David Webber’s new book, The Rise of the Working-Class Shareholder: Labor’s Last Best Weapon, might just as well have been titled, “How Shareholders Can Save the Planet.” Webber, a professor at the Boston University School of Law, has written a book that tells a number of stories about public and private employee pension funds using their economic muscle to change corporate behavior for the better. I will not recount all of these stories in this space; here is an excellent review that provides a good summary. But there is one story that illustrates the potential for universal owners to make real and permanent change: Webber calls this story “The Fight for Meaningful Corporate Elections.”

Twenty-five years ago, “corporate democracy” in the United States was at a nadir: a large majority of publicly traded companies had staggered boards, so that it took shareholders at least two elections cycles to “fire” the board. These companies also had “plurality voting,” so that when directors ran unopposed, they would win as long as they got a single vote. Finally, it was prohibitively expensive for shareholders to challenge management-sponsored director nominees, because companies were not required to include the shareholder nominees in their proxy statements or on their proxy cards. Thus, even though shareholders nominally had the voting power necessary to control the companies they owned through board elections, it was exceedingly difficult for shareholders to exercise that control.

Webber tells the story of how labor funds led a two-decade battle to reverse this situation so that today most public companies have (1) boards that are entirely up for election every year, (2) a requirement that unopposed directors receive at least half the vote in order to stay in office and (3) bylaws allowing shareholder nominees access to the company proxy statement.

This is a story of patience, resilience and real change. The good news is that the same tools that labor funds and other universal shareholders utilized to change corporate governance (and the changes themselves, which give shareholders even greater power) can now be used by shareholders to insist that the companies they own stop earning profits through externalizing social and environmental costs. Our mission at TSC is to help universal shareholders use that power in order to manage the social and environmental impact of the companies they own.

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