Research & Advocacy in Action
by Marcela Pinilla and Heidi SoumeraiFrom the December 2010 issue of Values
If the impact of the U.S. Supreme Court’s Citizens United decision on corporate political spending was unclear, we now have the November 2010 election as Exhibit One. According to the Center for Responsive Politics, nearly half of $293 million spent by outside groups (non-party organizations), such as the ubiquitous U.S. Chamber of Commerce, came from undisclosed donors, and most of the money funded campaigns supporting or opposing individual candidates. Such direct financial input in political contests is new.
Corporate political spending transparency is a top engagement priority for Walden because the country needs a functional representative democracy to tackle looming crises such as climate change or wealth and income inequality. For the 2011 shareholder resolution season, we are a lead filer of resolutions addressing political spending policies and disclosure at 3M, Accenture, IBM, PepsiCo, Pfizer, Target, and UPS.
Other corporate governance concerns remain central at Walden. The newly enacted Dodd-Frank financial reform legislation provides one-to-three year options on the frequency of shareholder advisory votes on executive compensation (Say on Pay), but Walden led a letter campaign signed by a diverse group of institutional investors to encourage an annual Say on Pay vote. Many companies responded thoughtfully, including Apache which committed to annual implementation. At Hewlett-Packard and State Street, we are the lead filer of resolutions calling for the separation of CEO and Chair positions to foster independent oversight of management.
Walden regularly seeks improvements in environmental, social, and governance (ESG) reporting, including disclosure on efforts to reduce greenhouse gas emissions and assess water risk. We are providing input to Aptar Group as it upgrades the Sustainability section on its website and experiments with best practice Global Reporting Initiative (GRI) reporting in Latin America. First time ESG reporting resolutions were filed at Emerson Electric and Varian Medical Systems; the latter was withdrawn recently when the company committed to a GRI-based report. Several representatives of Emerson Electric visited Walden to discuss its achievements, including products that boost energy efficiency and components for alternative energy development, but the company did not agree to comprehensive ESG reporting. Hence, despite the constructive meeting, we anticipate that the Emerson Electric resolution will go to a vote.
Walden also continues to participate as an investor signatory to Carbon Disclosure Project’s (CDP) annual questionnaires addressing greenhouse gas management and disclosure of water risk. Representing more than 500 institutional investors holding $64 trillion in assets, the new round of letters to the world’s largest companies on climate risk disclosure is planned for February 2011 (see Partnerships at Work, page 3).
With the vast majority of large companies embracing inclusive equal employment opportunity policies, Walden’s longstanding engagement on LGBT rights has shifted to smaller firms. Parkway Properties added sexual orientation to its nondiscrimination policy after we demonstrated that it was an outlier in its industry. A resolution for 2011 asking eHealth to adopt an inclusive nondiscrimination policy was withdrawn when the company amended its policy accordingly.
Smaller companies are also fertile ground for engagement on workforce diversity. We are one of three U.S. participants in an initiative through Principles for Responsible Investment (PRI), an organization that represents global investors with over $20 trillion in assets, calling for increased representation of women on boards and in senior management. Dialogues are underway at three portfolio companies with sub-par records: CommVault, Dime Community Bancshares, and Dupont Fabros Technology.
The devastation caused by U.S. mortgage foreclosures is hard to grasp. In hardest hit Nevada, one in every 79 properties received foreclosure notices in October alone (RealtyTrac). Failure to stabilize the housing market remains a critical business concern with enormous human costs. Unfortunately, progress on loan modifications industry-wide has been disappointing. Walden co-filed a resolution asking J.P. Morgan to develop policies to ensure that the same loan modification methods for similar loan types are applied uniformly to loans owned by the company and those serviced for others (the latter representing the vast majority of the bank’s mortgages).
Engagement on community impact goes beyond U.S. shores. Walden hosted Medtronic and a group of investors in September to discuss sourcing of minerals, such as tin, from violence-torn areas in the Democratic Republic of Congo (DRC). New Securities and Exchange (SEC) disclosure rules require assurance that “conflict minerals” from DRC do not make their way into company supply chains, an unexpected component of the Dodd-Frank legislation. Medtronic has formed a Supply Chain Council with a special task force to assess conflict minerals risk in specific products.
Public Policy Initiatives
On an array of topics, Walden continues to press for effective public policy. In the past six months we:
• Submitted comments to the U.S. Banking Committee on financial reform legislation encouraging greater industry regulation and oversight, credit rating agency reform, stronger consumer protections, and mandatory Say on Pay votes and ESG disclosure.
• Signed the Investor Environmental Health Network letter to congressional leaders supporting strong public health protections through the Safe Chemicals Act of 2010 and Toxics Chemicals Safety Act.
• Urged the U.S. State Department to endorse the United Nations Declaration of the Rights of Indigenous Peoples.
• Opposed California’s Proposition 23 ballot initiative, subsequently defeated, that would have stopped implementation of the state’s landmark clean energy law.
• Joined the Investor Network on Climate Risk and other global investor coalitions calling for innovative public policy encouraging renewable energy, energy efficiency, low-carbon infrastructure, and an international agreement on climate change mitigation.
The information contained herein has been prepared from sources and data we believe to be reliable, but we make no guarantee as to its adequacy, accuracy, timeliness or completeness. We cannot and do not guarantee the suitability or profitability of any particular investment. No information herein is intended as an offer or solicitation of an offer to sell or buy, or as a sponsorship of any company, security, or fund. Neither Walden nor any of its contributors make any representations about the suitability of the information contained herein. Opinions expressed herein are subject to change without notice. The writings of authors do not necessarily represent the views of Walden Asset Management, its parent, or affiliated entities. There are certain risks involved with investing, including various risks depending on the type of investment vehicle being used.
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