Why being an engaged owner or investor makes sense

As a Christian, it’s important to navigate your life and walk with Christ intentionally. This intentionality is weaved into all aspects of life including how you give back, how you treat people and how you spend your time. That same intentionality should also be reflected in your finances and investments. But aside from just intentionally owning or not owning a stock, it’s important to be active in addressing issues with the company.

Being an “engaged owner” doesn’t always have to be a lengthy task. It’s important to know what business a company is in and what facets of the world they touch. Perhaps you should look into their footprint, goods they source, people they employ, what consumers utilize their products and what kind of market share they have. For example, pharmaceutical patent stacking isn’t an aberrant act in itself, but it doesn’t typically align with a Christian investor’s values when the company is leveraging legal gray areas to stifle the competition. Some of these pharmaceutical companies create such high barriers of entry that they’ve effectively created a monopoly. Those practices then often lead to anti-consumer practices like the creation of lower cost generic or biosimilar drugs.

There are two different ways to be engaged in a company you invest in. The direct parallel for us at GuideStone is being an asset manager who cares about these issues, is a large institutional owner of shares and will go out to work on these issues with a company. For the DIY and individual investor who doesn’t work with an asset manager, you can reach out to the investor relations team at the company to air any issues that go against your values. In some cases, you may receive an answer from the company, and in other cases, the company may never respond. Making a change in a company can seem like a fleeting idea at times, but whether you’re a DIY investor or work with an asset manager, you should always remember that it could take years of being an engaged investor before you’re able to bring about real change.

For example, the palm oil industry has drastically changed because of investor engagement. Shareholders expressed that some industry practices didn’t align with their values, and were able to significantly reduce the usage of child labor in the harvesting of palm fields, which was prevalent at the time. Shareholders were able to make this change by engaging with palm oil producers and the large companies buying the product and asking these companies if they have a supplier code of conduct they hold their suppliers to. Those discussions caused the larger companies to explain to the producers that they wouldn’t buy anything from farms that harvest the palm oil through child labor.

Although public pressure from equity owners can incite change, there are instances where companies just won’t budge on certain issues. Some investors may then choose to file for a proxy vote, which would bring the issue into a public forum and allow all shareholders to vote on an issue. In a lot of cases, companies don’t want these hiccups to become public since it can tarnish their reputation. Even though a company doesn’t have to follow a proxy vote, it can be an overwhelming example of how many people don’t agree with the companies practices.

What is interesting to note is that religious investors account for about 45% of the proxy actions that are brought to companies on an annual basis, showcasing this investor demographic’s desire to spur change. Engaged shareholders and asset managers can leverage their values to explain why something the company does may be perceived in a negative light and how it may tarnish the company's name. The companies are able to see these values based issues as real business risks. When the company enacts change, not only are they better aligned with their shareholders, it also provides them the opportunity to paint themselves as an industry leader.

With all of these tactics in mind, it’s important to be intentional before you even invest in a company. It’s possible to invest in a company that may not completely align with your values, but it’s important to consider if the issue is something that’s fixable versus a core business practice for the company. For example, a company like Anheuser-Busch is solely in the business of producing and selling alcohol. There’s no amount of engagement or activism that could convince them to not be an alcohol provider.

As a Christian investor, you have an excellent platform to promote change in companies you invest in because of the core set of beliefs that guide you on certain issues. By carrying your values into your investments and being an engaged investor, you’re able to promote change within the companies you invest in and continue your intentional walk with Christ.

Will Lofland is director and head of intermediary distribution at GuideStone Funds based in Dallas, Texas, and also oversees GuideStone's shareholder advocacy strategy.