Investor concern about excessive executive compensation remains pronounced, most recently fueled by media attention to the questionable dating of stock option awards for executives and ongoing evidence of stagnant wage growth for the average American. Walden continues to press companies and policymakers to improve performance in these and other areas.

In 2007, new Securities and Exchange Commission (SEC) disclosure rules will require proxy statements to contain additional information on executive compensation, which should help bring clarity and transparency to how senior officers are rewarded. Still, investors have little opportunity to communicate their satisfaction, or lack thereof, with executives’ compensation packages. To help address this concern, Walden has written to dozens of our portfolio companies to ask that shareholders be given the opportunity to cast an advisory vote on the compensation report for executives. Based on a similar practice in the United Kingdom, this approach would allow investors an opportunity to provide feedback on executive compensation policy. We have heard back from several companies willing to study the proposal. For example, CEO Rueben Mark of Colgate Palmolive reported to us that the idea was raised with the board of directors, and that the company plans to survey its largest investors for additional input.

A Walden resolution requesting a comprehensive sustainability report from food distributor SYSCO Corporation was withdrawn in August. Despite its stated commitment to sustainable agriculture, along with other environmental and social goals, there is currently scant information on SYSCO’s policies and practices with which to measure the company’s progress. However, SYSCO has agreed to publish a comprehensive sustainability report on its web site, a draft outline of which has been shared with Walden. SYSCO has also agreed to ongoing dialogue with shareholders and to continuously improve its sustainability reporting.

We met in New York with BP CEO Lord John Browne, BP America President Robert Malone, other senior BP executives, and a small group of investors to discuss the recent accidents, spills, and alleged pricing abuses that have plagued the energy company over the past year. Browne affirmed the seriousness of the events and highlighted several operational and management changes, stating that the company needed to address the many problems honestly and directly. Because of BP’s unique and constructive position in the climate change debate, its unusual level of engagement and responsiveness, and its importance to client portfolios, Walden remains committed to investment in and engagement with BP. (See related cover story.)

The dialogue with Microsoft on Internet freedom of expression has also continued. In addition to its new blog policy announced early in the year, Microsoft has taken steps to inform users in China of state-mandated censor activity. For example, users receive notice when content is omitted from searches or when sites have been removed from the search index. Along with others, Walden will continue to advocate for additional reforms.

Significant Company News

These words, in a report co-authored by Chubb’s Chief Risk Officer (CRO), were unimaginable four years ago when we first began to talk with the company about climate change:

…The sheer magnitude of climate change could in future impact a large number of industries to such an extent that sustainable insurability may ultimately be put into question. This raises important issues for society as a whole and might require adaptation measures such as public-private partnerships and, of course, adequate public actions on climate change issues. (CRObriefing: Emerging Risk Initiative – Position Paper, June 2006).

This statement represents a marked departure from the response to Walden’s early efforts to engage Chubb on climate change. Then, Chubb had suggested that the issue was largely irrelevant to its business. Now, this industry brief indicates that insurance companies are beginning to speak out with one voice in favor of actively addressing climate change—a welcome development. In October, PepsiCo promoted its chief financial officer, Indra Nooyi, to the top job and corner office, replacing retiring CEO Steven Reinemund. Nooyi becomes one of just 11 women to head Fortune 500 companies, positive news in a time of stagnant progress in breaking the glass ceiling at the highest corporate echelons.

Lobbying and Strange Company

It comes as no surprise that the Voting Rights Act (VRA)— which protects the rights of minority voters and was passed in July—was backed by the usual civil rights groups and liberal advocates. It may be a surprise to some, however, that support from more than 10 major company executives provided significant clout to help overcome objections raised by a group of conservative Republicans. It is highly unusual for CEOs to lobby for social reforms that are indirectly related to their business, yet AT&T, Coca-Cola, PepsiCo, Verizon and Wal-Mart were among the companies urging Congress to pass the VRA. Their reasons were many and varied, but several saw their support as an expression of commitment to workplace diversity. Here’s how Chairman Lee Scott of Wal-Mart put it:

Wal-Mart is the largest private employer of African-Americans and Hispanics and we, therefore, have a particular interest in this issue. On behalf of them as well as our millions of customers whose lives are touched by this landmark statute, we believe it is important to move forward expeditiously.

While cynics may write this off as self-serving rhetoric, we should not dismiss the importance of the corporate voice in issues of social policy. We are glad to recognize these companies for their role in the passage of VRA.

-H. Soumerai