Concentrated attention on institutional investors' activism has been perceived in the last few decades and further intensified in the post‐Enron era. A new area of particular significance that has emerged is institutional investors' growing awareness and practice of socially responsible investment (SRI). This article starts by reviewing the importance of institutional investor activism and the historical implication of SRI. Significantly, various elements that give rise to the growth of SRI in the modern business world are considered in (...) detail. It is recognized that, although current empirical evidence suggests ambiguous effects of SRI, the positive impact of institutional investors' activism on SRI is likely to have been undermined due to the underdevelopment of evaluation systems, and SRI should stand out as a good investment option for its joint financial and societal concerns. Nevertheless, obstructions still exist in the exercise of investor activism and the pursuit of SRI strategy, which implies that, at least in the near future, SRI strategy will remain as a minor investment trend for institutional investors in Anglo‐American countries. Additional regulatory methods and awarding schemes are, therefore, expected to motivate institutional investors' activism on SRI, and subsequently to promote global sustainability. (shrink)

An important goal of ethical investment is to influence companies to improve their ethical and environmental performance. The principal means that many ethical funds employ is passive market signalling, which may not, on its own, have a significant effect. A much more promising approach may be active engagement. This paper reports on a questionnaire study of a sample of 1146 ethical investors in order to assess whether U.K. ethical investors would support more activist ethical investment and whether they would be (...) prepared to invest in companies which are failing ethically in order to do so. The results show general support for the current practice of passive signalling accompanied by "soft" engagement in the form of lobbying and the development of dialogue in order to improve corporate practice. The "harder" options of investing in companies that err in order to change them is, however, favoured by consistent minorities. (shrink)

Shareholder activism challenges management control over the corporate status quo. Drawing on reactance theory and recent empirical work on corporate political activity and on firms’ response to shareholder activism, and testing using data complied by the Interfaith Center for Corporate Responsibility, the Federal Election Commission and others for S&P 500 firms from 1999-2006, we find evidence that CPA buffers firms from corporate social responsibility-related or socially-oriented shareholder proposals. Greater CPA, particularly greater relational CPA, influences responses of the U.S. (...) Securities and Exchange Commission as well as responses of the targeted firm, to help neutralize socially-oriented shareholder activism. (shrink)

Corporations, which in the past have been hesitant to contribute to conversations regarding political and social issues, are increasingly speaking out on current issues such as race, sexual orientation, gender, immigration, and environmental issues. Despite this trend, limited academic research has focused on how corporate sociopolitical activism (CSA) efforts impact firm value. In addition, extant studies have not fully identified the extent to which the firm and their message influence the outcomes of this approach. The current study explores how (...) sociopolitical stances communicated on Twitter affect firms’ stock prices. Results from an event study of 260 incidents of CSA show that CSA efforts decrease firm value by an average of 0.22%, indicating that wading into social or political issues is a risky strategy. However, further analysis highlights the importance of clearly articulating stances on social issues that align with the firm’s core values. (shrink)

The study explores the challenges UK-based institutional investors face when trying to monitor investee companies and influence their social, environmental, and governance practices. Consistent with previous research, I find that misalignment of interests within the investment chain and dispersed ownership are factors which inhibit investor activism. However, other underexplored challenges include lack of investee company transparency and investor experience in activism, as well as low client demand for engagement and internal conflicts of interest. The results contribute (...) to the literature on institutional investor activism by using direct empirical evidence to systematically discuss the challenges to stewardship. Given the intensification of media and regulatory attention on shareholders in the post-global financial crisis era, coupled with investors’ growing awareness and practice of stewardship, the research opens new avenues for enquiry which go beyond the on-going debate about the monitoring versus short-termism roles of institutional investors. (shrink)

Investment in financially distressed companies has taken place since the end of the depression. But a new breed of predatory activist investors called "vultures" has emerged in recent years. They take sizable debt positions in insolvent companies with the intention of significantly increasing the value of their investment through aggressive negotiation either in bankruptcy or in pre-bankruptcy restructurings. Predators thrive on adversarial conflict. Vulture investment is legal, but is it morally acceptable? This paper argues that the strategies and tactics of (...) vultures may be very unpleasant, but in themselves these are insufficient grounds for moral censure. (shrink)

This empirical study examines corporate responses to activist shareholder groups filing social-policy shareholder resolutions. Using resource dependency theory as our conceptual framing, we identify some of the drivers of corporate responses to shareholder activists. This study departs from previous studies by including a fourth possible corporate response, engaging in dialogue. Dialogue, an alternative to shareholder resolutions filed by activists, is a process in which corporations and activist shareholder groups mutually agree to engage in ongoing negotiations to deal with social issues. (...) Based on a unique dataset of resolutions filed by member organizations of the Interfaith Center on Corporate Responsibility from 2002 to 2005 and the outcomes of these resolutions, our analysis finds that corporate managers are more likely to engage in dialogue with shareholder activists when the firm is larger, is more responsive to stakeholders, the CEO is the board chair, and the firm has a relatively lower percentage of institutional investors. (shrink)

