At Domini, we we seek to influence corporations through shareholder activism. This includes direct dialogue with corporate management, the filing of shareholder proposals, and the principled use of proxy voting.
What Is Direct Dialogue?
For a corporation to create long-term value for its shareholders, it must pay attention to concerns raised by members of society that are impacted by its operations. Companies depend upon employees, communities and governments to function. All too often, however, companies refuse to speak with community members or NGOs that have raised valid concerns. As investors, therefore, we seek to focus the attention of companies on how their actions affect its broad range of stakeholders, from its influence on local communities to its impact on the natural environment. We often work with nongovernmental organizations, such as environmental and human rights groups, and other investors.
When we have a concern with a company, we often begin by encouraging corporate management to come to the table to discuss our concerns. Many companies respond to this offer, and are willing to listen to our perspective. We have participated in numerous face-to-face discussions with senior management teams. Sometimes this process can last for years.
What Is a Shareholder Proposal?
Shareholders of corporations have the right to take part in the firm’s strategic management by participating in annual meetings. A company’s management proposes issues to be voted on at these meetings, and shareholders have the right to place their own proposals on the ballot.
Shareholder proposals are an important part of the corporate governance process, and have been instrumental in raising emerging issues and changing corporate practices. Investors have used shareholder proposals to raise important social and environmental issues since the 1970s. The proposal itself is a statement (up to 500 words) containing a specific request to management or the board of directors. It may request that a company adopt labor rights protections for factory workers in its global supply chain, for example, or take specific steps to address climate change. The proponent of the proposal is also given an opportunity to make a brief speech at the annual meeting, and the company has an opportunity to respond.
Although most shareholder proposals are non-binding, meaning the company does not have to adopt its recommendations, they can be very persuasive. Companies would prefer not to see these issues raised at their annual meetings, and shareholder support for these proposals has risen substantially in recent years.
Since 1994, Domini has filed more than 250 shareholder proposals at more than 95 different corporations. We file these proposals each year because they have proven to be a highly effective tool in changing corporate behavior. The submission of a proposal sends a strong message to corporate management, and often encourages the company to speak to us about reaching an agreement. If an agreement is reached, we are pleased to withdraw our proposal. If not, the proposal is printed in the corporate proxy statement and put to a vote by all company shareholders.
Most shareholder proposals are submitted in the Fall and come to a vote in the Spring. You can view a complete list of every proposal we’ve ever filed. We also publish quarterly Social Impact Updates to keep you updated on how your dollars are working for change.
What Is a Proxy Vote?
Proxy voting is the primary forum where management seeks affirmation of what it’s doing, and where shareholders can weigh in on important issues. Most shareholders are unable to attend the annual meetings of the companies in which they own stock. They therefore participate in absentia, by way of a proxy vote.
Proxy ballots typically contain proposals from company management on issues of corporate governance, including the election of the board of directors, executive compensation, capital structure and auditors. They may also include shareholder proposals.
Investors in mutual funds delegate their proxy voting rights to their mutual fund manager. Every mutual fund has a fiduciary duty to vote proxies for the stocks in its portfolio in the best interests of its shareholders.
We have always been committed to transparency in our proxy voting. Because we believe our Fund shareholders have an absolute right to know how we are casting proxy votes on their behalf, we have regularly published our comprehensive voting policies since 1992.
In 1999, we became the first mutual fund manager in America to publicly disclose its actual proxy votes. Thanks to a rule by the Securities and Exchange Commission (for which we petitioned the SEC and helped organize support by Domini Funds shareholders and members of the general public) all mutual funds are now required to make their voting policies and actual votes publicly available.