How Stockholders Can Promote Their Economic and Social Objectives

How Stockholders Can Promote Their Economic and Social Objectives
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  • 0:59 Social Responsibility…
  • 1:49 Shareholder Advocacy
  • 2:25 Social Screening of Stock
  • 3:39 Social Responsibility…
  • 4:31 Shareholder Lawsuit
  • 4:54 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
In this lesson, you will learn how stockholders are tasked with balancing their investment choices with promoting their own economic and social objectives.

Shareholder Activism

In this lesson, we will discuss the various ways stockholders can promote their economic and social objectives. A stockholder, or shareholder, is any person or business that owns at least one share of a company's stock.

One major trend in the business world is the growth of shareholder power through the development of shareholder activism. This is where shareholders utilize their rights as the partial owner of a publicly-traded corporation to force social change, such as the elimination of a company's policy of using sweatshops.

This new power has allowed shareholders to promote their own values, beliefs and considerations within their companies. These shareholder activists, or S.A. Superheroes as we'll call them in this lesson, are able to orchestrate changes and craft company policies. Let's take a look at how they use their powers!

Social Responsibility Investment

There are numerous special powers that the shareholder activists utilize to promote both their social and economic objectives. Shareholder activists practice the idea of social responsibility investment, which is the investment in ethical or socially conscious companies that can provide excellent financial return and social promotion of certain objectives. For example, some S.A. superheroes refuse to invest in any corporation that produces or deals with the production of tobacco, alcohol, guns or pornography. Investing in that type of company would be against some people's personal beliefs and values. The S.A. superheroes research companies thoroughly before they invest and ensure that these unethical businesses are not represented.

Shareholder Advocacy

In addition, S.A. superheroes use shareholder advocacy to work together to help make changes in an organization by alerting media to issues and filing resolutions for shareholder votes. For example, let's say that some shareholder activists did not like that one of their real estate investment companies was considering opening a hotel in Atlantic City, N.J. This S.A. team was against gambling and started pressuring the company to consider building a new hotel elsewhere via dialogue and media influence.

Social Screening of Stock

Another secret weapon the shareholder activists use is the social screening of stock, otherwise known as the S.S.S. The activists have created a unique group of social and environmental criteria to determine if they should invest. The three types of screens are:

  • Negative screen - This is when the shareholders refuse to invest in a company that shows involvement in a particular area, such as tobacco, alcohol or prostitution.
  • Positive screen - This screen is when shareholders search out a specific social cause and invest in it, such as wind energy or green cleaning methods. A member of our shareholder activists team likes to invest in alternative fuel companies that use wind and solar power.
  • Restricted screen - This is when shareholders invest in a company that engages in a limited amount of activity that the shareholders consider to be immoral. For example, one of the shareholder activists is against investing in alcohol companies but will invest in a restaurant chain that has only 5% of their stores serving alcohol.

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