With respect to public companies in the United States, Shareholder resolutions are proposals submitted by shareholders for a vote at the company's annual meeting. Typically, resolutions are opposed by the corporation's management, hence the insistence for a vote. For publicly-held corporations in the United States, the submission and handling of resolutions is regulated by the Securities and Exchange Commission (SEC).

Shareholders submit resolutions dealing primarily with corporate governance

Corporate governance

Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...

, such as executive compensation

Executive compensation

Executive pay is financial compensation received by an officer of a firm, often as a mixture of salary, bonuses, shares of and/or call options on the company stock, etc. Over the past three decades, executive pay has risen dramatically beyond the rising levels of an average worker's wage...

, or corporate social responsibility

Corporate social responsibility

Corporate social responsibility is a form of corporate self-regulation integrated into a business model...

 issues, such as global warming

Global warming

Global warming refers to the rising average temperature of Earth's atmosphere and oceans and its projected continuation. In the last 100 years, Earth's average surface temperature increased by about with about two thirds of the increase occurring over just the last three decades...

, labor relations

Labor relations

Industrial relations is a multidisciplinary field that studies the employment relationship. Industrial relations is increasingly being called employment relations because of the importance of non-industrial employment relationships. Many outsiders also equate industrial relations to labour relations...

, tobacco smoking

Tobacco smoking

Tobacco smoking is the practice where tobacco is burned and the resulting smoke is inhaled. The practice may have begun as early as 5000–3000 BCE. Tobacco was introduced to Eurasia in the late 16th century where it followed common trade routes...

, human rights

Human rights

Human rights are "commonly understood as inalienable fundamental rights to which a person is inherently entitled simply because she or he is a human being." Human rights are thus conceived as universal and egalitarian . These rights may exist as natural rights or as legal rights, in both national...

, and animal welfare.

Virtually all shareholder resolutions are non-binding (or "precatory," to use the legal term of art). In this sense the voting on these resolutions more closely resembles a poll than it does a (binding) referendum

Referendum

A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendment, a law, the recall of an elected official or simply a specific government policy. It is a form of...

 or plebiscite. Still, media coverage of voting on shareholder resolutions tends to focus on whether the proposal received a majority of votes, which occurs in a very small but increasing proportion of cases. According to SEC rules, defeated resolutions may be resubmitted only if they pass certain election hurdles (percentage of affirmative votes).

Shareholder resolutions have been an important part of activist campaigns in several cases. For example, resolutions were effective at raising public awareness and thereby pressuring corporate management about investments in apartheid South Africa

South Africa

The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

, nuclear power

Nuclear power

Nuclear power is the use of sustained nuclear fission to generate heat and electricity. Nuclear power plants provide about 6% of the world's energy and 13–14% of the world's electricity, with the U.S., France, and Japan together accounting for about 50% of nuclear generated electricity...

, and labor disputes. Given these results, resolutions have been spearheaded by several coordinating groups, including the AFL-CIO

AFL-CIO

The American Federation of Labor and Congress of Industrial Organizations, commonly AFL–CIO, is a national trade union center, the largest federation of unions in the United States, made up of 56 national and international unions, together representing more than 11 million workers...

 and the Interfaith Center on Corporate Responsibility

Interfaith Center on Corporate Responsibility

The Interfaith Center on Corporate Responsibility is a coalition of 275 faith-based institutional investors. Founded in 1973, the organization advocates for corporate social responsibility and files shareholder resolutions and engages in dialogue with corporate management on issues such as global...

. Governmental and labor union pension funds also have become involved in supporting and submitting shareholder resolutions.

A shareholder resolution to protest napalm manufacturer Dow Chemical resulted in a U.S. Supreme Court case called SEC v. MEDICAL COMMITTEE FOR HUMAN RIGHTS, 404 U.S. 403 (1972). The court decided that the case was moot due to Dow's agreeing to include the resolution on its proxy statement. The dissent argument by Justice Douglas encourages the SEC to facilitate more shareholder resolutions. "The philosophy of our times, I think, requires that such [404 U.S. 403, 410] enterprises be held to a higher standard than that of the "morals of the marketplace" which exalts a single-minded, myopic determination to maximize profits as the traditional be-all and end-all of corporate concern." http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=404&invol=403

Sources

• AFL-CIO. "How to File a Shareholder Resolution" http://www.aflcio.org/corporatewatch/paywatch/what2do/w_howshare.cfm
• Gartman, Grant A. The IRRC handbook on proxy voting duties and guideline development. 1999
• Gray, Hillel. New Directions in the Investment and Control of Pension Funds. DC: Investor Responsibility Research Center, 1983.
• Medical Committee for Human Rights v. SEC 432 F.2d 639 (DC Cir. 1970, cert. granted) 401 US 973 (1971)
• SEC Shareholder Proposals Staff Legal Bulletin No. 14B, September 15, 2004 http://www.sec.gov/interps/legal/cfslb14b.htm
• Shareholder Activism IRRC
• Simon, Powers and Gunnemann. The Ethical Investor Yale Univ. Press
• Voorhes, Meg. "The Rising Tide of Shareholder Activism" DC: IRRC, 2005