We study 944 shareholder proposals submitted to 343 U.S. firms on climate change issues during 2009–2022. We use logistic and two-stage regression to estimate the propensity for a firm to be targeted or subjected to a vote at the annual general meeting and, for voted proposals, the determinants of that vote. We also examine whether climate-related proposals affect investor returns and how they relate to firms’ future environmental performance and greenhouse gas emissions. Compared to a matched sample, we first (...) find that activists target larger, more carbon-intensive, and less R&D-active firms. Second, voting likelihood is higher for firms with repeated and operations-related proposals and lower pre-proposal environmental ratings. By contrast, disclosure-related proposals are likelier to be negotiated and withdrawn. Third, repeated and operations-related proposals receive higher votes in favor, whereas votes on carbon-intensive firms do not. Fourth, building on the theory that investors act as if they distinguish among the different shareholder proposals based on the expected cost to the firm, we find evidence to support this idea. We find that investors respond negatively to ex-ante costlier proposals, such as those that relate to emissions reduction and target carbon-intensive firms. Fifth, targets’ future environmental performance rating is almost twenty percent higher after a proposal than before compared to the matched sample, whereas emissions do not budge appreciably. (shrink)

Investors with a pro-social or sustainability agenda increasingly attempt to influence firm managers to adopt socially responsible behavior, either through positive/reward tactics or negative/punishment tactics. This paper considers how investors can use each approach to differentially influence managers to make more CSR investments. The paper uses game theory with an all-pay contest structure to model how a large institutional investor could reward firms for CSR activities by creating a socially responsible investment fund (reward contest) or punish firms via shareholder (...) activism (punishment contest). We identify conditions under which the punishment contest induces a higher level of CSR activity among firms compared to the reward contest. Managers bearing substantial private costs stemming from the activism is one such condition. Spillover effects are seen as the other managers in the economy engage in CSR to avoid being punished by the investor’s activism. This level of engagement is not the case when rewards are used—only those managers with an expectation of being rewarded increase their CSR activity in that scenario. This suggests, for example, that incorporating thresholds or tiers (e.g. gold, silver, and bronze-level winners) can increase the effectiveness of reward contests. Implications for designing both positive and negative CSR inducements are explored. We also identify the ethical dilemmas that relate to such influence attempts. (shrink)

Institutional investors control almost 60% of all assets under management worldwide and encompass a wide variety of organizations. Despite this reach, however, institutional investors have not received the normative scrutiny they merit beyond general discussions around their legally grounded fiduciary obligations to their beneficiaries. This paper offers a discussion of institutional investor ethical obligations in light of their specific attributes. We propose that the different characteristics of institutional investors and the diverse roles they play in the marketplace inform the (...) scope of their activities, and, in turn, the different ways in which their basic ethical obligations can be fulfilled. (shrink)

This paper investigates the emerging effect of mutual fund involvement on the agency problem between majority and minority shareholders during the pre-IFRS period in China indicated by earnings informativeness from an ethical perspective. We find that the presence of mutual fund hampers earnings informativeness implying that mutual funds in general, at their early stage in China, are not yet capable of serving as an effective monitor. This finding is in sharp contrast to the role of institutional investors in mature markets (...) as documented in the literature. However, mutual funds affiliated with banks have been found to be effective to improve earnings informativeness of Chinese listed companies, and the impact is more pronounced among those affiliated with joint-equity banks compared to their counterparts affiliated with state-owned banks. (shrink)

A generation ago, Barber and Rifkin [The North Will Rise Again: Pensions, Politics and Power in 1980s (Beacon Press, Boston)] envisioned a new strategy for American Labor that would make extensive use of the capital in multi-employer and public pension plans. They argued that organized labor could influence how these funds were invested in order use this capital as both a weapon in struggles with recalcitrant management and as a tool to generate new union jobs. A number of union officials (...) took this advice seriously, to make labor-connected individuals and organizations were among the most determined and successful investor activists of the 1990s. It is, however, hard to find evidence that this activism has effectively met the goals of organized labor, leading to the ironic conclusion that the innovations of labor's investor activist will do more to assist the investment community than the American labor movement. (shrink)

The activism of institutional investors tends more and more toward the supervision and control of the behavior of the managers of big companies. In this article, we present a model based on the creation of an activism index that lets us evaluate such activism's effect on the sensitivity of the investment policies of a company in the face of financial variables and market variables. To test our assertions, we analyze firm-level data for United Kingdom, Germany, France, Denmark, (...) and Spain during the period 1995-2004. Our results point to a significant reduction in the sensitivity of company investment decisions in the face of these variables, especially relative to intangible capital, as a result of the neutralizing effect of activism on the high agency costs of free cash flow and on the information asymmetries of the market. (shrink)

The activism of institutional investors tends more and more toward the supervision and control of the behavior of the managers of big companies. In this article, we present a model based on the creation of an activism index that lets us evaluate such activism's effect on the sensitivity of the investment policies of a company in the face of financial variables and market variables . To test our assertions, we analyze firm-level data for United Kingdom , Germany, (...) France, Denmark, and Spain during the period 1995-2004. Our results point to a significant reduction in the sensitivity of company investment decisions in the face of these variables, especially relative to intangible capital, as a result of the neutralizing effect of activism on the high agency costs of free cash flow and on the information asymmetries of the market. (shrink)

