control contestability. This is because CEOs who can rely on anti-takeover defenses and
dominated boards do not need stakeholders’ support to buttress their positions. Finally,
CEOs are always opposed to any institutionalization of stakeholder protection which would
deprive them of their grip on stakeholders.
Our work is motivated by a recent trend whereby social and environmental activists and
shareholders are growing increasingly supportive of each other’s agendas, as corroborated by
the following stylized facts:
Shareholders’ recognition of stakeholders’ rights.
Mainstream shareholder activists and institutional investors are asking firms to produce
timely information on environmental and social performance and even to link executive com-
pensation to these measures. The Corporate Sunshine Working Group, an alliance between
institutional investors, environmental organizations, unions and public interest groups, is
asking the SEC to expand corporate social and environmental disclosure requirements. As
reported by the Investor Responsibility Research Center (IRRC), resolutions filed by so-
cially responsible shareholders are often endorsed by institutional shareholders that have
long been associated with shareholder-value enhancing activism, like CalPERS. 3 There are
even cases where social activists and minority shareholders have shared the costs of resolu-
tions and proxy fights to improve the firms’ corporate governance and its commitment to
stakeholders. 4
Social activists’ interest for corporate governance issues.
Social and environmental activists are more and more involved in the corporate gov-
ernance debate. Many activists have in fact joined forces with shareholders’ lobbies to
campaign against anti-takeover legislation, CEO-dominated boards and lenient auditors, is-
sues that used to be well beyond the traditional social activism program. Business Ethics, a
well-known publication on socially responsible business, ranks first the need for independent
3 Activists are increasingly exploiting standard corporate governance tools (e.g., shareholder resolutions
and proxy contests) to commit firms to a socially responsible behavior. As recently reported by The
Economist (May the 10th, 2001) “Shareholder activism is not new. But the issues being put to the vote [at
firms’ annual meetings] are moving beyond corporate governance towards questions of social, environmental
and ethical behaviour.” For interesting evidence on shareholder activism on social issues, see IRRC (2000).
4A case in point is represented by the unusual proxy fight set up in 1999 against Charles Hurwitz, the
C.E.O. of Maxxam Corporation, accused of breach of fiduciary duty by shareholders, and held responsible
for Maxxam’s 128 violations of environmental regulation and costly labor disputes. The fight was aimed at
imposing an independent board of directors at Maxxam (with one director being a leading consumer rights
advocate), and it was simultaneously supported by mainstream shareholder activists like CalPERS, by the
Rose Foundation for the Communities and the Environment, and the United Steelworkers of America, all
holding minority shares in the firm.