Scott Hirst is a Lecturer on Law at Harvard Law School and Associate Director of the Harvard Law School Program on Corporate Governance. This post is based on a recent article by Dr. Hirst, forthcoming in the Journal of Corporation Law.
Shareholders exert significant influence on the social and environmental behavior of U.S. corporations. Shareholders vote on social responsibility resolutions that are put forward at corporations; their success or failure influences the social and environmental behavior of those corporations. The largest shareholders are institutional investors—mutual funds, investment advisers and pension funds. When they vote on social responsibility resolutions, they do so as fiduciaries for their own investors. In a new article, Social Responsibility Resolutions, forthcoming in the Journal of Corporation Law, I consider two questions: Do the votes of institutions on social responsibility resolutions follow the interests of their own investors? And do the votes of institutions on social responsibility resolutions follow the preferences of their own investors? I put forward evidence that many may not, and consider whether this is a problem, and if so, how it could be addressed. The stakes are high: if institutional investors voted on social responsibility proposals as their own investors preferred, corporate behavior on social and environmental matters might be much closer to what investors, and society, would prefer.