The activism of institutional investors tends more and more toward the supervision and control of the behavior of the managers of big companies. In this article, we present a model based on the creation of an activism index that lets us evaluate such activism’s effect on the sensitivity of the investment policies of a company in the face of financial variables (such as cash flow and liquidity ratio) and market variables (ownership concentration and value creation index). To (...) test our assertions, we analyze firm-level data for United Kingdom (U.K.), Germany, France, Denmark, and Spain during the period 1995–2004. Our results point to a significant reduction in the sensitivity of company investment decisions in the face of these variables, especially relative to intangible capital, as a result of the neutralizing effect of activism on the high agency costs of free cash flow and on the information asymmetries of the market. (shrink)

In the mid-1990s, global labour standards emerged as a new and important are of concern for socially responsible investors, especially with respect to investments in the "problematic" footwear, apparel, and toy industries. In this paper, I elucidate the primary areas of concern for investors and discuss a framework for evaluating firms'' labor standards performance. In addition, I argue that today''s sweatshop debates follow closely those of centuries ago, with the standard economic defense of low wage manufacturing on the one hand, (...) and the activists'' protests against poor conditions and wages on the other. An examination of this historical context reveals a promising middle ground in this ongoing debate. (shrink)

The popular view of shareholder activism focuses on shareholder resolutions and the shareholder vote via proxy statements at the annual meeting, which is treated as a "David vs. Goliath" showdown between the small group of socially responsible investors and the powerful corporation. This article goes beyond the popular view to examine where the real action typically occurs-in the Dialogue process where corporations and shareholder activist groups mutually agree to ongoing communications to deal with a serious social issue. Use of (...) the capitalized word "Dialogue" is intended to distinguish this formal process between corporations and shareholders from all the other forms of dialogue or twoway communication exchanged between a corporation and its stakeholders. The phenomenon of Dialogue between a corporation and dissident shareholders has not been analyzed in the academic literature or in the popular press because it occurs behind the scenes and out of sight from media scrutiny. Yet this is where a great deal of social change initiated by shareholder activists is negotiated. This article contributes both theoretically and empirically to the study of Dialogues between shareholder activists and corporations. We explain how Dialogues occur in the context of the shareholder resolution process and examine two Dialogues that focus on international labor issues in two industries. Then data on Dialogues during the period, 1999-2005, from the Interfaith Center on Corporate Responsibility are analyzed. This research contributes to knowledge about the Dialogue process and the emerging literature on corporation-stakeholder engagement. (shrink)

The popular view of shareholder activism focuses on shareholder resolutions and the shareholder vote via proxy statements at the annual meeting, which is treated as a “David vs. Goliath” showdown between the small group of socially responsible investors and the powerful corporation. This article goes beyond the popular view to examine where the real action typically occurs – in the Dialogue process where corporations and shareholder activist groups mutually agree to ongoing communications to deal with a serious social issue. (...) Use of the capitalized word “Dialogue” is intended to distinguish this formal process between corporations and shareholders from all the other forms of dialogue or two-way communication exchanged between a corporation and its stakeholders. The phenomenon of Dialogue between a corporation and dissident shareholders has not been analyzed in the academic literature or in the popular press because it occurs behind the scenes and out of sight from media scrutiny. Yet this is where a great deal of social change initiated by shareholder activists is negotiated. This article contributes both theoretically and empirically to the study of Dialogues between shareholder activists and corporations. We explain how Dialogues occur in the context of the shareholder resolution process and examine two Dialogues that focus on international labor issues in two industries. Then data on Dialogues during the period, 1999–2005, from the Interfaith Center on Corporate Responsibility are analyzed. This research contributes to knowledge about the Dialogue process and the emerging literature on corporation–stakeholder engagement. (shrink)

As one of the more progressive facets of the socially responsibleinvestment movement, shareholder activism isgenerally recommended or justified on the grounds that itcan create social change. But how effective are differentkinds of activist campaigns likely to be in this regard? Thisarticle outlines the full range of different ways in whichshareholder activism could make a difference by carefullygoing through, first, all the more specific lines of actiontypically included under the shareholder activismumbrella and, second, all of the different ways in (...) which ithas been suggested that these could influence the activitiesof commercial companies. It is argued that – althoughmuch more empirical research is needed in the area – thereare at least theoretical reasons for thinking that it will bedifficult to influence companies through the standardactions of filing or voting on shareholder resolutions.However, some alternative strategies open to activists mayallow them to increase their efficacy. It is specificallyargued that even individual investors could be able to pushfor corporate change through devising a radically selfsacrificialcampaign that manages to get the attention ofpowerful forces outside the corporate sphere. (shrink)

