache Corporation. Moreover, he explained, investor coalitions like the Interfaith Center on Corporate Responsibility and the Investor Network on Climate Risk have substantially increased institutional leverage with corporate management on issues including climate change, energy efficiency and corporate political contributions.

In wide-ranging comments in response to questions from Lucian Bebchuk, Beth Young and Harvard Law School students, Mr. Lindblom discussed the merits of reforming the rules that allow investors to file shareholder resolutions, the corporate costs imposed by shareholder activism, and the extent to which some resolutions advocate positions harmful to broader shareholder interests.

A webcast of Mr. Lindblom’s talk can be viewed here.