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A record year for shareholder activism

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Question: What single force can get Tyco International to strive for cleaner emissions, inspire PepsiCo to study the impact of AIDS in developing nations, and even get Merck & Co. to declare its intentions to not manufacture an abortion pill?

Answer: shareholders.

Motivated to be heard in the post-Enron age, shareholders are flexing their muscles, demanding responsible policies and practices in unprecedented ways. And though some still feel like second-class citizens behind executive elites, shareholder activists are reporting new receptivity to their causes - thanks, they say, to a scandal-charged atmosphere that has management humbled and listening.

"The embarrassment of the scandals is leading companies to talk," says Daniel Rosan, director of public health for the long-time shareholder activist network, Interfaith Center on Corporate Responsibility. "Savvy companies have realized that shareholder concerns are a kind of feedback they need."

The chief barometers of shareholder activism indicate the movement has reached new heights since the wave of corporate scandals began in 2002. In that year, shareholders brought 802 proposals to a vote at company annual meetings, according to tracking data from the Investor Responsibility Research Center. In 2003, that number jumped to 1,082. So far this year, a record 1,147 proposals have been made as the five-month proxy season winds down this month.

What's more, shareholder proposals - once regarded as voices crying in the wilderness - are now receiving more votes. A record 161 proposals won majority support from shareholders in 2003. That record could be broken this year.

What shareholders want ranges from limits on chief executive officer pay (the most common proposal) to nondiscrimination policies that include sexual orientation. Although they are nonbinding, resolutions commonly work by bringing unwelcome public attention or even shame upon a corporation.

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