SOCIAL TOPICS (Archive): HISTORY OF WALDEN ASSET MANAGEMENT/SRI

Published, Summer 2002

       By Stefanie Haug

       How many resolutions does it take for a company to see the light and change? Sometimes only one. On May 8, 2002, at the annual meeting for EMC Corporation, a shareholder coalition coordinated by Walden won an astounding 56 percent of the votes in favor of EMC creating an independent board. This resolution, one of two, marked the first time EMC shareholders votedľand successfully votedľon resolutions not sponsored by management. "We're witnessing a piece of EMC history," stated Walden's Tim Smith at the meeting.

       Corporate implosions by Enron and its ilk have brought home the significance of good corporate governance. In the past shareholder resolutions on corporate governance issues did not create this much of a stir. In fact, Carol Bowie of the Investor Responsibility Research Center told the Wall Street Journal that the EMC vote was "remarkable." She noted that only three out of some 50 similar proposals calling for an independent board won the support of shareholders of American companies between 1996 and 2001.

       In EMC's case, the success was even more remarkable given the company's past resistance to change. EMC's board has never been independent; five of the eight directors listed on the 2001 proxy were current or former employees and two others had close business relationships with EMC. While the balance is marginally better today, EMC has been reluctant to talk with shareholders about corporate governance issues at all. Because the resolution is non-binding, the coalition took special pains to get Chairman Mike Ruettgers' public commitment to implement the resolution. Ruettgers stated he would be open to meeting with the coalition to discuss these and other corporate governance issues.

       The second shareholder resolution also garnered significant support with 33 percent of shareholders voting for EMC to diversify its board, currently made up exclusively of white males. Shareholders in attendance at the meeting chuckled when informed that, as part of EMC's argument to the SEC to omit this resolution the company stated that it did have a woman on the Board in the past. What it failed to point out was that she was the wife of EMC's founder, Richard Egan. EMC also argued that its board was diverse, because, "the Directors range in age from 43 to 71…."

       As Elizabeth McGeveran, a coalition member representing investment firm Friends Ivory & Sime aptly pointed out to SocialFunds.com, resolutions are a business issue and not a political one where votes are all-important. "If I were a company manager and I had 10, 20, 30 percent of my customer base or my owners telling me the same thing, that would be a red flag. Thirty percent is a big number in business." The votes for these two first-time shareholder resolutions with EMC are even more significant given that EMC's proxy card neglected to include descriptions of the shareowner resolutions or even instructions regarding where to consult the proxy statement for descriptions.

       Walden believes that the lights are now on at EMC. The company's statements at the shareholder meeting and subsequent conversations encourage us that the need for positive corporate governance change is on EMC's corporate agenda.

Stefanie Haug is a socially responsive investment officer and participates in shareholder activism initiatives. Her work focuses on child labor, gender, and international issues.