Research & Engagement in Action

By Heidi Soumerai, CFA
From the Winter 2011 Edition of Values


No one can know the longevity or specific direction of Occupy Wall Street (OWS) and its many spin-off demonstrations. Yet, the movement has succeeded in energizing a national discussion about the consequences of rising income and wealth inequality and the shortcomings in U.S. economic and political systems that have contributed to this gap. Despite our place in the Wall Street arena, Walden and like-minded investors share common ground with OWS, expressed through our engagement on corporate environmental, social, and governance (ESG) performance and accountability. Our initiatives addressing corporate influence in the political process, excessive executive compensation, fair lending practices, international labor standards and human rights, and environmental sustainability, among others, coincide with the central economic and social justice concerns voiced by OWS’s 99 percent.

In 2012, corporate electioneering funds are expected to shatter previous records, thanks in part to the U.S. Supreme Court’s Citizens United decision effectively allowing unlimited corporate money in politics. Building on success in previous years, Walden continues to lead shareholder campaigns encouraging political spending transparency and accountability, including resolutions at Accenture, Deere, IBM, PepsiCo, and State Street for 2012 annual meetings. Walden withdrew the resolution at Accenture when the company agreed to post on its website its political spending policies, which sensibly prohibit direct corporate expenditures and indirect use of trade association membership dues for political purposes. Moreover, in September Walden wrote to more than 40 companies seeking comprehensive disclosure of lobbying expenditures and policies including direct, indirect, and grassroots lobbying of legislators and regulators at the local, state, and federal levels (see "The Importance of Being Earnest on Lobbying Disclosure"). As part of a larger shareholder initiative, Walden has filed a new lobbying disclosure resolution for 2012 annual meetings at 3M, ConocoPhillips, Johnson & Johnson, JPMorgan Chase, State Street, and UPS.

Walden’s multi-year leadership in support of the shareholder advisory vote on executive compensation, popularly known as “Say-on-Pay,” became a reality with the passage of Dodd-Frank in 2010 that included a Say-on-Pay mandate. To continue encouraging greater accountability on executive compensation, including CEO pay relative to other executives and company employees generally, Walden is using Say-on-Pay proxy votes as a platform for more in-depth discussions. We recently had a candid conversation with Umpqua, for example, which was among the small minority of companies to receive a majority vote against executive compensation practices. When Bottomline Technologies reached out to us about our proxy votes in advance of its general meeting, we affirmed its compensation policies while also explaining our lack of support for a director nominee on its nominating committee due to a lack of diversity on the board.

Where continued weakness in the housing market is central to the ongoing U.S. economic malaise, the message of discontent from OWS and many others is loud and clear: Banks get bailed out but people lose their homes. Walden and other investors are pressing banks to report comprehensively on their loan modification processes and how they are attempting to make progress. With expert assistance from mortgage lending consultant CANICCOR, we are encouraging JPMorgan Chase and PNC Financial to ramp up efforts to avoid unnecessary foreclosures, including, as appropriate, reducing the principal owed as a means to lower monthly payments. Most recently, we are assessing the loan modification processes at Ocwen, among the largest servicers of subprime mortgages, to ensure that its good record on loan modifications can withstand the company’s fast pace of growth through acquisitions of troubled loans.

Walden’s engagement on economic and social justice issues is not confined to U.S. borders. When we learned recently of the temporary closure of Shanghai Johnson Controls by China’s environmental authorities due to reports of lead poisoning in children living near the facility, we immediately followed up with the company. Johnson Controls, known for its strong environmental, safety, and health programs, asserts that contamination is not from its facility and that ongoing monitoring of employees shows no elevated blood-lead levels. Walden is continuing to follow this situation.

Walden’s multi-year dialogue with ConocoPhillips, led by Boston Common Asset Management, addresses indigenous rights concerns associated with oil exploration and production in Peru. Together with representatives of the nongovernmental organization Amazon Watch, we have encouraged the company to adopt the best practice standard of free and prior informed consent. A breakthrough occurred in August when ConocoPhillips updated its official human rights position to be consistent with International Labour Organization Convention 169, concerning Indigenous and Tribal Peoples, and the United Nations Declaration on the Rights of Indigenous Peoples. This explicit recognition of indigenous rights provides a foundation for continuing discussion about energy development in Peru and other sensitive locations.

Environmental degradation and the looming scarcity of natural resources, such as water, may not be central to the OWS movement, but their connection to the economic divide is obvious. With nearly half of the world’s population living in areas where water is either physically scarce or in short supply due to inadequate infrastructure, water intensive industries, such as agriculture and technology, may face significant water risk in their global supply chains. Walden and Trillium Asset Management led a resolution at Sysco, the largest U.S. food distributor, asking for an evaluation of its exposure to supply chain water scarcity. We withdrew the resolution upon Sysco’s commitment to expand its sustainability strategy to address water scarcity and sustainable agriculture, and to complete in 2013 the Carbon Disclosure Project Water questionnaire, the leading repository for corporate data on water risk management. We filed a similar resolution at wireless technology company Qualcomm and a dialogue is underway.

Extended producer responsibility (EPR) shifts responsibility for managing post-consumer waste from individuals and governments to corporations. Led by As You Sow (AYS), Walden filed shareholder resolutions at General Mills and Procter & Gamble (P&G), asking them to study the feasibility of adopting an EPR policy that builds on their successful experiences in Europe and Canada. The General Mills resolution was withdrawn based upon the company’s agreement to hold quarterly meetings with AYS and investors, sharing key data on packaging waste and EPR programs from other countries, including data on program costs and recycling and recovery rates. The P&G resolution was also withdrawn when it committed to a study evaluating EPR and other options in the United States to achieve its goal of zero post-consumer waste to landfills.

On an array of economic, social, and environmental justice concerns, Walden challenges companies to address actual and potential detrimental business impacts that are too often externalized to communities without a big voice. We are pleased to occupy this unique space on Wall Street.