Rehbein, Waddock & Graves: Corporate Social Exposure, Risk, and Shareholder Resolutions


Why do some companies get targeted by shareholder activists and others not? Despite the volume of shareholder resolutions submitted, little is known about why certain corporations become the targets of social policy shareholder resolutions (IRRC, 1999). This study takes the position that targeted companies are more “socially exposed” (Miles, 1987) in a variety of ways and that it is this social exposure that draws attention from activists. Social exposure is potentially evidenced through size and profitability, high levels of CEO compensation, problems of corporate governance, diversity, and human rights, products that are problematic in the eyes of some investors, overall risk, as well as in the very nature of the industry in which a company participates.

The present study uses nearly 3000 social-policy shareholder resolutions (or proxies) submitted to companies between 1988-1999 and social research firm of KLD’s database on corporate responsibility. We find significant relationships between corporate practices and activists’ targeting of companies with social policy resolutions for size, CEO compensation, governance, human rights, product characteristics, and some industries, but not for profitability, diversity, or risk. We conclude that shareholders activists appear to provide a social monitoring function. They single out firms that may be qualitatively  worse than other corporations with respect to their social agenda on specific issues of concern.


Available for download here.