Corporate Accountability: a role for shareholders and consumers

As we began to see this week, private corporations play a tricky role in global governance. They gather authority collectively and act as an influential presence in the international realm but are, unlike states, controlled by legal jurisdiction. In cases of domestic policy, corporate law is more straightforward, but in the face of international companies dominating globalization, how are we to hold them accountable?

In recent years there has been an increasing prevalence of social movements with the aim to make businesses and business institutions more accountable to their shareholders and stakeholders. Concepts like B-Corporations have taken hold and even influenced policymakers to create Benefit Corporations. Benefit Corporations have a double bottom line to hold them accountable to both their shareholders and to consumers. When a company becomes a Benefit Corporation they adopt governance practices that require them to meet higher standards of transparency and accountability. Additionally, these corporations all work to provide a responsible and socially beneficial product or service. Benefit Corporation legislation has been passed in 33 states and the District of Columbia and the concept is gaining traction in other regions.

In Benefit Corporations, both shareholder and stakeholders have a role to play in influencing corporate governance but these aren’t the only companies being held accountable by their shareholders. There has been an up-tick in the past decade in the use of shareholder resolutions being passed at corporations, large and small, to advance an idea or goal. This year, after the U.S. withdrawal from the Paris Climate Agreement, shareholders stepped in at many corporations to push the adoption of policies to mitigate climate change, most beginning with an assessment and disclosure on the climate change risks of the company. As of March, 66 investors had submitted resolutions about climate change in the 2018 proxy season. According to ISS, “of that total, 17 are seeking risk assessments based on the 2-degree scenario embedded in the U.N.’s Paris Agreement, which aims to limit the average rise in temperatures to below 2-degrees Celsius of pre-industrial levels. There were 18 2-degree scenario proposals for all of 2017, eight in 2016, one in 2015,” said Institutional Shareholder Services (ISS) (Stein 2018).

Sure, the sum of 66 investors is but a drop in the bucket in comparison to the profile of global corporations, but the increase in the number of resolutions passed by citizens as shareholders in response to a state decision shows that there is an increase in the number shareholders willing to hold companies accountable in addressing global issues.

Stein, Lemos Mara. “More Shareholder Proposals Spotlight Climate Change.” Wall Street Journal, February 8, 2018. https://blogs.wsj.com/riskandcompliance/2018/02/08/more-shareholder-proposals-spotlight-climate-change/.

“What is a Benefit Corporation,” Benefit Corporation, last modified 2018, http://benefitcorp.net/.