Changing the climate on climate change: Shareholder challenges to one firm
can inspire industry-wide changes
EXECUTIVE SUMMARY
This study suggests not only that activists and governments can spur change in organizations but that the
challenges they mount against one firm can inspire industry-wide change. The authors of this study examined the
willingness of firm executives to describe the risks and opportunities climate change posed to their businesses, to
outline their corporate strategies for managing these risks and opportunities, and to detail their greenhouse gas
emissions.
BACKGROUND
METHODS
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. This
study explores corporate responses to shareholder
activism, specifically shareholders’ direct appeals to
management for greater corporate transparency.
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.
FINDINGS


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 more likely to publicly disclose requested
environmental information.
IMPLICATIONS FOR MANAGERS
Management should anticipate that activist
shareholders and the threat of government regulations
not only affect their targeted firms and industries, but
also affect other companies. 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.
CITATION
Reid, Erin M., & Toffel, Michael W. (2009).
Responding to Public and Private Politics: Corporate
Disclosure of Climate Change Strategies. Strategic
Management Journal, 30: 1157-1178.
Full article source.
SUMMARIZED BY
Mitchell Praw & The Network Team
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