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SRI Background
Socially responsible
investing (SRI) occurs when investors take social and environmental
factors into account when deciding where and how to invest
their money. The policies that the SRI movement influences
encompass a board range of issues including human rights,
labor practices, environmental protection, equity, diversity,
discrimination, and corporate disclosure. There are
three primary ways in which investors can influence corporate
behavior:
1)
Shareholder Resolutions: Shareholders, as part owners
of corporations, are able to both propose new policies, and
vote on proposals submitted by others. These resolutions,
which can be voted on either in person or by proxy, can address
any issue of concern to the shareholders or to management.
Votes are weighed according to the amount of stock an investor
holds in the corporation. If a shareholder does not
vote, their vote automatically goes to management. Consequently,
it is not possible to take a neutral position on any resolution:
investors must actively vote in favor of positive social change,
or their votes may be used to work against it.
2)
Negotiations with Management: Shareholders can also
work with management to improve a company's ethical standards
through meetings, letter-writing, petitions, and other forms
of communication and advocacy.
3)
Divestment: As a last resort, shareholders will sometimes
advocate for complete divestment from a corporation if it
does not appear that management is willing or able to address
their concerns. Divestment occurs when a shareholder
sells all of their holdings in a company.
The Process:
Often, a concerned
investor will press a company to adopt a socially responsible
practice by submitting a proposal for shareholders to vote
on at the annual general meeting. During the first three
years they are proposed, resolutions must receive 3, 6 and
10% of the vote respectively. If they do not, shareholders
must wait 5 years before they can re-submit the same proposal.
If it appears that a proposal will garner even 3% of the vote,
management may decide to enter into negotiations with concerned
investors. Once a corporation shows signs of a willingness
to discuss and possibly adopt a proposed resolution, shareholders
will often withdraw the resolution, as it is no longer necessary.
By engaging corporations
in a dialogue with investors such as Barnard, we can ensure
that businesses take into account both their fiscal and social
impact on the public.
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