In response to public outrage over Enron and other instances of corporate fraud, Congress has passed new legislation meant to increase public access to corporate information. Citizens exercising these access rights can help spur ethical behavior inside corporate cultures, observers say, without necessarily mounting a costly legal battle.
One potential pressure point: shareholder resolutions. This year, investors are bringing 1,126 policy proposals to vote at corporate annual meetings, up from 802 in 2002, according to the Investor Responsibility Research Center.
Another pressure point: federal regulators.
Since news of the scandals broke two years ago, thousands of people have called the Securities and Exchange Commission with tips on corporate misbehavior. As investors take advantage of their new rights under the law, regulators can no longer be aloof, says Tracey Rembert, director of shareholder activism for the Social Investment Forum. "I think it's had a profound effect on the SEC because they're not used to hearing from individuals."
Within this climate, corporations must make their shareholders aware of potential liabilities that could cause stock prices to plummet.
That requirement has enabled shareholders to pressure utilities, with threats of embarrassing resolutions and lawsuits, to report how their fossil-fuel burning might affect global warming. At least six states, according to the Wall Street Journal, are preparing to sue five energy companies whose emissions have allegedly become a public nuisance. In other cases, shareholders are demanding that company managers report how much impact operations might have on global warming.
Changes in the law have also opened new avenues for ethical crusading in the workplace. Whistle-blower laws protecting employees who witness wrongful conduct on the job have become significantly stronger, Ms. Rembert says. Example: Those who go over their bosses' heads to report wrongdoing no longer need to fear retribution. By law, their identities can't be revealed to their immediate superiors.
For average investors, creative use of the law in today's scandal-weary environment often means exercising their newly established rights. Once investors know those rights, experts say, execution is far easier than they might have imagined.