Conservative Shareholders Act Up

Conservatives engage in shareholder activism, taking page from liberal playbook
2003 Walmart shareholder meeting / AP

2003 Walmart shareholder meeting / AP


A conservative policy advocacy group and think tank is employing a tactic traditionally used by liberals to press corporations on their public policy positions and support for liberal groups.

The National Center for Public Policy Research sent a representative to Duke Energy’s shareholder meeting Thursday to ask the company’s CEO Jim Rogers about the company’s position on a repeal of North Carolina’s renewable energy mandate. A state senate committee voted on Wednesday to repeal the law, which Duke Energy supported when it first passed.

“With an unemployment rate of 9.4 percent, North Carolina can ill-afford to discourage businesses from relocating here,” the representative of the National Center told Rogers. “But that’s exactly what the renewable-energy mandate does.”

Many other states have similar green energy standards and the cost of green energy is dropping, Rogers said in response.

The meeting is one of about 30 National Center representatives will attend this year, said National Center chairman Amy Ridenour. The group’s representatives attended five shareholder meetings this week.

National Center’s goal is to push corporations to support free-market policies and resist the influence of liberal activists. It pursues these goals by submitting shareholder resolutions all shareholders must vote on and by asking pointed questions at public shareholder meetings.

“Corporations are increasingly influential in the public policy of the nation,” Ridenour said.

Ridenour disagreed with the stereotype that businesses always side with the right.

“This notion that they’re all a bunch of conservatives is just complete nonsense,” she said.

Shareholder activism is neither new nor necessarily political: An “activist shareholder” may simply engage with the company in order to change or try to change the company’s direction and improve the stock’s value.

The National Center began going to shareholder meetings in 2009, although the National Legal and Policy Center (NLPC) and the now-defunct Free Enterprise Action Fund began submitting shareholder resolutions around 2005.

Liberal groups have been using shareholder activism to move companies to the left since the 1960s. They became more active after a D.C. circuit court of appeals decision in 1970 revolving around Dow Chemical, Napalm, and Vietnam, according to Heidi Welsh, executive director of the Sustainable Investments Institute.

“The court endorsed shareholder review of corporate decisions, paving the way for all the social and environmental shareholder resolutions since,” Welsh said.

Welsh coauthored the 2013 Proxy Preview along with Michael Passoff, CEO of Proxy Impact. The Sustainable Investments Institute and Proxy Impact educate shareholders about liberal shareholder resolutions at various companies in order to promote what they call “corporate responsibility.”

The preview illustrates how much more liberals engage in shareholder activism than conservatives: Investors submitted 365 shareholder resolutions that require a proxy vote by shareholders, with 284 pending at the time of the report’s publication.

The report lists only four shareholder resolutions submitted by conservative groups. Ridenour said National Center submitted only a few this year, and most were either struck down by the SEC or withdrawn after negotiations with the corporation.

NLPC did not submit any resolutions this year, NLPC president Peter Flaherty said.

“They beat our pants off,” said Ridenour, comparing liberal and conservative shareholder activism.

“I think the left is really ten steps ahead of us. Make that a hundred steps,” said John Berlau, an economics expert at the Competitive Enterprise Institute.

Liberal groups ranging from labor unions to foundations to universities engage in shareholder activism, with their efforts typically aimed at issues of the moment. Labor unions used their pension funds to pressure companies during the social security overhaul debate in 2005 for example, the Wall Street Journal reported.

Welsh insisted shareholder resolutions are simply the “expression of public opinion about the corporate role in society” and not the actions of special interests seeking to push corporations to bend to their political agenda.

“It’s a mistake to say shareholder activism can be reduced to a giant left wing plot led by unions to take over and silence corporate America,” Welsh said. “That’s ridiculous and reductionist and reality is far more complex and interesting.”

Conservatives view the left’s efforts to sway corporations in a far more strategic light.

“While they were out of power, they pursued power through finding ways to intimidate corporations,” Berlau said.

