Responding here to John’s and Hauke’s comments above. I hugely appreciate these comments. Especially the highlighting of the marginal impact of the individual, that’s exactly the framework of analysis needed.
I want to focus specifically on the added value of being a shareholder for advocacy.
Nonprofits are able to be more radical, and have the edge in reaching the attention of the mainstream public—which is likely most important in advocacy campaigns focused on consumer-facing brands.
As I see it, both shareholder and nonprofit advocates have the ability to build larger coalitions, influence policy, and generate media attention.
But shareholder advocates are likely to be more effective for some campaigns. Shareholders are more primary stakeholders, can more easily meet with corporate decision-makers, have more credibility in interactions, can promote and frame issues in a business sense (this, by the way, is one of the most effective factors in shareholder engagement).
Shareholders can take established issues and push them over a critical threshold. They can be more effective when dealing with issues that are less obvious to the general public but still present long-term risks to corporations, as well as working with companies that aren’t consumer facing.
It is also likely that shareholders hold a particular advantage over advocacy nonprofits in authoritarian countries that are becoming increasingly antagonistic to nonprofits, while welcoming foreign investment.
I would love to more thoroughly map out what scenarios are most effective for shareholders vs. nonprofits, could be a great guide for effective advocacy.
On marginal impact and what an individual can do:
For most individual investors, the decision is which mutual fund to invest in. By investing in a fund that does shareholder advocacy on one’s behalf, the individual increases the mutual fund’s earnings, which helps it expand advocacy operations. Now if the fund didn’t do advocacy, those fees could have gone to a nonprofit so it could expand its operations and conduct more advocacy. But as I explained above I think there are a sufficient number of scenarios where that tradeoff would be worth it (I don’t think that shareholder advocacy should replace nonprofit advocacy, but I do think that it is much more neglected, and there are a lot of easy opportunities for shareholder advocacy impact).
The potential of SRI at scale is to have more shareholder advocacy staff to run more and bigger campaigns. Not just to have more assets behind a request.
I had a couple other thoughts but they weren’t that relevant and my comment was getting too long.
1. Shareholder advocacy often combats displacement effects because the campaigns often target entire industries (see Farm Animal Investment Risk and Return or Boston Common Asset Management’s Banks and Climate Change work as examples).
2. It makes sense for index investors to advocate for corporate policies that benefit their entire portfolio. They have incentives to encourage companies to minimize negative externalities (funny enough, some academics worry that index investors will discourage competition, and want to make them illegal). I’m not making any particular argument here, because if big investors explicitly acted on this line of reasoning it probably would become illegal, but I do find the thought interesting so I wanted to raise the point.
3. More people should be exploiting the clever hack! That’s actually how I got into this space :)