Shareholder Advocacy

If the company you are targeting is a mutual fund, pension fund or a company listed on a stock exchange, you may also be able to recruit its investors to help you pressure the company through shareholder advocacy.

Mutual funds collect a pool of money from investors, either individuals or institutions. The fund then invests this money in companies on behalf of the individuals and institutions. Pension funds can be either actively managed — meaning a fund manager makes the investment decision — or passively managed, meaning investment decisions are tied to the performance of a stock market index.

Pension funds collect a pool of money from workers, usually from their salary. The fund invests the pooled money on behalf of the workers. Pension funds must pay out funds to the workers when they retire, so they are generally more heavily regulated by governments than other funds and are likely to make less risky investments.

A public company usually has a large number of shareholders, and their shares are bought and sold on one or more stock exchanges. This means anyone, including the general public, can own part of the company.

There is a growing movement of ethical or activist investors who are working to influence corporate social, environmental and human rights practices. Ethical investors usually buy shares only in companies with good corporate policies and behaviour. Activist investors also buy shares in companies with poor social and environmental records in order to use their rights as shareholders to try to make the company behave more responsibly.

There are also ethical institutional investors, which are organisations that pool large sums of money from their members and invest it on their behalf based on social and environmental criteria. Institutional investors can have considerable influence over company behaviour because of their ability to own a large number of shares. The more shares an investor has, the more votes it gets on issues raised at shareholder meetings.

Activist investors can use several methods to influence companies.

One of the most powerful tools that activist investors have at their disposal is the introduction of a shareholder resolution. This is when shareholders make a formal recommendation to the company and put it to a vote of all shareholders at the annual general meeting. Rules for shareholder resolutions are different in every country. In the United States, resolutions can only be introduced by shareholders with a meaningful stake in the company (defined as 1 per cent of all outstanding shares or $,2000 worth of shares, held for at least one year prior to the resolution submission deadline). In the United Kingdom, resolutions can be put forward by shareholders with a 5 per cent stake in the company or by a group of at least 100 shareholders that each hold at least £100 worth of shares.


Introducing shareholder resolutions is a great way to get an issue on the agenda of the company and its investors. It also provides a good opportunity to attract media attention to your issue, particularly if the resolution is introduced by a well-known investor.

The last resort in shareholder advocacy is divestment, which is when a shareholder sells its stake in a company. This should usually only be considered when other methods fail. After all, if your allies sell their shares in the company, then you will lose the opportunity to influence the company from within. If all else fails, and your shareholder allies are unable to persuade the company to change its behaviour or take the actions that you want it to take, then you might consider calling upon them to divest.


Divestment is unlikely to be an effective strategy if only a few shareholders take part. However, if you are able to get institutional investors or a significant percentage of ordinary shareholders to divest, this can lead to a drop in the company’s value, which may put enough pressure on the company to persuade its directors to change course.

Shareholder advocacy holds a lot of potential as a campaign tool if you are able to convince investors in the company to support your cause. Sometimes an ethical investment fund based in the relevant country will already hold shares in the company. It may be worth contacting them to ask if they hold shares and, if so, whether they will support your campaign. The fund managers need to uphold the fund’s claim and reputation as ethical, so if you can show that the company has harmful practices, the fund should pay attention to what you have to say. Another approach is to ask a civil society partner in the country to buy a few shares, which will give them voting rights. They can even delegate those rights to you and community representatives, which will allow you to attend the company’s annual general meeting, pose questions and share information informally with other investors in attendance.

Box 21: Case Study

Shareholder Advocacy in the Vedanta Campaign

Niyamgiri mountain in the state of Orissa, India, is the ancestral home of one of the world’s most vulnerable tribal peoples, the Kondh. The Kondh rely on the mountain for their food, medicines and culture. It is also the seat of their god, the supreme deity Niyam Raja.

ActionAid supported the Kondh in their battle with UK mining giant Vedanta Resources. The company wanted to build an open-pit bauxite (aluminium) mine at the top of Niyamgiri mountain. This would force the Kondh tribe to move elsewhere and their unique way of life would be lost forever.

The Kondh tribe were determined to protect the mountain. They held several demonstrations against the company. ActionAid India supported the Kondh community by providing legal support for the community’s challenges; documenting environmental and human rights violations; creating media attention around the threat; facilitating the community’s mobilization; taking part in behind-the-scenes lobbying; and by maintaining a daily, on the ground relationship with the Kondh people.

However, it soon became clear that to have an impact on the power and might of Vedanta, it was important to take the Kondh’s struggle beyond the community level – and beyond India. With Vedanta listed on the British stock exchange, campaigners at ActionAid UK and ActionAid International highlighted the issue to UK media and investors, using a two-pronged approach that covered the company’s legal home-base in the UK and the site of the alleged human rights violations in India.

Using strategic media stunts, celebrity spokespeople, submissions to the UK government, investor lobbying, and by enabling the Kondh people to travel to Vandanta’s annual general meetings and voice their plight, ActionAid’s work outside India added power to the movement in Orissa. The Joseph Rowntree Trust and the Church of England, two major, high-profile investors, pulled out of the company in February 2010. Both cited concerns about the rights of the Kondh tribe. This caused Vedanta’s share price to drop and damaged the company’s reputation.

In August 2010, after six years of national and international campaigning, disinvestment by key Vedanta shareholders and protracted legal challenges, the community had a major breakthrough. The Indian government refused permission for the mine to go ahead. The Environmental Minister came out strongly against the mine, criticising the company and accusing it of breaking the law.

Source: ActionAid.