In the wake of widespread corporate scandals, the U.S. subprime mortgage meltdown and the global financial crisis, shareholders have embraced several initiatives designed to give them a stronger voice in companies and better protection for their investments. Shareholder propositions may provoke opposition and may generate story ideas.

In the United States, under SEC regulations, any share-holder who owns more than $2,000 in shares or 1 percent of a company is permitted to make a shareholder proposal. (The threshold may vary in other countries.)

Regulation and enforcement

In some markets, shareholders are pushing for tougher regulations on companies, particularly on disclosure and accountability, and more rigorous enforcement. Any such activism deserves the attention of journalists, who can also use the occasion to compare the rigor of their stock exchange’s requirements with those in other countries.

Corporate social responsibility

Shareholders and stakeholders — such as customers, neighbors of company facilities and vendors — and governments often demand that companies act responsibly in protecting the environment, using natural resources sparingly and treating employees fairly.

Investors point to the business case for corporate social responsibility, saying that companies can earn good returns and outlast competitors. Pension funds, such as Norway’s, are using guidelines and codes to evaluate whether companies in their portfolio or under consideration are good corporate citizens. More than 550 investment funds managing $18 trillion have signed U.N. Principles for Responsible Investment, a set of international guidelines, using their capital as clout.

Clashes between companies and community activists and investors are ideas for good news stories. For several years, Coca-Cola Co. in India has been under pressure to resolve water-scarcity problems farmers say are caused by Coke’s bottling plants. For a story on the controversy, which also involves Intel Corp. in China, see: http://bloom.bg/HRwPGC

From 2011 onward, the Bear Creek Mining Corporation has faced as many as 25,000 protestors in Peru. Strikes erupted, and major highways were blocked with boulders to protest a new silver mine farmers feared would interfere with their livelihood. Women in the Niger Delta of Nigeria seized oil rigs to demand economic benefits from Chevron Nigeria Limited.

Governments may also apply pressure on companies that do business in their countries, especially when the business involves tapping into a country’s natural resources. In Tanzania, for example, President Jakaya Kikwete urged extractive industries to buy goods and services locally.

“This will ensure a good relationship between the companies and the communities where they operate, otherwise hostilities between the two cannot be avoided,” he said.

The way that boards address social responsibility sheds light on their corporate governance policies and practices and their investment outlook. Allowing chemicals to pollute surrounding communities may be a sign of deeper problems, from out-of-date manufacturing technologies to erosion in profits.

Questions for journalists to ask when covering issues involving corporate social responsibility include:

• Is the company listening to complaints and addressing them?

• Does anyone on the board or in senior management have conflicts of interest that allow them to benefit from the company using vendors who violate employment and environmental protection laws?

• Do stakeholders have valid criticisms?

• What will it take to fix the problems and what is the cost of the solutions?

• Is there any cover-up?

Watch to see whether crises arising from CSR conflicts lead to changes in leadership, harm the company’s reputation and profits, create political problems for the government or press regulators to impose workplace, environmental and other regulations.

Institutional investors and nongovernmental organizations, such as environmental groups that have done independent evaluations of companies, are typically good sources for corporate social responsibility stories.

To better understand whether companies observe best practices, compare their track record with guidelines from CLSA Asia Pacific Markets, which does an annual review of companies in Asia; the United Nations Global Compact; the Equator Principles of the International Finance Corporation; and the U.N. Principles for Responsible Investment developed by the world’s largest pension funds.

These best practices include:

Tag-along rights
Protects minority shareholders if a majority shareholder sells a stake. Under this rule, if adopted by a company, minority shareholders have the right to join the transaction and sell their shares.

Separate chairman/CEO
See Chapter 2 for discussion of this issue.

Say on pay
Gives shareholders a nonbinding vote on executive compensation. In many countries, shareholders have been given this right as an advisory vote. Negative advisory votes are worth following, especially if they occur in successive years.

For a story on Australia’s “two-strikes” compensation policy, see: http://bit.ly/HPb2Qv