What is shareholder engagement?

Shareholders get a say in how the companies they own shares in are run. For example, investors get to submit proposals for a vote during the companies’ annual meetings. These proposals are known as shareholder resolutions. The resolutions increasingly target ESG issues, such as carbon emissions or workplace diversity.

Notable 2020 proposals included deforestation at Procter & Gamble and climate lobbying at oil major Chevron. In 2021, more ESG resolutions received majority support from shareholders. For example, a small activist investor, Engine No. 1, got to appoint three directors to the Board of oil giant ExxonMobil with the goal of reducing Exxon’s carbon footprint.

Shareholder votes aren’t generally binding, but even so, it’s getting harder for management to ignore them. Even if the shareholder resolution doesn’t pass but garners support, it can help by bringing certain issues to the management’s attention.

Shareholder resolutions that pass are generally filed by institutional investors such as asset management firms. Doing it as an individual investor is nearly impossible. There are multiple rules outlining minimum ownership requirements and the length of stock ownership.