Can shareholder advocacy shape energy governance? The case of the US antifracking movement

Abstract

Research on socially responsible investing (SRI) and investor-led governance, especially in the climate sector, suggests that shareholders adopt social movement tactics to influence corporate governance, including building networks, engaging directly with corporations and lobbying regulators. Further, research on corporate transparency and financial disclosure has proliferated, notably in the extractives sector. Our work builds on these existing literatures, with a focus on shareholder resolutions on hydraulic fracturing (HF) in the United States. We analyze US HF-focused shareholder resolutions from 2010 to 2016 to evaluate filing strategies and outcomes. We argue that these resolutions provide space for a range of new actors to shape corporate governance—but their power is constrained. The constraints flow from the same political economy factors that enable shareholders to take collective action: the distance between individual investors and financial decisions; the structure of resolutions and managerial responses; and the complexity of investment vehicles and vote shares. We assess how shareholders respond strategically by altering the focus of resolution demands, liaising with external campaigns and networks, and engaging with government to enhance regulatory interventions. Our work reveals how the upstreaming of power in commodity chains intersects with the power of management boards and the challenges of financialization, with consequences for corporate and energy governance.

Keywords:

• Shareholder resolutions
• hydraulic fracturing
• corporate governance
• financialization
• social movements
• socially responsible investing (SRI)

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

Notes

1 Many resolutions are filed and withdrawn prior to publication on proxy materials. For many reasons, resolutions might also fail to be published, for instance as a result of the company successfully petitioning the SEC for a ‘no-action letter’ or a formal indication from the SEC that it will not take action against the company for omitting the resolution from its proxy materials.

2 Technically, the hydraulic fracturing component is a small part of the entire operation of unconventional natural gas extraction and production. Because the public discourse has often adopted the short-form ‘fracking’ to indicate the full cycle of unconventional oil and gas extraction from shale and tight rock and given the politicized use of the term fracking, we use the abbreviated HF.

3 Jones Luong and Weinthal (2010) document private ownership and private control of US petroleum resources; this is in contrast to other countries where petroleum resources are usually owned and controlled by the state.