The popular view of shareholder activism focuses on shareholder resolutions and the shareholder vote via proxy statements at the annual meeting, which is treated as a “David vs. Goliath” showdown between the small group of socially responsible investors and the powerful corporation. This article goes beyond the popular view to examine where the real action typically occurs – in the Dialogue process where corporations and shareholder activist groups mutually agree to ongoing communications to deal with a serious social issue. (...) Use of the capitalized word “Dialogue” is intended to distinguish this formal process between corporations and shareholders from all the other forms of dialogue or two-way communication exchanged between a corporation and its stakeholders. The phenomenon of Dialogue between a corporation and dissident shareholders has not been analyzed in the academic literature or in the popular press because it occurs behind the scenes and out of sight from media scrutiny. Yet this is where a great deal of social change initiated by shareholder activists is negotiated. This article contributes both theoretically and empirically to the study of Dialogues between shareholder activists and corporations. We explain how Dialogues occur in the context of the shareholder resolution process and examine two Dialogues that focus on international labor issues in two industries. Then data on Dialogues during the period, 1999–2005, from the Interfaith Center on Corporate Responsibility are analyzed. This research contributes to knowledge about the Dialogue process and the emerging literature on corporation–stakeholder engagement. (shrink)

The purpose of this Article is to consider a novel framework for institutional shareholders’ activism in the United States. This new activism framework would be aimed at improving, at minimal costs, the performance of the portfolio companies in which institutional shareholders invest. The Article begins by laying out this new activism framework and then compares the proposed framework with the prevalent mode of activism through hedge funds. The Article concludes with a discussion of certain implementation challenges, (...) and calls for future research into the proposed activism framework. (shrink)

As one of the more progressive facets of the socially responsible investment (SRI) movement, shareholder activism is generally recommended or justified on the grounds that it can create social change. But how effective are different kinds of activist campaigns likely to be in this regard? This article outlines the full range of different ways in which shareholder activism could make a difference by carefully going through, first, all the more specific lines of action typically included under the shareholder (...) activism umbrella and, second, all of the different ways in which it has been suggested that these could influence the activities of commercial companies. It is argued that – although much more empirical research is needed in the area – there are at least theoretical reasons for thinking that it will be difficult to influence companies through the standard actions of filing or voting on shareholder resolutions. However, some alternative strategies open to activists may allow them to increase their efficacy. It is specifically argued that even individual investors could be able to push for corporate change through devising a radically selfsacrificial campaign that manages to get the attention of powerful forces outside the corporate sphere. (shrink)

It has been argued amply that alternative theoretical approaches to the corporate governance phenomenon can be a valuable complement to the mainstream economic approach. However, such approaches are largely embryonic and empirical studies based on more organisationally oriented theory are few and geographically limited. The purpose of the present article is to discuss the value of organisationally oriented approaches to corporate governance as a complement to more traditional economic approaches. This is accomplished by discussing the findings of an empirical study (...) on Swedish shareholder activism in the light of institutional sociology. The study demonstrates how the preferences and actions of investors are institutionally determined, and not only influenced by regulation and law, but also by moral obligations, societal expectations and relational ties. Thus, the study demonstrates the value of complementing economic explanations with more institutionally and organisationally oriented accounts, in order to better understand shareholder activism in particular, and corporate governance in general. (shrink)

We study behind-the-scenes investor activism promoting environmental, social, and governance improvements by means of a proprietary dataset of a large international, socially responsible activist fund. We examine the activist’s target selection, forms of engagement, impact on ESG performance, drivers of success, and effects on the targets’ operations and value creation. Target firms are typically large and visible, perform well, and have high liquidity and low ESG performance. Engagement induces ESG rating adjustments: firms with poor ex ante ESG ratings (...) experience a ratings increase after complying with the activist’s demands, whereas firms with high ex ante ESG ratings experience a ratings decrease following the revelation of their ESG problems. Activism that is focused on environmental and social issues is more likely to succeed if targets are ESG-sensitive. Successful engagements boost targets’ sales. Risk-adjusted excess stock returns of successful engagements outperform those of unsuccessful engagements by 2.7%. Results are especially strong for firms with low ex ante ESG scores. Specifically, targeted firms in the lowest ex ante ESG quartile outperform matched peers by 7.5% in the year after the end of the engagement. Our results thus suggest that the activism regarding corporate social responsibility generally improves ESG practices and corporate sales and is profitable to the activist. Taken together, we provide direct evidence that ethical investing and strong financial performance, both from the activist’s and the targeted firm’s perspective, can go hand-in-hand together. (shrink)

Some institutional investors are exposed to social norms and public scrutiny. Prior research indicates that these norm-constrained institutions engage in negative screening and invest less in firms operating in ‘sin’ industries. We examine whether social norms also motivate these institutions to engage in positive screening—where they invest more in firms with better corporate social responsibility performance—and CSR-related activism—where they promote improvements in the CSR of existing investees. We find that firms with superior CSR performance have greater ownership by norm-constrained (...) institutions, consistent with positive screening, and we use a natural experiment to establish causality. We also find that increases in the shareholdings of norm-constrained institutions are associated with subsequent improvements in CSR, consistent with activism. Further, we rule out an alternative explanation for our results where the positive screening and activism are ‘profit-driven’ rather than driven by social pressure. Thus, our results suggest that the influence of social norms on stock markets is more pervasive than documented in the prior literature. (shrink)

