Bram van der Kroft is a Postdoc Fellow at MIT. This post is based on a working paper by Dr. van der Kroft, Professor Juan Palacios, Professor Roberto Rigobon and Professor Siqi Zheng.
Filling and voting on shareholder proposals has been a critical corporate governance mechanism, enabling investors to mitigate classical principal-agent problems. In the past, most shareholder proposals concerned corporate governance issues such as CEO remuneration, takeover prevention, board structure, and voting rights. In recent years, sustainable investors have started leveraging their shareholder rights and filing proposals to improve firms’ environmental or social performance. Such sustainable engagements are increasingly prominent as investors file hundreds of proposals annually with potentially significant consequences. A recent NBER working paper titled “Timing Sustainable Engagement in Real Asset Investments” analyzes a core factor influencing the effectiveness of sustainable engagement: The depreciation levels of real assets of the firm.
