Responding to Public and Private Politics: Corporate Disclosure of Climate Change Strategies
Executive Summary — Social activists are increasingly attempting to directly influence corporation behavior, using tactics such as shareholder resolutions and product boycotts to encourage companies to improve their environmental performance, increase their transparency about operations and governance, and more stringently monitor their suppliers' labor practices. This paper examines how companies are responding to these pressures, in the context of requests for greater transparency about the risks climate change poses to their business—and the strategies these companies have developed to address these risks. This paper reveals that a company is more likely to comply with social activists' requests for greater transparency about climate change when the company itself, or other companies in its industry, has been targeted by formal shareholder resolutions on environmental topics—and when the company is facing potential regulations restricting greenhouse gas emissions. These findings demonstrate that changes in corporate practices may be sparked by both social activists and by the mere threat of government regulations, and that challenges mounted against a specific firm may inspire broader changes within its industry. Key concepts include:
- Firms are more likely to acquiesce to a shareholder request if they or other firms in their industry have already been targeted by a shareholder resolution on a related issue.
- Political context affects the success of private politics, in that firms under threat of regulation are more likely to acquiesce to a shareholder request.
The challenges associated with climate change will require governments, citizens, and corporations to work collaboratively to reduce greenhouse gas emissions, a task that requires information on companies' emissions levels, risks, and reduction opportunities. This paper explores the conditions under which firms respond to shareholders' requests for this information. Building on previous theories of how social activists inspire field-level change, we hypothesize that shareholder actions and regulatory threats are likely to prime firms to cooperate with shareholder requests for information disclosure. Using a unique dataset, we find evidence of both direct and spillover effects. In the domain of private politics, shareholder resolutions filed against a firm, and against others in its industry, increase its propensity to acquiesce to these shareholder requests. Similarly, in the realm of public politics, the threat of state regulations that target a firm's industry-as well as those that target other industries-increases the likelihood that the firm will acquiesce to shareholder requests to disclose related information. These findings extend existing theory by showing how organizational change can be sparked by both activist groups and government policymakers, and that challenges mounted against a single firm (and industry) can inspire field-level (and state-level) changes.