Institutional investors are increasingly becoming active owners through voting their shares and engaging in dialogue with investee companies to improve corporate environmental, social and corporate governance (ESG) performance. This article applies a model of stakeholder salience to the shareholder context, analysing the attributes of power, legitimacy and urgency, to determine the factors that are likely to enhance shareholder salience. It is found that a strong business case and the values of the managers of investee companies are likely to be the (...) most important contributors to shareholder salience. (shrink)

Psychedelic or ecodelic medicines (e.g., psilocybin, ayahuasca, iboga) for the care and treatment of addiction, post‐traumatic stress disorder, cancer, cluster headaches, anxiety, and depression have surged to the forefront of discussions about mental health in the US, leading to the emergence of well‐capitalized biotech companies offering multimillion‐dollar IPOs. Venture capital website Pitchbook reports “continuing investor interest and growing acceptance of what until recently was seen as a fringe area of medicine.” As scholars, activists, and practitioners who have been healed (...) by these medicines and applaud the recent wave of decriminalization after a long, strange trip of mass incarceration and widespread dangerous misinformation, we look forward to a culture that makes these medicines available in a safe and affordable way that respects the lineages of the knowledges that are essentially and not accidentally bundled with these plants—Indigenous and counterculture wisdoms for whom these medicines were never “fringe,” but always foundational. In place of corporadelia's pursuit of standardization, we emphasize the care and wisdom of the Indigenous and countercultural teachings—traditions that have made psychedelics available to the emerging corporate/research partnership in the first place. These knowledge traditions offer foils to the ongoing translation of university peer‐reviewed research into market copy, technical articles, and IPOs, and the concomitant emergence of psychedelic pundits. In particular, we examine instances where prominent researchers have overstated the findings of existing clinical trials in public‐facing representations of the field. We argue that these corporate priorities and tactics are being aided by a new wave of psychedelic “thought leaders” who seek to delegitimize non‐hierarchical approaches to knowledge production and community support within a psychedelic commons. While prominent psychedelic psychiatrists and behaviorists are focused on rooting out and transforming individual habits of mind, we argue that there is another, latent potential for psychedelics to draw attention to—and transform—the invisible, hegemonic infrastructures and ideologies that subtly naturalize and perpetuate deeply unequal societies. (shrink)

Despite its aesthetic appeal, the Iranian resort Majara is poised to be a sore point among local residents. Looking at the 200 vibrant oddly-shaped domes might make you feel you’re on a Wes Anderson movie set.The Majara Residence overlooking the Persian Gulf offers homes and resort-like accommodation, complete with cafes, restaurants, souvenir shops, tourist information, a prayer room, laundry, storage and more. Located at Hormuz (or Ormuz) Island, a historic port off the southern coast of Iran, the project is designed (...) to attract tourists to the small island and serve as an alternative to high-rise developments traditionally used to house visitors. Presence in Hormuz 2 is a series of urban development projects designed by the Tehran-based ZAV Architects. Majara (which means adventure) is the second phase of this multipurpose cultural residence, aimed at binding together the lives of local people and visitors culturally and economically. On the verge of opening, this project has been heavily criticised by environmental activists and urban experts citing ecological, economic, cultural and social concerns. Such projects have made locals mere servants in service of investors, which impedes the enhancement of their quality of life. (shrink)

Recent years have featured a spate of regulatory action pertaining to the development and/or disclosure of corporate governance structures in response to financial scandals resulting in part from governance failures. During the same period, corporate governance activists and institutional investors increasingly have called for increased voluntary governance disclosure. Despite this attention, there have been relatively few comprehensive studies of governance disclosure practices and response to the regulation. In this study, we examine a sample of 50 U.S. firms and their public (...) disclosure packages from 2004. We find a high degree of variability in the presentation and reporting format choices for many elements of the governance structure. This variability includes several items for which disclosure is mandated by regulators or legislative action. In particular, smaller firms offer fewer disclosures pertaining to independence, board selection procedures, and oversight of management (including whistleblowing procedures). There are also trends associated with board characteristics: boards that are less independent offer fewer disclosures of independence and management oversight matters. Moreover, large firms provide more disclosures of independence standards, board selection procedures, audit committee matters, management control systems, other committee matters, and whistleblowing procedures but do not appear to have a strictly superior information environment when compared to smaller firms. The findings raise questions about compliance with regulatory requirements and the degree to which conflicts of interest between managers and directors are being controlled. While there have been notable improvements in the information environment of governance disclosures, there remain structural issues that may possess negative ramifications for stakeholders. (shrink)

This paper reviews the development of socially responsible investment (SRI) in the Spanish financial market. The year, 1997 saw the appearance in Spain of the first SRI mutual fund, but it was not until late 1999, that major Spanish fund managers offered SRI mutual funds on the retail market. The development of SRI in the Spanish financial market has not experienced the high levels of development seen in other European countries, such as France or Italy, where interest in SRI began (...) during the same period. This paper presents an analysis of the impact of SRI mutual funds managed by Spanish fund managers comparing the evolution of managed assets and number of investors. We also analyse the investment strategies adopted by these funds, which mainly use negative screening criteria and the participation of non-governmental organisations as institutional investors. An analysis of the take up of socially responsible investment in the Spanish financial market shows majors deficits in this process. This is due to Spanish investors having limited sensitivity to social issues and knowledge of SRI, and a lack of development of SRI investment strategies, such as engagement or shareholder activism by fund managers. Furthermore, the take-up of SRI mutual funds in the Spanish financial market coincided with a fall in the stock market at the beginning of the 21st Century. We conclude with an analysis of the relationship between SRI and Corporate Social Responsibility (CSR). (shrink)

