The Shareholder Commons applies a PRE-COMPETITIVE systems approach to corporate purpose and social responsibility.
While today’s ESG (“environmental, social and governance”) initiatives focus on improving individual companies, we believe that in a free market system, investors and companies must work collectively to establish universally applicable minimum standards in order preserve essential social and environmental systems.
The Shareholder Commons will advocate for an economic system where companies are expected to forgo profits made from the exploitation of vulnerable communities and depleting common resources, and instead focus on profits from innovative value creation.
Leveling the playing field
The Shareholders Commons seeks to catalyze a movement of universal owners to identify and implement minimum acceptable standards of corporate conduct that all businesses must meet before pursuing profit.
The Shareholder Commons will develop and advocate for public policies that accommodate the needs of universal owners.
Speaking on behalf of the universal owner in the courts, The Shareholder Commons will use litigation to further systems change and stop rewarding irresponsible companies with high margins and cheap capital.
opportunities for engagement
Investors are trapped in a system where success is measured by alpha, but the race to outperform and lower fees is threatening the systems all companies and beneficiaries rely on. Read here to find a better path.
As long as private capital chases relative return with no regard for systemic effects, direct policies to rein in business exploitation of common resources will be locked in a struggle against regulatory capture evolving technologies and tactics. Read here to learn about policies that reset the way private capital operates, in order to harmonize public and private goals.
While businesses are frequently demonized in discussions about social and environmental issues, corporate attempts to manage impacts are often hampered by shareholder pressure to prioritize financial interests. To learn how you can be part of a movement where shareholders encourage authentic corporate commitment to stakeholders, read here.
Unfortunately, the law and perceptions of the law can lead to corporate and investor behaviors that undercut attempts to address systemic issues through improved business conduct. Members of the legal community with an interest in helping to change this dynamic should read here.
Pension funds and other asset owners must preserve their capital and earn sufficient return to satisfy obligations to retirees and other liabilities. Asset managers must help investors optimize their returns based on an acceptable level of risk. For owners and managers alike, returns are the result of three variables:
- The return of the market overall to the classes of securities within a portfolio (beta);
- The performance of the portfolio above or below beta based on the securities selected to be in the portfolio (alpha); and
- Asset management costs and fees.
Historically, asset owners and managers have focused on the second and third components and accepted beta as a factor over which they did not have control and for which they had no responsibility. The increasing recognition that the social and environmental systems upon which the global economy depends are at risk from corporate behavior demonstrates the deep flaw in that thinking—corporate behavior with respect to social and environmental systems affects the economy as a whole, and overall economic performance is a critical determinant of beta.
Moreover, shareholder activism in other areas demonstrates that shareholders can indeed affect corporate behavior. Thus, if shareholders can analyze the potential effects of their votes on corporate behaviors that affect the economy, they can—for the price of exercising a vote—make reasonable attempts to improve a critical facet of return.
PROXY VOTING POLICIES
Click here to see our model proxy voting policies. Click here for see our case for why proxy voting policies should enable voting decisions that prioritize systems over alpha.
SHAREHOLDER RESOLUTIONS & VOTES
TSC is supporting multiple proponents in filing shareholder resolutions with a beta-activist lens. We are also monitoring other key votes on company proxies around the world that provide an opportunity for investors to vote according to a beta-activist approach. We will be updating the following list regularly, so please check back often. You can also subscribe to receive weekly updates on critical developments throughout the proxy voting season.
- To get a broad understanding of the theory behind our initiatives, you can check out our two pager, or read this short blog post, this medium-length article, or this longer academic piece.
- For an overview of our strategy and an introduction to The Guardrail Project, watch our webinar.
- To catch up on what we have been doing, check out this archive of our newsletters
- For a case study in how shareholders make a difference: Majority Action, Climate In The Boardroom: How Asset Manager Voting Shaped Corporate Climate Action In 2019
- Two of the leading thinkers today on the problem with the current financial system: J. Hawley & J. Lukomnik, The Long and Short of It: Are We Asking the Right Questions? Modern Portfolio Theory and Time Horizons,
- An authoritative piece explain why all of this matters:UNEP Finance Initiative, Universal Ownership: Why Environmental Externalities Matter to Institutional Investors
- A sensible plan for a capitalism that works for all of us from the former Chief Justice of Delaware: L. Strine Jr., Toward Fair and Sustainable Capitalism
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