IS YOUR MONEY WHERE YOUR MOUTH IS?
Part III: Shareholder Activism

Socially Responsible Investment Strategies with Darron Stover

Through the past several editions, I have written this column introducing you to the idea and methods of investing socially responsibly. Of the three methods I mentioned in my first column, I have talked about social screening, both positive and avoidance. In the last edition, I focused on methods for being socially responsible with “local” assets, such as your bank accounts. While certainly worthwhile endeavors, these are ultimately passive methods for influencing the corporate world.

Of the three primary methods for socially responsible investing, the most effective is known as Shareholder Activism. Anyone who has ever been involved with a cause is familiar with the word activism. It quite simply means that we use our position as shareholders, as owners of a company, to actively try to change the way that company behaves. Just as in all other aspects of socially responsible investing, there are varying degrees of Shareholder Activism that shareholders might choose to involve themselves.

If you are an investor in a socially responsible mutual fund, the primary way to be active within your portfolio is to monitor the management of your fund. You should monitor the policies they maintain towards social screening and the shareholder activism they engage in on your behalf. Managers of larger pools of money, such as mutual funds, pensions and institutions, generally have a greater capacity to be active shareholders. It is important that we make sure they are representing our invested dollars effectively. Not only should we be informed, but we should take every opportunity to express our opinions to our funds, to influence and participate in their shareholder activism.

For investors that own individual securities, the most important social responsibility you have is to know your investments. As an owner of a company’s stock, you are an owner of that company and can participate in the decisions for that company. But, first, you need to know what that company does. You need to know all the products and services that make them money and the practices and policies they implement to produce and sell them. Not only should we do the research to make sure a company is a good fiscal investment, we should also do the research necessary to make sure that it is a good social investment, or at least to know what it is socially that we can help a company improve upon. I have listed a number of links below to watchdog and shareholder groups. Another great source for information on a company is its website.

The most basic form of shareholder activism is voting shareholder proxies which, technically, is important for investors to do regardless of their feelings on social responsibility. Publicly-traded companies are required by law to hold an annual shareholder meeting, during which shareholders have the ability to vote to approve the board of directors and to vote on resolutions or actions that may be brought up by management or shareholders. Those who are unable to attend the shareholder meetings still have the ability to vote through a mail-in proxy. Companies must notify all shareholders of all votes that will occur at the shareholder meeting and provide ample time for those votes to be mailed in prior to the meeting. Some are even moving towards e-delivery and e-voting, which is a great environment-saving and cost-saving step. To learn more about the shareholder meeting and about the votes that will occur, the most convenient place to find information is again the company’s website, usually under a link titled “investor relations.”

Pay attention to what’s on the ballot, what you’re voting for and who you’re voting for. If your company is not behaving according to your social standards, you can withhold your votes from those in elected positions. Perhaps there are resolutions put forward by other socially responsible shareholders or entities asking for a change in corporate behavior. It would certainly be responsible to be aware of those important resolutions and weigh in with your vote.

Next edition we’ll talk more about shareholder activism, about how we can actively change the behavior and culture of the companies that we invest in … how we can make sure our money is where our mouth is.

www.corpwatch.org
www.scorecard.org (for environmental info on companies & facilities in your community)
www.iccr.org
www.ncdivest.com & www.sudandivestment.org (divestiture of companies doing business in Sudan)
www.sweatshopwatch.org
www.ceres.org
www.sec.gov (find Corporate filings with the Securities & Exchange Commission)

For over 11 years, Darron Stover has provided wealth management services to clients. It is his higher purpose to help investors meet their financial objectives through socially-responsible investment strategies. Darron is registered to offer securities in NC, FL, GA and NY and to dispense investment advice in NC through FSC Securities Corporation, a Registered Investment Advisor & Registered Broker/Dealer, member NASD & SIPC.  Ask for Darron at (919) 782-0033 or visit www.invest4change.com 3356 Six Forks Road, Raleigh, NC 27609.

Printed in the April/May 2007 issue of Innerchange.