Ethical investing is all the rage. Unfortunately, excitement about it has outpaced plausible philosophical discussions. This article asks and answers two questions: “What counts as investment?”, and “What moral choices do investors have?”. I answer the first question broadly. Investment is pervasive in our economy, and by participating we share responsibility for corporate practices. These facts lead to an “austere conclusion”: short of outright withdrawal from the standard forms of investment, we have little hope of avoiding participation in immoral activities. (...) Thus we must withdraw. Fortunately, the answer to the second question mitigates this disturbing result. Under certain circumstances, shareholder activism aimed at moral goals is a valuable way to participate in a deeply flawed system. By demonstrating the pervasiveness of investment and analogies with consumption and democratic political participation, the conclusions of this paper illuminate not only the ethics of investment but a more-general problem of individual responsibility in complex institutions. The paper is informative both for its applicability to these latter questions, and for its demonstration that investment is not merely a side-topic for business ethics texts, but rather a central problem of modern market societies. (shrink)

In the contemporary US, a configuration of market theocracy has melded together laissezfaire economics and right-wing religious conservatism, in spite of the many differences among the groups involved; it is a configuration that remains powerful even as it is increasingly fractured. Market theocracy draws on the mechanism of literalism, not the literal reading of texts but a concept of realism based on a belief in a common-sense version of unmediated natural law. Literalism filters meaning through two concepts long available in (...) American culture: spirit and surrender. Analyzing this configuration requires an analysis of a double structure: a highly complex deployment of strategic vagueness, joined to claims of simple clarity, and wrapped in passionate, emotional intensity. It is the most valuable prize in mass-mediated US politics. This article traces literalism by way of the concepts of ‘surrender’ and ‘spirit’ in three secular discourses: a best-selling marriage self-help book for women; marketing texts directed at entrepreneurs and investors; and an academic study written for neoconservative economists, in order to assess the importance of the strategic deployment of literalism. Unlike the literal, literalism draws on the most advanced sophisticated technological resources of modernity in order to produce a form of ‘vague clarity’ characterized by passionate, affective intensities. This literalism often confounds scholars and activists on the left who, in too many cases, still presume that knowledge and faith, the secular and the religious, the rational and the emotional can be kept ‘cleanly’ separate. (shrink)

The development of the aquaculture industry in Canada has triggered a conflict of a scope never seen before. As stated in Young and Matthews’ The Aquaculture Controversy, this debate has “mushroomed over the past several decades to become one of the most bitter and stubborn face-offs over industrial development ever witnessed in Canada” (Young and Matthews in The aquaculture controversy in Canada. Activism, policy and contested science. UBC Press, Vancouver, p 3, 2010). It opposes a wide variety of actors: (...) from industrial investors, scientists, politicians and environmentalists to Native associations and communities, citizens groups and local stakeholders. The opposition is fierce between those in favor of a flourishing and modern aquaculture of industrial nature and those who fear the dreadful consequences of such an industry. In particular, the possible implementation of biotechnology innovations, such as a genetically modified salmon, has made this debate coextensive with the GMO debate, thus multiplying the opposition’s spectrum of arguments against the industry. Throughout the debate, Canadian environmental NGOs like the Suzuki Foundation and Greenpeace Canada have assumed leadership over the opposition to aquaculture development with certain success. Their participation in the debate features numerous ethical concerns related to environmental health, a respect for wilderness and local human communities. Such a position can be associated overall with a form of ecocentric ethics or concern. Nevertheless, a careful examination of the technical solutions proposed by these NGOs reveals their embeddedness in biocentrism. Through the example taken from the Canadian debate on aquaculture development, this paper aims to highlight the conceptual difficulty of enacting ecocentric ethical positions beyond formal arguments. Because ecocentrism implies a true paradigm shift, not only in mentality, but also in the way we conceive our technical interventions in nature, biocentrism remains an important practical method to enact ethical positions related to environmental concerns in public debates. (shrink)

A stock divestment campaign is a common strategy used by social activists to pressure corporations to abandon undesirable practices. However, evidence on the effectiveness of the strategy remains mixed. In this paper, we examine the effectiveness of an international stock boycott by studying a large sample of institutional investor transactions in four emerging market stocks targeted by the Sudan divestment campaign from 2001 to 2012. We find evidence of a negative relationship between the intensity of the campaign and the (...) ownership breadth of the stocks, suggesting the effectiveness of the campaign in encouraging investors to divest from targeted companies. Additional analysis indicates that investors in countries that are sympathetic towards CSR activities are more responsive to the divestment campaign. Further, we find evidence consistent with higher campaign intensity being associated with more depressed stock prices. Finally, when performing qualitative content analyses of the annual reports and CSR reports, we find evidence about the effects of the campaign on the targeted companies’ corporate policies and activities in Sudan. In sum, our results support the effectiveness of the stock boycott. (shrink)

