Research & Advocacy in Action

by Heidi Soumerai & Meredith Benton

From the Fall, 2007 issue of Values

Sometimes clichés make sense. While the Securities and Exchange Commission floats proposals that would quash shareholder resolutions (see Tyrant or Fiduciary), we can’t help thinking, If it ain’t broke... The effectiveness of the shareholder resolution process as a mechanism to help strengthen corporate environmental, social, and governance (ESG) practices is readily apparent in the results of Walden’s proxy season.

Excluding two that became moot after the companies were acquired, Walden filed 23 resolutions in 2007 on a broad range of ESG topics (summarized in the summer edition of Values available at www.waldenassetmgmt.com). Fourteen of them, or 60 percent, were withdrawn based on positive agreements with the companies. These included, among others, commitments to tighten global vendor standards and monitoring, increase transparency of political contributions and equal employment opportunity data, collaborate on a study of governance reform related to executive compensation, adopt inclusive nondiscrimination policies, and publish comprehensive sustainability reports.

The remaining nine resolutions went to a shareholder vote. Voting support ranged from 20 percent to 43 percent, extraordinarily high levels, indicating mainstream acceptance that a company’s ESG performance is linked to long-term business success and debunking any lingering misconceptions that shareholder advocates are merely gadflies or tyrannous special interest groups.

Company Advocacy Update

In our last report, two shareholder resolutions were still in the works. Co-filing with Calvert Asset Management, we asked Linear Technology to increase efforts to establish racial and gender diversity on its Board of Directors. The resolution was withdrawn when Linear amended its Policy for Director Recommendations and Nominations to “expressly provide that diversity of background and experience, including (among other things) gender and race,” is considered in evaluating director candidates. A resolution seeking improved disclosure of political contributions by FedEx went to vote and was supported by 20 percent of shareowners. The company has expanded website disclosure, but remains reluctant to disclose contributions to trade associations.

Working with the Center for Political Accountability and Sheet Metal Workers’ National Pension Fund, Walden encouraged two other companies, Dell and Oracle, to adopt comprehensive political disclosure and accountability policies. In so doing, they join 31 other firms committed to full transparency, including funds provided to trade associations used for political purposes.

Over 125 participants attended a July Roundtable, a coalition of institutional investors, companies, and governance experts addressing executive compensation and accountability led by Walden, AFSCME (American Federation of State, County, and Municipal Employees), and Pfizer. Attendees heard the results of a six-month exploration of the efficacy of giving shareholders an advisory vote on executive pay practices as described in annual proxy statements, a routine practice in the U.K and a few other countries. A diverse mix of companies including American International Group, EMC, and Colgate Palmolive participated, gaining important insights as they study reforming their own executive compensation governance policies. This year’s extremely successful shareholder resolution campaign, involving approximately 50 “say on pay” proposals with supporting votes averaging 42 percent and seven winning majority approval, confirmed broad investor support for strengthening director accountability on this issue.

In the persistence-pays-off category, we can report substantial progress related to our near decade-long dialogue with Coca-Cola on plastics recycling. Along with As You Sow and other investors, we have urged beverage companies to increase recycled content in plastic beverage containers and to establish explicit container recovery goals. In September, Coca-Cola announced it would invest $60 million to build the world’s largest PET plastics recycling plant with an estimated annual output of 100 million pounds. Additionally, Coca-Cola committed to eventually recycle or reuse 100 percent of PET plastic consumed in U.S. markets¾a goal that is unquestionably The Real Thing.

In partnership with Amnesty International USA and Sudan Divestment Task Force, Walden joined other concerned investors in writing asset management firms believed to have significant investment in foreign oil companies that help fund Sudan’s brutal government-sponsored genocide. We did not call for divestment. Instead we appealed to companies such as T. Rowe Price and Wells Fargo to exert their influence through specific engagement strategies, including actions to support the presence of a robust United Nations peacekeeping force.

Conversations with Hershey Foods and Wrigley around their vendor standards programs continue productively. Walden led an investor meeting to discuss Hershey’s vendor standards policies, monitoring, and supplier training program. Wrigley has adopted a vendor code of conduct that is available on its website. Given Wrigley’s commitment to continuous improvement, Walden is coordinating a group of experts and concerned investors to offer the company feedback on its developing program.

Public Policy Advocacy Update

Several companies responded positively to a Walden-led initiative to encourage corporate support of the Employment Non-Discrimination Act (ENDA, H.R. 2015), legislation providing job protections for lesbian, gay, bisexual, and transgender employees. Alberto Culver, BP, EMC, and Goldman Sachs have written Congress to endorse ENDA. Walden was also pleased to write a letter commending General Mills for its testimony at a Committee on Education and Labor Subcommittee on Health, Employment, Labor and Pensions hearing in support of ENDA.

Walden continues to support the Toxic-Right-to-Know Protection Act (S. 595), legislation that would reverse recent Environmental Protection Agency rule changes that weakened public access to information on toxic chemical releases from thousands of facilities nationwide. In July, the bill barely passed, 10-9, along partisan lines in the Senate’s Environmental and Public Works Committee and will next go before the full Senate.

The reinvigorated, violent military crackdown on pro-democracy demonstrators in Burma is a tragic reminder of continuing widespread human rights violations in that country. On a local level, Walden expressed support for the Commonwealth of Massachusetts bill H. 2729 authorizing the State’s Pension Reserve to use shareholder leverage to encourage withdrawal of companies doing business in Burma and to suspend new investments until a democratically elected government is established.