Steve Milloy, who co-founded the Free Enterprise Action Fund, said liberals were using shareholder activism when it became clear they could not get their agenda through Congress.

“We started the fund to be a counterweight,” Milloy said. He and his partner, Thomas Borelli, launched the Free Enterprise Action Fund in 2005.

Milloy confessed he had only modest means—the mutual fund had only about $12 million—but he indicated he saw some success in provoking large companies like Walmart and Goldman Sachs at their shareholder meetings.

Liberals and conservatives both say the goal is not to win the shareholder vote outright—very few do—but to gain the attention of the company’s management.

Ridenour said she wants National Center’s efforts to change the corporation’s policies or how it acts, but often the victory can come in the corporation’s executives inviting National Center “into their decision-making process,” she said.

National Center recently submitted a resolution to one of the biggest corporations in America. The resolution encouraged the corporation not to support a liberal bill that was being considered. The senior management did not want to allow the resolution to come to a vote, so they invited Ridenour to talk to them in exchange for her withdrawing the resolution.

Ridenour said National Center often cannot look for an immediate impact. “Sometimes you have to take a long view,” she said.

However, liberal groups point to much larger and more numerous successes. As You Sow CEO Andrew Behar hailed the “broad changes across industries” resulting from liberal shareholder activism and pointed to a list of the group’s victories on their website.

Welsh said resolutions over social or environmental issues regularly gain about 20 percent support from shareholders, while some gain 40 percent or more—a size hard for management to ignore.

They can be hard for the media and other shareholders to ignore, as well. If a resolution makes it onto the ballot—and only the SEC can strike it down—then the corporation has to send out all the information related to the resolution at their own cost.

“It’s a great opportunity to make a point,” Flaherty said, calling the tactic “sort of a guerrilla technique.”

Flaherty has been to Walmart’s shareholder meetings three times, he said, with one of the visits attracting the attention of Newsweek. The left-leaning website ran an article titled, “Is Walmart Too Liberal?” and aired Flaherty’s concerns about the leftward drift of the traditionally conservative corporation.

Grover Norquist, president of Americans for Tax Reform, sees a lot of potential for conservatives in this area.

“Just having the vote, being able to speak … it would get lots of press,” he said. He suggested conservatives target Warren Buffett’s company Berkshire Hathaway.

“Take one of his speeches from the sixties, when he was making money, about how tax rates are everything, and just get in the resolution to reaffirm Warren Buffett when he said this,” Norquist said.

While liberals and conservatives can both use shareholder activism, conservatives should approach shareholder activism differently than liberals, Berlau argued.

“We have to recognize that their goal is and should be to make products and services that earn a profit,” he said.

Norquist concurred.

“Liberals don’t mind hurting the company’s bottom line—you know, we want our company to be green or something. Conservatives can do it in a way that says, we want our company to affirmatively fight to abolish the capital gains tax because that’s important to our investors,” he said.

Berlau said conservatives should let businesses know “someone will have their backs if they don’t cave to the left.”

National Center has been doing some of this kind of positive-reinforcement, both Berlau and Ridenour said. For example, National Center encouraged Harley-Davidson to stand up to the Consumer Financial Protection Board, an entity created by the 2010 Dodd-Frank financial overhaul bill.

Conservatives remain reticent about shareholder activism despite such successes.

“Conservatives … really don’t get shareholder activism,” Milloy said.

He attributed the lack of enthusiasm among conservatives to a difference in temperament: Liberals want to change things, while conservatives simply do not think in the same radical way. If a company is not doing what conservatives want, they will simply go invest elsewhere, he argued.

Nevertheless, Ridenour was resolute.

“There’s a lot more to come,” she said.

“Politics is a fact of life, and corporations can’t just hear from the left on politics,” Berlau said.

Andrew Evans   Email Andrew | Full Bio | RSS
Andrew Evans is an assistant editor at National Affairs and a former reporter for the Washington Free Beacon, where he covered government accountability and healthcare issues.