This paper investigates how social movements generate new and profit-driven organizational forms in the context of Socially Responsible Investment. Building on empirical evidence from previous research, we highlight the transformation of SRI from an activist-driven movement aimed at lobbying corporations for social causes to a profit-driven industry focused on generating revenue for investors. We first show this change as it occurs across time in the US. Then, we discuss the cross-cultural diffusion of this practice from US to two continental European (...) countries. We provide a collective action model framework to account for this process of institutional commodification. (shrink)

For the last few months the financial crisis is being widely discussed. However, it was foreseen some time ago by at least two people who named its deep causes. A philosopher of culture, Zygmunt Bauman, claims that a postmodern utopia of “morality without ethical code” makes it impossible to solve problems created by our era of “liquid modernity”. George Soros, an American currency speculator, stock investor, businessman, philanthropist, political activist, and a pupil of Karl Popper, maintains that the crisis (...) is a result of a victory of “transaction morality” over “morality of the open society”. The two diagnosis of the present crisis show that the process of deregulation of the economy should not lead to the point where ethics loses its normative functions. This is the lesson of the crisis. Capitalism must be ethical or none. (shrink)

The US Securities and Exchange Commission recently proposed rules relating to shareholder (independent) director nominations to publicly-traded companies. While shareholder groups, such as institutional investors, consumer groups, and shareholder activists, generally support the proxy reform, the business community, including The Business Roundtable and the US Chamber of Commerce, are critical of the proposal, arguing that it will 'open the door' to special interest directors, e.g., labour unions or other groups having a social or political agenda contrary to the economic interests (...) of the shareholder owners of the corporation. An analysis of the proposed rules, however, show that the mechanisms offered to nominate and elect independent directors offer little or no threat of any shareholder group placing special interest directors on the board of a publicly-traded company in the USA. The article concludes with a recommended managerial course of action for executives and boards to follow in the unlikely event that shareholders are seriously threatening to place a special interest director(s) on the proxy ballot. (shrink)

Transformations under way in Indian cities have begun to alter the opportunities for democratic participation among the urban poor. Highlighting efforts to promote globally oriented urban developments in Mumbai, this article examines the state’s engagement with groups directly impacted by these efforts. Based on ethnographic research and interviews with key stakeholders in the Dharavi Redevelopment Project, the article traces the character of such engagements over the project’s four-year planning process. It finds that the state undertook an unusually inclusive process, consulting (...) with resident and activist groups at points throughout this period. The article posits that this novel engagement is an unintended consequence of pressures to promote rapid development and ease investor concerns. Situating this case in the recent literature on political shifts in the globalizing Indian city, it concludes that the state may be engaging more with the urban poor than many of these accounts suggest. (shrink)

George Lippard’s 1845 best-selling novel, The Quaker City; or, The Monks of Monk Hall, provides insight into utopian longing in the United States during an era of uncertainty following a major economic crisis. Published in the wake of a banking panic, it portrays class hostilities stemming from notions that the poor were bearing the brunt of economic hardships caused by bad decisions on the part of wealthy investors. Lippard was a serial novelist and social activist who ultimately used his fiction-writing (...) success to two key ends. First, he founded the Brotherhood of the Union, an early U.S. labor organization. Second, he founded The Quaker City Weekly, a newspaper published from 1848 to 1850 that focused on .. (shrink)

The purpose of this paper is to analyze from a strategic ethical perspective four selected shareholder resolutions reported by the Social Issues Service of the Investor Responsibility Research Center regarding international labor and workplace standards. Particular attention will be paid to specific employee relations issues at the operating and tactical level of individual multinational firms. The paper concludes with policy recommendations for proxy statements.

The aim of this study is to analyze investor behavior towards socially responsible mutual funds. The analysis is based on an experimental study where a sample of individuals takes investment decisions under different parameters of information about the investment alternatives and expected returns. In the experiment, each participant decides how to distribute an investment budget between two funds, returns on which are uncertain and change over time. Two treatments are conducted, each providing a different degree of information on the (...) socially responsible (SR) character of one of the two investment alternatives. The results obtained suggest that although individuals’ criteria for investment are essentially guided by returns and diversification, participants invest significantly more in a fund when they are explicitly informed about its SR nature. In particular, participants who declare being concerned about SR actually invest significantly more in the SR alternative. Furthermore, the level of SR faithfulness among a small group of investors is such that they invest the main share of their budget in the SR fund, even when the return differential is highly unfavorable. Providing clear information about the SR characteristics of an investment is crucial to help investors express their preferences. (shrink)

Investor-state-dispute-settlement is an arbitration mechanism to settle disputes between foreign investors and host-states. Seemingly a technical issue in private international law, ISDS procedures have recently become a matter of public concern and the target of political resistance, due to the power they grant to foreign investors in matters of public policies in the countries they invest in. This article examines the practice of ISDS through the lenses of liberal-statist theories of international justice, which value self-determination. It argues that the (...) investor-state arbitration system illustrates how liberal-statist theories of international distributive justice ought to care about relative socioeconomic disadvantage, contra the sufficiency principle that they typically defend. The sufficiency principle draws on a questionable conception of the freedom that self-determination consists in. (shrink)

