Environmental awareness and shareholder proposals: the case of the Deepwater Horizon oil spill disaster

Abstract

Purpose The authors study the effect of increasing environmental awareness on shareholders' activism. Specificallly, this study aims to examine whether growing environmental awareness is reflected in more aggressive environmental shareholder proposals. Design/methodology/approach This study uses the 2010 Deepwater Horizon oil spill disaster as an exogenous event that increased shareholders' environmental awareness. This study analyzes the spill’s effect on the tone of proposals about environmental issues and nonenvironmental topics. Findings After the disaster, the tone of environmental proposals (i.e. the treatment group) is significantly more negative. In contrast, the tone of nonenvironmental proposals (i.e. the control group) is unaffected. This study interprets this finding as direct evidence that the oil spill led to increased shareholder environmental activism through proposals that targeted the environmental risks surrounding the business more aggressively. By contrast, this study finds no effect of the oil spill on the tone of managers' responses to the proposals, consistent with managers refraining from emphasizing environmental threats. Originality/value Anecdotal evidence and recent studies suggest a link between environmental disasters and shareholder pressure for corporate change. However, no prior research has investigated the channel through which shareholders could have exerted such pressure or has looked for direct evidence of it in the negotiations between shareholders and managers. By finding such evidence in shareholder proposals, this study fills in this gap.

The Role of Passive Investors in Corporate Governance and Socially Responsible Investing: Evidence from Shareholder Proposals

“…Shareholder proposals allow individual or institutional investors to easily put forth specific issues for consideration at a company's annual meeting. Furthermore, proposals offer a direct channel for shareholders to promote awareness about specific issues (e.g., sustainable investment) and advocate for responsible corporate behaviors [65,66]. They are shown to be an effective instrument for sponsors to monitor companies [67].…”

The Moderating Effects of Corporate Social Responsibility on Corporate Financial Performance: Evidence from OECD Countries

“…This study draws on agency theory and stakeholder theory [18][19][20]. According to agency theory, corporate governance plays a crucial role in resolving conflicts between management and shareholders, aligning management objectives with investor interests, and maximizing corporate financial performance [6,12]. Agency theory also suggests that adhering to corporate governance codes, including board characteristics and auditor characteristics, can enhance organizational financial performance [21].…”

“…Additionally, the moderation effect of CSR disclosure in these selected OECD countries' listed companies remains understudied, creating another gap for exploration in the current study. Underpinning theories such as agency theory, stewardship theory, stakeholder theory, and resource dependence theory highlight the major role of corporate governance in resolving conflicts between management and shareholders, aligning management objectives with investor interests, and maximizing corporate financial performance [6,12].…”