This article is based on the author's keynote address at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.
In 1952, the SEC altered the shareholder proposal rule to exclude proposals made “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes.” The SEC did not reference civil rights activist James Peck or otherwise acknowledge that its actions were prompted by Peck’s 1951 shareholder proposal to Greyhound for desegregating seating. Instead, the SEC indicated that its change simply reflected a codification of a position the SEC staff had taken in 1945.
Today, the shareholder proposal rule has evolved, giving way to several amendments that now enable shareholders to submit proposals on the proxy statement that involve significant policy issues that transcend economic significance to the corporation. Nevertheless, we continue to grapple with the underlying corporate governance issues raised by Peck’s proposal. Those issues center around at least two questions: First, what constitutes proper subjects for corporate action? Second, what should be the shareholder’s role in advancing those subjects?
My talk today seeks to answer these two questions, particularly as they relate to the theme of this conference and the kind of activism engaged in by shareholders such as James Peck. Put a different way, those questions can be viewed as follows: First, can the pursuit of social justice be a proper subject of corporate action and behavior? My answer is yes. The for-profit company has proven that it can deploy resources to advance economic innovation and change. Art, music, technology, social media, the sharing economy, all of these innovations reached the public through the for-profit corporation. Why not use the vast resources and power of the for-profit corporation to be the engine for social innovation and change?