Indeed, an amazing thing happened at that company's recent annual meeting (actually, several amazing things happened, but I will focus on one). In the face of increasing scrutiny of ethics and governance challenges in corporate America, and in the wake of growing unhappiness over various issues, including claims that the relationship between Home Depot's Board and its CEO were too cozy, the company's shareholders rose up and spoke loudly and effectively. According to a June 2 New York Times story, thirty percent or more of shareholders who voted withheld approval from 10 of the 11 directors. Forty percent voted in favor of a proposal opposed by management that would give shareholders a voice in deciding executive compensation. Forty-one percent voted to split the role of chairman and chief executive. And fully forty-five percent voted in favor of a proposal that would give shareholders the right to approve extraordinary retirement benefits for executives (read the article here). Percentages like these cannot be dismissed as reflecting merely the views of the "activist fringe" of Home Depot shareholders. Rather, such totals can only occur if "mainstream" shareholders are similarly discontent.

Indeed, the extraordinary Home Depot numbers speak to the increasing impact and influence of mainstream shareholder groups, including pension funds and other large institutional investors, on ethics, governance and corporate responsibility issues in corporate America. Shareholder activism is on the rise and has proven to be increasingly effective in recent years. This trend will continue. A January 2006 survey by Mercer Investment Consulting reported that roughly a quarter of 183 institutional investor respondents plan to step up their proxy voting and shareholder engagement activity over the coming two years. And in April, the heads of leading institutional investment firms from 16 countries and representing over $2 trillion in assets officially signed onto the newly launched "Principles for Responsible Investment". These principles -- initiated by the UN Secretary General and developed in conjunction with the UN Environment Programme Finance Initiative and the UN Global Compact -- are designed to provide a framework for achieving enhanced long-term investment returns by better reflecting environmental, social, corporate governance and ethics considerations.

Home Depot presents just the most recent, and most dramatic, example of this evolving trend, but it is certainly not alone. ExxonMobil has been the repeated recipient of enhanced shareholder attention, and indeed its active shareholders have recognized strength in numbers by working together on proxy campaigns involving issues of common interest and concern. Put a few institutional investors together and you can produce a healthy block of votes for or against any of a full range of issues that shareholders care about. Alan Murray commented about this trend in his June 7 column in the Wall Street Journal.

All of which is to urge wise, thoughtful business leaders to pay heed to the shareholder groups that are knocking at your doors. Take them seriously, and develop true strategies for constructive engagement. Your owners are increasingly effective and increasingly mobilized. This trend is not likely to reverse itself. Most critics of the social responsibility movement argue that shareholders are the only relevant stakeholders that management should consider in running companies. Even accepting this as true (a topic for another blog, perhaps), your shareholders are speaking. Are you listening?