Does Shareholder Signaling Matter for Corporate Strategy? A Study of ESG- and Carbon-Related Proposals

Based on more than 7,000 shareholder proposals, this article argues that firms targeted by environmental, social, and governance (ESG)–related proposals subsequently improve their ESG performance. We reach the same conclusion in the climate change context. Surprisingly, we find no evidence that withdrawn proposals are more or less impactful than proposals that were omitted or those that were brought to a vote. This result suggests that the filing of the proposal itself has an agenda-setting effect. Yet, we find evidence that the more shareholder proposals a firm receives, the stronger the effect on ESG performance. By submitting proposals, shareholders signal what matters for them and this, in turn, may shape a firm’s strategy.