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We seek to influence the actions of corporations through shareholder activism —
including direct dialogue with company management, and the filing or co-filing
of shareholder resolutions — and through the principled use of proxy voting.
What Is Direct Dialogue?
Like other socially responsible investors, we seek to focus the attention of
companies on the broad range of stakeholders that their actions affect, from
local communities to the natural environment. In this effort, we may work with
nongovernmental organizations, environmental groups, religious investors, and
other social investment firms.
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 participa
ted in numerous face-to-face discussions with senior management teams,
sometimes lasting years. Often these negotiations are confidential. When
companies refuse to discuss the issues, however, or if no progress is made in
discussions, we may consider filing or co-filing a shareholder resolution.
What Is a Shareholder Resolution?
As owners of a corporation, shareholders 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. These shareholder
resolutions deal with a variety of issues, including diversity, environmental
practices, and sweatshop practices.
Since 1994, we have filed more than 140 shareholder proposals at more than 60
corporations on a wide range of issues, including environmental issues,
executive compensation and overseas labor practices. We generally co-file
resolutions with one or more other investors.
The Interfaith Center on Corporate Responsibility
(ICCR) is instrumental in coordinating this process, and in providing valuable
expertise during dialogue with companies.
Our goal in filing shareholder resolutions is not simply to gain the votes of
shareholders but to change corporate policies. If we achieve our goal before
the annual meeting, we may choose to withdraw the resolution. Should
negotiations fail to produce a satisfactory result, our objective becomes to
achieve sufficient votes to keep the resolution on the proxy the following
year.
When we sponsor a shareholder resolution, we educate the public about the issue
through letters,
press releases
, email bulletins, our newsletter, our website, and other methods. We encourage
individual and institutional shareholders to cast their proxy votes in favor o
f our resolution as a way to keep the issue in the spotlight and pressure
management to respond.
If possible, we refile the resolution each year until the issue is resolved.
According to the rules of the Securities and Exchange Commission (SEC), a
resolution must receive 3% of the vote the first year it is filed, 6% in year
two, and 10% thereafter to be included on the proxy the following year.
What Is a Proxy Vote?
Most shareholders are unable to attend the annual meetings of the companies in
which they own stock. Instead they participate in absentia, by way of a proxy
vote. Investors in mutual funds delegate their proxy voting rights to the
mutual fund manager.
Proxy ballots typically contain proposals from company management on issues of
corporate governance, including capital structure, auditing, board composition,
and executive compensation. They may also include shareholder resolutions. Pro
xy voting is the primary forum where management seeks affirmation of what it’s
doing, and where shareowners weigh in on important issues. Every mutual fund
has a fiduciary duty to vote proxies for the stocks in its portfolio in the
best interests of its shareholders.
Domini is committed to openness and transparency in proxy voting. Shareholders
have an absolute right to know how their mutual fund is casting proxy votes on
their behalf. We have published comprehensive
voting guidelines
regularly since 1992, and in 1999 we became the first mutual fund manager in A
merica to publicly disclose its actual
proxy votes
. Thanks to a new rule by the Securities and Exchange Commission, for which we
petitioned the SEC and helped organize support by shareholders and the public,
all mutual funds are now required to make their voting guidelines and actual
votes publicly available.
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