Those of us who are company shareholders can play an important role in encouraging and directing a company along the path of moral capitalism.

Steven Greisdorf

When I was 13 years old, my father purchased 10 shares of stock for me in a small computer company. No, it wasn’t Microsoft or AOL or Apple. He did this more as a learning tool than as an investment. It gave me an opportunity to look at the business section of the newspaper, find the stock, and track its progress. I enjoyed watching my investment grow (some of the time) and knew that I was somehow taking part in the vast market system in which I was living.

Soon enough, I discovered that one of the by-products of owning stock in a company was receiving the company’s annual report. I enjoyed looking at the pictures, getting a feel for the company by the people that were shown next to their very lofty sounding titles. Sometimes, I ventured into the back of the annual report where the tables of numbers were displayed. I remember comparing one year’s bottom line to the next, sensing intuitively that if the numbers were bigger this year than last, the company was doing well. (This was before the days of the “triple bottom line” and the Global Reporting Initiative.)

Typically, included with the annual report was a proxy statement. This seemingly innocuous piece of paper was the company’s acknowledgement that I was, in fact, an owner of the company. The power to vote on members of the Board of Directors, approving the company’s auditors, or, perhaps, voicing my opinion about a lofty matter such as the company’s compensation plan seemed quite important to a young teenager. Even if I only owned a tiny fraction of the company, I still had my vote.

Steve Young, Global Executive Director of the Caux Round Table, writes about the roles and responsibilities of the various stakeholders in a publicly traded company in his recently released book Moral Capitalism: Reconciling Private Interest with the Public Good. Each stakeholder, from suppliers to consumers, from labor to management, from owners to Boards of Directors, has a particular role to play in ensuring that the best of the capitalist system emerges. Otherwise, he says, we risk falling into a form of brute capitalist that is little more than a survival of the fittest and jeopardizes the system as a whole.

Recent stories have emerged around the globe related to shareholder activism. In most cases, these stories involve large shareholders voting or threatening to vote in a particular way on issues that are of significant concern to the company, including CEO compensation, making political contributions, doing business with the military, and other such weighty matters. But what is my role as an individual shareholder? What can I do to build a system of moral capitalism?

The first thing that I can do is exercise my role as a shareholder by responding to corporate proxies. During this last season of corporate annual reports, I had the opportunity to review a number of these documents. Reading and comprehending the issues under consideration takes some time. However, while I own very few shares in any particular company, I have a responsibility to respond, letting the Board of Directors and management know how even the smallest shareholder feels about the issues that have been raised.

Another thing that I can do is get to know the companies that I own better. Peter Lynch, the famous Fidelity mutual fund manager, says that you should know what you own and why you own it. I must admit to owning stock in some companies that have pretty big names, but that I have no real idea about the products or services that they sell. In the same way that I wouldn’t buy a car based solely on reputation, I shouldn’t own stocks based solely on reputation. Moral capitalism implies a deeper understanding of a company’s products, management, corporate culture and the broader issues that are confronting the company.

Stakeholders today have a variety of tools at their disposal to get their voices heard by a company’s management. These range from exposés in the newspaper or on the web to protests and boycotts to lawsuits when corporate actions are particularly egregious. Shareholders, who it might be said represent a cross-section of the various stakeholder groups, have an additional tool: the proxy process. By submitting a proposal to be included on proxy statement, I can send a signal to management and to other shareholders that there is something about which the company might need to concern itself in order to preserve both its reputation and its bottom line.

The concept of corporate stakeholder is continuously evolving. Companies are now required to take into account the impact of their operations on suppliers, neighborhoods, labor, the environment, and, to some extent, even corporate activists. The degree to which the company listens to these various stakeholders has the potential to impact the future of the company itself.

For over 50 years, Initiatives of Change has been engaged with stakeholders at all levels about the role each individual can play to create a system based on the principles of moral capitalism. As an individual shareholder, I represent one of these stakeholders. My voice – while small – can play a big role in encouraging and directing a company along the path of moral capitalism. Am I prepared to play this role?

Steven Greisdorf works for Initiatives of Change in the United States. He and his family live in Bethesda, Maryland.

This commentary was first published on the Initiatives of Change global website (www.iofc.org) on 5 July 2004.