View this email in your browser

 Market Mysteries of the week

  Can I be an activist investor?

Answer:

Yes, as a shareholder,

you can advocate for your values by voting in annual meetings, but big financial institutions hold most of the power.

Those annual meetings are happening right now

.

How does voting work?

Shareholder voting is the most direct way to influence a company.

During annual meetings, shareholders can vote on hot topics

like executive pay, dividend disbursement, and acquisitions, with voting power determined by how much stock each shareholder owns. Folks who can’t make it in person to the meeting have the option to vote by proxy, essentially assigning a third party to cast their votes on their behalf. This applies most broadly to asset management firms that manage money for stakeholders through managed funds, exchange-traded funds (ETFs), and other assets.

Does my vote count?

Yes, but voting power is proportional to your ownership of the company.

You may be a small voice, but a few non-profits like

As You Sow

and

Proxy Preview

have excellent step-by-step guides about the basic voting process and how to bring your own proposals up for a vote.

Shareholder proposals can bring issues to leadership's attention, but

not all approved bids are binding.

This means they are really just a suggestion left to the board to decide. For example, McDonald’s currently faces a shareholder proposal for a civil rights audit that regulators are not allowing the board to dismiss. If the shareholders approve this proposal in the May meeting,

McDonald’s board will decide whether to move forward with an unwanted audit

.

Who holds the most power?

Asset management firms control the most votes.

With investments like index funds, the institutions who manage the money, like Vanguard, State Street, or Blackrock, hold the voting power, not the index fund investors.

The Big Three own at least 20-30% of the stock market

. Blackrock alone

holds a 5% or greater stake in 98% of the biggest 500 companies in the US

.

Trying to figure out where these massive institutions stand on pay equity or climate change prevention issues is very difficult. Because index funds are meant to be “passive” investors, the fund managers have voted in line with the board. We

highlighted in recent notes

that

investors have started pressuring asset managers to use their influence in favor of sustainability initiatives. 

Are those companies doing anything good for the planet?

Yes, but they have to be accountable to their investors. In

many cases, investment firms vote their shares in line with the board of directors

, not challenging the board's suggestions or submitting proposals for change. However, because these huge firms hold so much voting power, it can have extraordinary effects on an annual meeting when they decide to step off the sidelines.

Blackrock made waves

when it announced its use of proxy voting

to push climate-conscious agendas

. As the largest financial institution in the world, Blackrock holds

influential voting power

across many industries, including energy and fossil fuels. While the firm has said that it will not be divesting from companies based on industry alone, it is committed to bringing its investors into the proxy voting process and

easing the transition to a decarbonized economy

. This would allow folks like you and me to voice opinions on how Blackrock should vote, especially on issues like environmental protection, and sway the proxy votes of financial management firms.

Can smaller investors still have an impact?

Yes,

a small activist hedge fund called Engine No.1 challenged the sustainability strategy of oil giant Exxon and won.

The fund only owned a 0.02% stake in the company. Still, it rallied support from major institutional shareholders with this simple idea: failing to address the risks of climate change could result in huge losses for all stakeholders. Three of Exxon’s biggest shareholders are investment firms,

Vanguard, Blackrock, and State Street

. The activist firm Engine No.1 campaigned and elected three directors with experience in reducing the carbon footprint of oil and gas companies.

This small victory for the planet was a litmus test for corporate America. It showed us that

there is potential for small investors to influence the sustainability decisions of multi-billion dollar companies.

Exxon had its world rocked when its most significant stakeholders sided with Engine No.1 to protect their investments in the face of climate disaster. Which company could be next?.

💙 The Share Scoops Team

Share the scoop!

1. Share your unique link with friends & coworkers (forward or copy)

2. When they sign up you unlock exclusive rewards

3. Keep on sharing to unlock more rewards

Forward your unique link:

*|SHAREURL|*

You have made referrals

Click for more ways to share & track your progress!