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A shareholder proposal is a formal recommendation, request, or requirement for the board of directors to take action on a specific issue. Proposals are usually presented at the annual shareholder meeting.
Today any shareholder may put a proposal up for vote, provided they meet applicable shareholder ownership requirements.
Shareholder proposals are usually advanced by issue advocates. Therefore, it’s critical to carefully consider management recommendations and strategic corporate objectives. Ultimately, these are often complex issues that involve weighing many competing interests.
Here is an overview of common shareholder proposal topics and issues which may arise:
Climate impact disclosure - Some shareholder proposals are asking corporations to track, document, and disclose climate related financial risks, existing environmental impacts and proposed pathways forward to reduce carbon emissions through metrics like greenhouse gas emissions, energy consumption, deforestation, clean technology use, water waste, and more.
ESG disclosure - In addition to the environmental risks referenced previously, increasingly, there are proposals asking companies to increase transparency around, social and governance matters. In recent years, issues such as employment relations, Indigenous rights as well as various ESG disclosure frameworks have gained prominence and shareholders are asking companies to proactively address them.
Workforce Practices - With greater focus on human capital management, we’re seeing more shareholder proposals push for greater transparency around diversity targets and gender pay gaps. The idea is that pay equity disclosure puts greater public pressure on companies to ultimately remedy pay gaps.
Executive compensation - “Say-on-Pay” proposals enable shareholders to vote on and approve executive renumeration. Proposals allow shareholders to better understand the situation and supporting rationale under which such compensation is paid as well as providing the ability to determine how compensation is linked to corporate performance.
As an investor myself, I understand the responsibility that comes with share ownership. That sense of ownership is powerful. It’s what drives me to empower shareholders to exercise their shareholder rights. Be sure to explore everything shareholdereducation.ca has to offer. You’ll find so many ways to share your voice and influence the future of the companies you invest in.
