Shareholder Challenges Can Inspire Industry-Wide Changes
A study by Erin M. Reid and Michael W. Toffel suggests the challenges activists and governments mount against one firm can inspire industry-wide change.
Activists' efforts to directly engage businesses have become more aggressive in recent years. These pressures have encouraged companies to align their practices with environmental, social, and governance principles, and to publicly report their progress.
A study by Erin M. Reid and Michael W. Toffel suggests the challenges that activists and governments mount against one firm can inspire industry-wide change. Their study explores corporate responses to shareholder activism, specifically shareholders' direct appeals to management for greater corporate transparency.
Firms are more likely to publicly disclose information requested about their climate change efforts if they, or if other firms in the same industry, have already been targeted by a shareholder resolution on environmental topics.
Firms headquartered in states considering more stringent environmental regulations, even if the regulations are only likely to affect other industries, are also more likely to publicly disclose requested environmental information.
Implications for Managers
Management should anticipate that activist shareholders and government regulation will affect their company, even if it or the specific industry is not directly targeted. Activists influence other firms in the same industries as those they target and state governments influence firms in their state even beyond the targeted sectors.
Implications for Researchers
This research contributes a greater understanding of the processes by which shareholder challenges and the threat of government legislation transforms business landscapes. Further research could investigate how public and private politics change over the long term.
The CEOs of S&P 500 companies received questionnaires describing the risks and opportunities that climate change posed to their businesses. The questionnaire asked CEOs to outline their corporate strategies for managing these risks and opportunities and to detail their greenhouse gas emissions. Authors used the data to examine how direct and indirect pressures exerted through public and private politics influenced responses.
Customers increasingly want to deal with socially and environmentally conscious businesses. This presents opportunities for small- and medium-sized enterprise (SME) owners to develop new areas of competitive advantage. Capitalizing on sustainability opportunities can lead to longevity, but requires managers who can integrate a sustainable development framework into their company’s strategy.
How can oil companies best respond to global competition and climate change? Keep up with competition by adapting your climate change strategy.
Research provides a strategy marketers can use to increase conservation behaviour. The key to success? Properly combine the right elements in your message.