Got a great cause? Here's how to build clout.
As a community organizer in the South Bronx, Elena Conte doesn't exactly fit the profile of a Wall Street mover and shaker. To the contrary, she works daily with some of New York City's poorest denizens to rid her neighborhood of toxic air and the nonstop stench of burning sludge.
But thanks to a recent partnership with nearby Sisters of Mercy nuns, her neighborhood's concerns will soon get a prominent hearing at Synagro, which owns the company that turns malodorous New York sewage into fertilizer pellets. The secret? Clout, as in the kind that comes with having millions to invest, as the sisters' Mercy Investment Program does.
"We've never tried anything along these lines, but we understand in other cases it's been very effective to make the case from within" as a shareholder coalition, Ms. Conte says via telephone from her office. "We're willing to try anything that's legal to make this company be a good neighbor.... It stinks here."
By bending the ear of an institutional investor, Conte's Sustainable South Bronx group has tapped into one of the most effective ways for citizens groups to influence corporations. The invested assets of institutions, such as state pension funds and college endowments, exceed $3.2 trillion. That's more than the annual federal budget of the United States - and represents more than a 25 percent stake in the nation's public companies.
Of course, winning over the decisionmakers at institutional funds isn't easy. Obstacles can arise. Yet a growing number of activists are trying nonetheless - and reporting a measure of success.
"I think it's related to the political landscape," says Dan Rosan, a health-issues specialist at the Interfaith Center for Corporate Responsibility. "People who want to make positive change in the world see it's tougher and tougher to do that through public policy. Shareholder activism, when it's done properly, can be very effective" as an alternative mechanism.
The key, according to those who have had success, requires adapting one's tactics to the particular organization. A lifelong contributor to a state pension fund, for instance, is likely to have stronger standing to propose a policy than does someone who has never lived in the state (although outsiders, using different methods, can be persuasive, too).
Before graduating from Williams College in 2004, Mark Orlowski felt the entire college community should know where the school's $1.3 billion endowment was invested and how its managers were voting on issues that came before shareholders. As a tuition-paying stakeholder in the college, Mr. Orlowski gained a seat on the Williams College Advisory Committee on Shareholder Responsibility and helped establish a policy of posting investment information on the Web.
Many college endowment committees have welcomed greater input from students, alumni, and other key constituencies in recent years. Since 2000, about two dozen colleges and universities have either added or expanded a process for gathering constituent input, according to Orlowski, who has since cofounded the Responsible Endowments Coalition.
"When you look back, just about all of it was a result of student engagement and encouragement," Orlowski says.
In upstate New York, residents concerned about emissions from Eastman Kodak's manufacturing operations in Rochester, used shareholder resolutions to call on the company to reduce its air and water pollution. The residents - as taxpayers who help fund the salaries of state employees - shared their research with the New York State Comptroller's Office, which oversees the pension fund. Result: The Comptroller's Office signed on and helped propel a number of environmental improvements at Kodak, according to Mike Schade, western New York director of the residents group, the Citizens Environmental Coalition (CEC).
Eastman Kodak sees the situation differently, crediting its "steady improvements over 17 years" to expanded federal requirements, not shareholder activism. "We don't make our decisions on emissions reductions based on the filing or lack of filing a resolution," says company spokesman James Blamphin.
Nevertheless, the CEC is developing a strategy to court support from religious pension funds and endowments. Though the group would have no standing to speak of as a constituent, Mr. Schade hopes the cause of environmental justice might resonate with those charged with investing the faithful's savings.
"When faith-based organizations get involved, they're able to take a moral high ground that others can't," Schade says.
Cultivating partnerships with institutional heavyweights isn't always easy or quick. Just ask the Minnesota Senior Federation, which for a decade has been lobbying lawmakers and drug manufacturers in an attempt to lower prices of prescription drugs. After trying many approaches, the group eventually got a hearing with the Minnesota State Board of Investment, which last March resolved to call on drug manufacturers to lower domestic prices and stop what the seniors' group called an intentional effort to limit supply to Canadian pharmacies that sell to Americans.
A pharmaceutical industry spokesman would neither affirm nor deny the allegation. But that outcome wouldn't have happened had the federation not spent years collaborating with state lawmakers and groups of state employees whose pensions were at stake, says Peter Wyckoff, the federation's executive director.
"You need to be able to persist," Mr. Wyckoff adds. "You need to be able to speak to both sides of the aisle, to both free-marketers and traditional liberals" before the state board regards a petitioner as a credible voice.
But from one institution to the next, certain principles always seem to apply. Every board overseeing an institutional fund has a fiduciary responsibility to the fund's contributors. This means oversight boards meet periodically with their core constituencies, whether these are union members, college donors, retired ministers, or others. Bringing an issue to light through one of these constituencies can lay the groundwork for an investment policy governing where billions of dollars go or don't go.
Nevertheless, those boards often receive minimal input on the social or environmental effect of their investments. Wellesley College in Massachusetts, for instance, relies on a subcommittee of its board of trustees to study proxy issues. Yet no campus constituency has come forward with proposals for debate, says spokeswoman Arlie Corday.
A similar situation exists with the board of trustees for the Maryland State Retirement and Pension System. Board members in January began reviewing a set of proposed proxy voting guidelines for the first time. While state troopers care deeply about labor issues, they have never asked whether the companies they own through their pension funds use union labor, says Morris Krome, who reports to his fellow troopers on board activity.
"It hasn't gone to the level of becoming policy," Major Krome says. "The concern is, 'Are we getting our benefits ... and are you handling the money as you should.' "