Annual meetings are the new frontline in the battle over corporate purpose

OMPANIES HAVE always had to answer to their investors. But these days shareholders have new questions—lots of them. On April 28 shareholders in three big drug companies -- Johnson & Johnson, Moderna and Pfizer -- are set to vote on resolutions filed by Oxfam, a charity, that seek to widen access to Covid-19 vaccines. In May shareholders in Amazon are due to vote on a proposal from New York state’s pension fund, asking for an audit of the e-commerce giant’s policies on racial equity. Carl Icahn, a notoriously fierce corporate inquisitor, has broadened his attention from profits to pigs. He has filed proposals at McDonald’s and Kroger, a grocer, in a quest to end the confinement of pregnant sows.

These proposals are a small selection of the onslaught of shareholder resolutions that American companies face in proxy season, the time when most publicly traded companies hold annual meetings, which runs from April to June. Emboldened by successes last year and newly favourable regulations, by April 12 investors had filed a record 576 proposals on environmental and social measures, up from 499 in 2021, according to the Sustainable Investments Institute, a research group. This barrage points to the next phase of America’s fight over corporate purpose. Executives who have endorsed “stakeholder value”, a much broader measure of corporate worth than profits and cashflow, are now seeing their declarations put to the test.

Shareholder activism used to be a much simpler affair. Investors such as Icahn would buy a stake in a firm, then press for changes to strategy or the board to boost the company’s performance. Activists also sometimes had broader goals. In 1971, for example, the Episcopal church demanded that General Motors cease manufacturing in apartheid South Africa. Such campaigns were rarely successful. Often companies and regulators deemed the issues raised not to meet the legal definition of being “material” to the company’s business. Even if a proposal went to a vote, shareholders usually sided with management.