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With respect to public companies in the United States, a shareholder resolution is a proposal submitted by
shareholders A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal ...
for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insistence for a vote. "Voting has long been recognized as one of the primary rights of shareholders." For publicly held corporations in the United States, the submission and handling of resolutions is regulated by the
Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
(SEC).
Shareholders A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal ...
submit resolutions dealing primarily with
corporate governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions ...
, such as
executive compensation Executive compensation is composed of both the financial compensation (executive pay) and other non-financial benefits received by an executive from their employing firm in return for their service. It is typically a mixture of fixed salary, varia ...
, or
corporate social responsibility Corporate social responsibility (CSR) is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethicall ...
issues, such as
global warming In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to ...
,
labor relations Labor relations is a field of study that can have different meanings depending on the context in which it is used. In an international context, it is a subfield of labor history that studies the human relations with regard to work in its broadest ...
,
tobacco smoking Tobacco smoking is the practice of burning tobacco and ingesting the resulting smoke. The smoke may be inhaled, as is done with cigarettes, or simply released from the mouth, as is generally done with pipes and cigars. The practice is beli ...
,
human rights Human rights are moral principles or normsJames Nickel, with assistance from Thomas Pogge, M.B.E. Smith, and Leif Wenar, 13 December 2013, Stanford Encyclopedia of PhilosophyHuman Rights Retrieved 14 August 2014 for certain standards of hu ...
, and
animal welfare Animal welfare is the well-being of non-human animals. Formal standards of animal welfare vary between contexts, but are debated mostly by animal welfare groups, legislators, and academics. Animal welfare science uses measures such as longevit ...
. Virtually all shareholder resolutions are non-binding (or "precatory," to use the legal term of art).Monks, Robert A. and Nell Minow. ''Corporate Governance''. Blackwell Publishers, 2001. In this sense the voting on these resolutions more closely resembles a poll than it does a (binding)
referendum A referendum (plural: referendums or less commonly referenda) is a Direct democracy, direct vote by the Constituency, electorate on a proposal, law, or political issue. This is in contrast to an issue being voted on by a Representative democr ...
or
plebiscite A referendum (plural: referendums or less commonly referenda) is a direct vote by the electorate on a proposal, law, or political issue. This is in contrast to an issue being voted on by a representative. This may result in the adoption of ...
. Still, media coverage of voting on shareholder resolutions tends to focus on whether the proposal received a majority of votes, which occurs in a very small but increasing proportion of cases. According to SEC rules, defeated resolutions may be resubmitted only if they pass certain election hurdles (percentage of affirmative votes). Shareholder resolutions have been an important part of activist campaigns in several cases. For example, resolutions were effective at raising public awareness and thereby pressuring corporate management about investments in
apartheid Apartheid (, especially South African English: , ; , "aparthood") was a system of institutionalised racial segregation that existed in South Africa and South West Africa (now Namibia) from 1948 to the early 1990s. Apartheid was ...
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring coun ...
,
nuclear power Nuclear power is the use of nuclear reactions to produce electricity. Nuclear power can be obtained from nuclear fission, nuclear decay and nuclear fusion reactions. Presently, the vast majority of electricity from nuclear power is produced b ...
, and labor disputes. Given these results, resolutions have been spearheaded by several coordinating groups, including the
AFL–CIO The American Federation of Labor and Congress of Industrial Organizations (AFL–CIO) is the largest federation of unions in the United States. It is made up of 56 national and international unions, together representing more than 12 million ac ...
and the Interfaith Center on Corporate Responsibility. Governmental and labor union pension funds also have become involved in supporting and submitting shareholder resolutions. A shareholder resolution to protest napalm manufacturer Dow Chemical resulted in a U.S. Supreme Court case called SEC v. MEDICAL COMMITTEE FOR HUMAN RIGHTS, 404 U.S. 403 (1972). The court decided that the case was moot due to Dow's agreeing to include the resolution on its proxy statement. The dissent argument by Justice Douglas encourages the SEC to facilitate more shareholder resolutions. "The philosophy of our times, I think, requires that such
04 U.S. 403, 410 4 (four) is a number, numeral and digit. It is the natural number following 3 and preceding 5. It is the smallest semiprime and composite number, and is considered unlucky in many East Asian cultures. In mathematics Four is the smalle ...
enterprises be held to a higher standard than that of the "morals of the marketplace" which exalts a single-minded, myopic determination to maximize profits as the traditional be-all and end-all of corporate concern."


References


Sources

*AFL-CIO. "How to File a Shareholder Resolution

*Gartman, Grant A. ''The IRRC handbook on proxy voting duties and guideline development''. 1999 *Gray, Hillel. ''New Directions in the Investment and Control of Pension Funds''. DC: Investor Responsibility Research Center, 1983. *''Medical Committee for Human Rights v. SEC'' 432 F.2d 639 (DC Cir. 1970, cert. granted) 401 US 973 (1971) *SEC ''Shareholder Proposals'' Staff Legal Bulletin No. 14B, September 15, 200

*''Shareholder Activism'' IRRC *Simon, Powers and Gunnemann. ''The Ethical Investor'' Yale Univ. Press *Voorhes, Meg. "The Rising Tide of Shareholder Activism" DC: IRRC, 2005 {{Corporate titles Corporate governance Resolutions (law) Resolution