The Perils and Promise of Shareholders as Stakeholder Advocates

Document Type

Book Chapter

Publication Date

11-2024

Abstract

In the United States, institutional investors, such as BlackRock, Vanguard, and State Street, have been instrumental in advancing ESG and related stakeholder concerns. Through open letters and active engagement, these investors have outlined their expectations regarding ESG practices, while providing guidance on disclosure practices that ensure corporations appropriately address ESG. Institutional investors also have utilized the shareholder proposal process to encourage corporations to address critical ESG concerns. Nonetheless, critics argue that linking ESG and stakeholder interests to investors’ profit motives may hinder progress, limiting any focus on ESG solely to issues that can be linked to measurable economic benefits. This chapter offers a more optimistic perspective. It argues that shareholders have been strong advocates for stakeholders, moving the needle around several critical ESG issues including disclosure, board oversight, and increased corporate commitment to specific ESG goals. This chapter further argues that shareholders may be best positioned to ensure that corporations maintain a long-term focus on ESG and other stakeholders. Thus, rather than hindering progress, this chapter posits that the connection between ESG and financial returns may enhance corporate focus on ESG.

Keywords

"environmental, social, and governance (ESG)", shareholder engagement, stakeholder interests, corporate governance, institutional investors

Publication Title

Board-Shareholder Dialogue: Policy Debate, Legal Constraints and Best Pracitices

DOI

https://doi.org/10.1017/9781009360746.009

Link to Full Text

Available at Biddle Library

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