A highly transmittable and pathogenic viral infection, COVID-19, has dramatically changed the world with a tragically large number of human lives being lost. The epidemic has created psychological resilience and unbearable psychological pressure among patients and health professionals. The objective of this study is to analyze investor psychology and stock market behavior during COVID-19. The psychological behavior of investors, whether positive or negative, toward the stock market can change the picture of the economy. This research explores Shanghai, Nikkei 225, (...) and Dow Jones stock markets from January 20, 2020, to April 27, 2020, by employing principal component analysis. The results showed that investor psychology was negatively related to three selected stock markets under psychological resilience and pandemic pressure. The negative emotions and pessimism urge investors to cease financial investment in the stock market, and consequently, the stock market returns decreased. In a deadly pandemic, the masses were more concerned about their lives and livelihood and less about wealth and leisure. This research contributes to the literature gap of investors’ psychological behavior during a pandemic outbreak. The study suggests that policy-makers should design a plan to fight against COVID-19. The government should manage the health sector’s budget to overcome future crises. (shrink)

Previous empirical research has found mixed results for the impact of corporate social responsibility (CSR) investments on corporate financial performance (CFP). This paper contributes to the literature by exploring in a two stage investor decision-making model the relationship between a firm’s innovation effort, CSR, and financial performance. We simultaneously examine the impact of CSR on both accounting-based (financial health) and market-based (Tobin’s Q) financial performance measures. From a sample of top corporate citizens, we find that: (1) a firm’s social (...) responsibility commitment (CSR) contributes to its financial performance; (2) after controlling for investment in innovation activities, CSR continues to have a positive impact on a firm’s financial performance; (3) the customer dimension of CSR has a positive effect on both CFP measures, whereas the employee dimension indicates a significant impact only on financial heath; and (4) the community relation dimension of CSR only affects the market-based CFP measure of firms with high innovation intensity. (shrink)

We investigate two under-explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud, namely institutional investors and political connections. The role of institutional investors in the effective monitoring of a firm’s management is well established in the literature. We further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud. The importance of political connections for enterprises, whether in a developed market (...) such as the United States or an emerging market such as China, has been established by previous studies. However, we find evidence of another positive effect of political connections: they may reduce the incidence of enforcement action against corporate fraud. We also find that political connections play a more significant role in reducing regulatory enforcement incidents against non-state-owned enterprises and firms in weaker legal environments, whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state-owned enterprises. (shrink)

The paper uses questionnaire responses provided by a sample of ethical investors to investigate willingness to sacrifice ethical considerations for financial reward. The paper examines the amount of financial reward necessary to cause an ethical investor to accept a switch from good ethical performance to poor ethical performance. Conjoint analysis is used to allow quantification of the utilities derived from different combinations of ethical and financial performance. Ethical investors are shown to vary in their willingness to sacrifice ethical for (...) financial performance, and hence to display more heterogeneity than the all-encompassing ‘ethical’ label implies. Because of the existence of sub-groups of ethical investors with different attitudes towards financial reward, an attempt has been made to associate observable investors’ characteristics with their level of willingness to trade-off morality for cash. One sub-group of investors in particular appears highly resistant to the idea of accepting higher financial return as compensation for poor ethical performance. This unwillingness casts doubt on Jensen and Meckling’s widely reported claim that trade-off behaviour is ubiquitous in all areas of life. (shrink)

Social movements often impose nontrivial costs on others against their wills. Civil disobedience is no exception. How can social movements in general, and civil disobedience in particular, be justifiable despite this apparent wrong-making feature? We examine an intuitively plausible account—it is fair that everyone should bear the burdens of tackling injustice. We extend this fairness-based argument for civil disobedience to defend some acts of uncivil disobedience. Focusing on uncivil environmental activism—such as ecotage (sabotage with the aim of protecting the (...) environment)—we argue that some acts of uncivil disobedience can be morally superior to their civil counterparts, when and because such acts target people who are responsible for environmental threats. Indeed, insofar as some acts of uncivil disobedience can more accurately target responsible people, they can better satisfy the demands of fairness compared to their civil counterparts. In some circumstances, our argument may require activists to engage in uncivil disobedienceeven whencivil disobedience is available. (shrink)

We aim to investigate the effect of corporate environmental responsibility (CER) engagement on investors' reactions. We also explore heterogeneity of this impact among different types of companies and different company's market performance. We use panel data models and quantile regression based on data related to firms listed on the A-share China security market and the final sample consists of 3,776 firm-year observations. The results show that CER engagement has a significant positive impact on investors' investment decisions. Further, investors are more (...) sensitive to CER engagement of high energy-consumption companies and no matter the company is a state-owned or a non-state-owned, CER engagement has a significant positive impact on investors' reactions. CER engagement has a significant positive impact on investors' reactions in all quantiles except one and the promoting effect increases first and then decreases with the growth of corporate market value from lower to upper quantiles. (shrink)