What is a Shareholder?
Several years ago, at a Goldman Sachs annual meeting, time was set aside for shareholders to ask questions of the CEO. A man approached the microphone and announced that he was a guest, not a shareholder, and wondered if he could ask a question. “No,” he was politely informed, “only shareholders can ask questions.”
It was a telling moment that spoke a significant truth about the corporate system – only shareholders count. For many, a responsible company is defined as a company that takes care of its shareholders. A nod will be given to other “stakeholders,” such as employees and community members affected by corporate activity, but only to the extent that these good relationships help create wealth for shareholders. Shareholders? That’s us. Most of us don’t know much about picking stocks, so we trust a financial advisor or a mutual fund manager to do this for us. Nearly 100 million Americans invest in mutual funds.
When you invest in a mutual fund, your money becomes part of a common pool of assets that the fund manager uses to invest in stocks or bonds or other financial instruments. It’s their job to look out for your best interests. A mutual fund is a profit-seeking vehicle, but it can also become a vehicle for the common good. Your small investment can be leveraged to help produce significant change.
Shareholders have not done a particularly good job monitoring the behavior of the companies they own. In fact, they are often a significant part of the problem. Corporations are some of the largest economic entities in the world, and they are managed with the steady drumbeat of "make me money" in the background. It should come as no surprise when companies cut corners on safety, oppose environmental regulations and outsource production where wages and worker protections are weakest. They do this to satisfy their shareholders. A year before the explosion in the Gulf of Mexico, Tony Hayward, BP’s former CEO, quipped that he pays his shareholders an annual dividend “to keep his job.”
Moral and financial concerns are not independent but interdependent. Corporate success depends on a delicate web of relationships with employees, customers, communities, governments, suppliers, investors, and ecosystems. Companies that treat these stakeholders with dignity and respect can prosper in the long run by avoiding problems and winning the loyalty of their employees and consumers. They can also create tremendous value for society. When oil companies like BP pay insufficient attention to worker health and safety, however, shareholders also suffer. And CEOs, like Mr. Hayward, lose their jobs.
So what does it mean to be a shareholder? A shareholder is a person of influence. Together, we have an opportunity to seek profits and wield that influence for the common good.
Read why Domini chose not to invest in BP, years before the Gulf of Mexico disaster. .