About a year ago, I was in a room full of financial professionals explaining how the corporate engagement firm I work for, Bowyer Research, is dialoguing with Apple on the issue of child safety. Discussing the best ways to combat online child sex abuse material (CSAM) is not a fun story. As I explained the reality of Apple\u2019s CSAM problem, in a room largely made up of Apple users, I saw a lot of concerned expressions and awkward glances at iPhones on conference tables. It\u2019s an understandable reaction. But it drives home the point that those of us in this industry wake up every day trying to make\u2014 and I said as much.<\/p>\n
Let me back up. My day job, corporate engagement, involves helping shareholders of companies like Apple use their financial influence to have conversations about issues at the world\u2019s biggest brands. Oftentimes, these conversations surround corporate politicization, ESG<\/a>, DEI<\/a>, and the like. But, during the past two years, we\u2019ve been having conversations at Apple about something more bipartisan: stopping the distribution of child sex abuse material.<\/p>\n It\u2019s a conversation that needs to happen. The company that gave us the iPhone has driven some of the most successful and recognizable innovations in the modern world. But Apple has also staked out a definite position in the privacy-versus-oversight debate. Those incredibly high-profile privacy commitments are ingrained into the company\u2019s ethos, and it\u2019s for that reason that engaging them on the issue of online child safety has been such a complicated endeavor. Despite Apple\u2019s commitments to human rights and its stated belief<\/a> that \u201cbusiness can and should be a force for good,\u201d the company\u2019s been facing down a massive CSAM distribution issue. Apple recently was the subject of a $1.2 billion class action lawsuit<\/a>, with victims of child sex abuse alleging that the company didn\u2019t appropriately address videos of their abuse being distributed on platforms such as iMessage. Apple notably rolled back<\/a> a planned anti-CSAM technology called NeuralHash in 2022 over privacy concerns, sparking criticism<\/a> from child safety organizations.<\/p>\n It\u2019s not that the technology didn\u2019t exist, but that Apple decided the cost-benefit analysis wasn\u2019t in its favor. That decision, right or wrong, has had real-world consequences, including significant legal liability for Apple. Investors are therefore right to ask how the company arrived at the decision to roll back the software.<\/p>\n This isn\u2019t merely a moral point but an economic one (and in an aspirationally free and virtuous society, those two are connected). It was time for shareholders to get involved. Last year, Bowyer Research filed a shareholder proposal at Apple on behalf of American Family Association<\/a>, an Apple investor, asking the company to publicly report the costs and benefits of not deploying anti-CSAM software. The proposal<\/a> received enough shareholder support for us to bring it back this year. More importantly, it gained us several productive discussions with the company to discuss child safety.<\/p>\n We\u2019d all do well to remember that the issues and decisions facing America\u2019s biggest companies are not merely issues to be opined about by external nonprofits, NGOs, and pundits (although countless admirable, constructive examples of such entities exist). They were investor-to-company discussions.\u00a0<\/p>\n Shareholders, the individuals and institutions who own Apple and are literally bought into its business model and responsibility for continued success, deserve a larger and more serious role in that discussion. In a properly functioning company with a fiduciary duty to its investors, CEOs work for boards, and boards for shareholders. Investors, whose continued returns depend on companies making the right decisions, absolutely have something to say about controversial issues that those companies must navigate. Apple\u2019s choices on combating online child abuse are no different.<\/p>\n And those discussions yielded results. After two years of constructive engagement from the American Family Association, along with increased legislative scrutiny regarding age protections from red states like Utah<\/a> and Texas<\/a>, Apple adopted changes<\/a> to its child safety protocols: restrictions on underage users viewing adult-rated apps in its App Store and stringent explicit content filtering for underage users on iMessage.<\/p>\n This is a major win. Not just for investors, but for the almost<\/a> 90 percent of teens who reportedly own iPhones. It\u2019s a big step in the right direction to make sure that online predators have fewer tools to abuse children online. And it\u2019s an indicator of yet another point that those of us in the corporate engagement world wake up every day to defend: genuine shareholder advocacy creates real impact.<\/em><\/p>\n For a long time, people have defended the idea that the best approach to values-based investing is screening out any problematic stocks from a portfolio (common categories are defense stocks, energy companies that prioritize fossil fuels, and the like). But right now, results we\u2019re seeing at the world\u2019s most valuable brand indicate there\u2019s a more impactful approach than screening.<\/p>\n When you screen a company out of your portfolio, you give up your leverage with that company, bringing your investor influence to zero. But when you use your investor influence to dialogue about the issues that impact the companies you own (and therefore, impact your future), you are maximizing your investor influence. It\u2019s not just Apple \u2014 we\u2019re seeing results at companies across sectors, from viewpoint protections at JPMorgan Chase<\/a> to depoliticized corporate policies<\/a> at tech giants like IBM. Shareholder advocacy like the American Family Association\u2019s gets discussions, builds relationships, and creates genuine change.<\/p>\n Too often, we talk about fixing businesses as if companies can only ever choose between doing the morally correct thing or making money. This is false framing. When it comes to child safety, Apple is making the right move not only for its youngest and most vulnerable users but for the investors who depend on its continued success for their financial future. And we\u2019re right to celebrate that as a win for the shareholder advocacy model. This isn\u2019t a moment to lean out and divest.<\/p>\n The post Apple\u2019s Child-Safety Pivot Shows Shareholder Engagement Beats Divestment<\/a> was first published by the American Institute for Economic Research (AIER)<\/a>, and is republished here with permission. Please support their efforts.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" About a year ago, I was in a room full of financial professionals explaining how the corporate engagement firm I work for, Bowyer Research, is dialoguing with Apple on the issue of child safety. Discussing the best ways to combat online child sex abuse material (CSAM) is not a fun story. 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