Typology: since not elsewhere disambiguated, divestment will be considered a form of shareholder activism in this article.
The aim of this call for information is to identify under what conditions shareholder activism or divestment is more appropriate. Shareholder activism referrers to the action and activities around proposing and rallying support for a resolution at a company AGM such as reinstatement or impeachment of a director, or a specific action like renouncing a strategic direction (like investment in coal). In contrast, divestment infers to withdrawal of an investment in a company by shareholders, such as a tobacco or fossil fuel company. By identifying the important variables that determine which strategy is most appropriate, activists and shareholders will be able to choose strategies that maximise social and environmental outcomes while companies will be able to maximise shareholder value.
Very little published academic literature exists on the consequences of divestment. Very little published academic literature exists on the social and environmental consequences of shareholder activism other than the impact on the financial performance of the firm, and conventional metrics of shareholder value.
Controversy (1)
One item of non academic literature, a manifestos on a socially responsible investing blog (http://www.socialfunds.com/media/index.cgi/activism.htm) weighs up the option of divestment against shareholder activism by suggesting that divestment is appropriate as a last resort, if considerable support is rallied, the firm is interested in its long term financial sustainability, and responds whereas voting on shareholder resolutions is appropriate when groups of investors are interested in having an impact. It’s unclear how these contexts are distinguished. DVDivest, a divestment activist group (dcdivest.org/faq/#Wouldn’t shareholder activism have more impact than divestment?) contends in their manifesto the shareholder activism is better suited to changing one aspect of a company's operation whereas divestment is appropriate when rejected a basic business model. This answer too is inadequate as a decision model since one companies can operate multiple simultaneous business models, own several businesses, and one element of their operation may not be easily distinguished from the whole system - the business. They also identify non-responsiveness of companies to shareholder action as a plausible reason to side with divestment.
Controversy (2)
Some have claimed that resolutions that are turned down have an impact. It’s unclear how to enumerate that impact and others. The enumeration of impacts is itself controversially and of course methodologically challenging.
Research Question(s)
Population: In publicly listed companies
Exposure: is shareholder activism in the form of proxy voting, submitting shareholder resolutions and rallying support for shareholder resolution
Comparator: compared to shareholder activism in the form of divestment
Outcome: associated with outcomes - shareholder resolutions (votes and resolutions) and/or indicators or eventuation of financial (non)sustainability (divestment) and/or media attention (both)
"If my college refuses to buy from a firm it hurts that firm a little, but if it refuses to buy stock in a firm it does that firm zero harm."
If a lot of people refrain from buying stocks from a given firm, don't they have to raise dividends or capital gains in order to attract capital? Those dividends or capital gains must be financed by cutting costs, raising prices or whatever. Either way, it does harm a firm when capital is not as cheap.
only if they do so in total secrecy.
If you're an analyst in a big trading firm you know that ,say, an oil company exists and is currently valued at a certain level by the market taking into account the available information about it's business and profits.
Later that company is targeted by divestment activists. A big university is pressured by economically illiterate students into selling all it's stock in the oil company.
The analyst's note this and know that the company is probably being slightly undervalued as a result and buy up some stock.
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