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Social Shareholder Engagement: The Dynamics of Voice and Exit

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Abstract

Investors concerned about the social and environmental impact of the companies they invest in are increasingly choosing to use voice over exit as a strategy. This article addresses the question of how and why the voice and exit options (Hirschman 1970) are used in social shareholder engagement (SSE) by religious organisations. Using an inductive case study approach, we examine seven engagements by three religious organisations considered to be at the forefront of SSE. We analyse the full engagement process rather than focusing on particular tools or on outcomes. We map the key stages of the engagement processes and the influences on the decisions made at each stage to develop a model of the dynamics of voice and exit in SSE. This study finds that religious organisations divest for political rather than economic motives using exit as a form of voice. The silent exit option is not used by religious organisations in SSE, exit is not always the consequence of unsatisfactory voice outcomes, and voice can continue after exit. We discuss the implications of these dynamics and influences on decisions for further research in engagement.

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Notes

  1. The term ‘social shareholder engagement’ (SSE) used here attempts to reconcile the array of definitions used in the SRI and engagement literature whereby shareholders voice issues of concern to companies on particular issues (Eurosif 2006). The issues focused on in SSE are principle-based and focus on the social, environmental and ethical impacts of corporate behaviour. This also includes some governance issues related to justice such as pay inequality. SSE speaks to the socially driven stream of engagement research identified by Chung and Talaulicar (2010). Governance issues with the objective of increasing financial return without regard to social, environmental and ethical impacts are not included in SSE and form part of the financially driven stream more common in the corporate governance and finance literature.

Abbreviations

AGM:

Annual General Meeting

CAAT:

Campaign Against Arms Trade

CIG:

Church Investors Group

EIAG:

Ethical Investment Advisory Group

ICCR:

Interfaith Center on Corporate Responsibility

IRRC:

Investor Responsibility Research Center

JPIC:

Justice, Peace and Integrity of Creation

JRCT:

Joseph Rowntree Charitable Trust

NGO:

Non-Governmental Organisation

PETA:

People for the Ethical Treatment of Animals

RI:

Responsible Investment

SEC:

Securities and Exchange Commission

SSE:

Social Shareholder Engagement

UNPRI:

United Nations Principles for Responsible Investment

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Acknowledgments

The authors would like to offer their thanks to all the interviewees who took part in this research and to 3iG which facilitated and supported the research process. This work was funded in part by grant 2013FI_B1 00206 (Goodman J.), DEC SUR Government of Catalonia.

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Authors and Affiliations

  1. ESADE Business School, Ramon Llull University, Av. Torre Blanca, 59, 08172, Sant Cugat del Vallès, Spain

    Jennifer Goodman

  2. Audencia School of Management, 8 Route de la Joneliere BP 31222, 44312, Nantes Cedex 3, France

    Céline Louche

  3. Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands

    Katinka C. van Cranenburgh

  4. ESADE Business School, Ramon Llull University, Av. Pedralbes, 60-62, 08034, Barcelona, Spain

    Daniel Arenas

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  1. Jennifer Goodman
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  2. Céline Louche
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Correspondence to Jennifer Goodman.

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Goodman, J., Louche, C., van Cranenburgh, K.C. et al. Social Shareholder Engagement: The Dynamics of Voice and Exit. J Bus Ethics 125, 193–210 (2014). https://doi.org/10.1007/s10551-013-1890-0

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