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Asset Management Best Practice

How Stockholders Can Effectively Engage with Companies

by James Gifford

Executive Summary

  • The executive director of the United Nations-backed Principles for Responsible Investment shares his experience of working with and researching stockholders who actively engage with the companies in which they invest.

  • He argues that the effectiveness of such engagement is driven by 12 key factors. These include the business case behind a stockholder request, the values of the target company managers, the assertiveness and persistence of the stockholder, and the policy environment in which the engagement takes place.

  • Above all, the most influential factor may be whether the company itself wants to change.


How many social workers does it take to change a light bulb? One. But the bulb has got to want to change. This is also the theme of this essay on stockholder engagement—the practice of investors seeking to influence corporate behavior for the better.

Institutional investors are increasingly engaging in dialog with companies for the purpose of improving some aspect of a company’s environmental or social impact, corporate governance, or strategic performance. This practice is widely known as “stockholder engagement.” As of early 2009, the UN-backed Principles for Responsible Investment (PRI), which contain commitments to active ownership, had over 470 signatories representing more than US$18 trillion in assets under management. Surveys of these signatories show that more than half engage in dialog with companies, either directly or as part of broader investor collaborations, to influence corporate behavior.

If stockholders want to influence corporate behavior, the company has got to want to change. Unless the stockholder has a large stake in a company, they are simply one of many stakeholders in the firm. If the stockholder wants the company to change, the company’s managers must be convinced that it is in the best interests of the company to do whatever it is the stockholders are asking.

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Further reading


  • Davis, Stephen, Jon Lukomnik, and David Pitt-Watson. The New Capitalists: How Citizen Investors Are Reshaping the Corporate Agenda. Watertown, MA: Harvard Business School Press, 2006.
  • Hebb, Tessa. No Small Change: Pension Funds and Corporate Engagement. Ithaca, NY: Cornell University Press, 2008.
  • Kiernan, Matthew J. Investing in a Sustainable World: Why Green is the New Color of Money on Wall Street. New York: AMACOM, 2008.
  • Krosinsky, Cary, and Nick Robins (eds). Sustainable Investing: The Art of Long Term Performance. London: Earthscan, 2008.
  • Sullivan, Rory, and Craig Mackenzie (eds). Responsible Investment. Sheffield, UK: Greenleaf Publishing, 2006.


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