When Change is Good
Published, Spring 2004
When Walden reviews companies it asks a number of questions. What are our concerns? Are we able to engage management on issues of concern while simultaneously enhancing shareholder value? How does the company respond to problems when they arise?
As virtually all companies are yin/yang mixes in the area of social responsibility, we regularly reassess our research and often see our concerns as opportunities to support positive change through engagement.
An Illustrative Narrative
When Walden first reviewed Pfizer in 1994 it was excluded from most client portfolios. Pharmaceuticals is a high impact industry in terms of product safety and the environment, and concerns existed that Pfizer was lagging behind industry peers. Among the reasons cited: In 1991 it was fined $3.1 million for dumping violations, at the time the largest fine awarded under the Clean Air Act. In 1992 the company paid $215 million to settle a class action suit with patients who had received fragile heart valves.
However, Walden’s social research team reassessed and then approved Pfizer in 2000. The company’s environmental performance had improved greatly; it had a strong record on workplace issues, particularly hiring and advancing women; was a leader in corporate governance; and was excellent in responding to investor concerns and inquiries. From that time, Pfizer has continued to take positive steps.
Examples of a changed Pfizer abound. In 2003 Pfizer’s board recommended that shareholders vote for a resolution to declassify the board, an issue Walden had earlier raised with the company. Pfizer has also set a goal to reduce greenhouse gas emissions by 35 percent per dollar revenue from 2000 to 2007. Pfizer’s was one of the most thoughtful responses Walden received to our compensation survey, a taboo subject for most companies. Walden regularly exchanges correspondence with a senior corporate governance executive and with Hank McKinnel, Pfizer’s CEO.
All this is not to say that Pfizer is a perfect company—there is no such entity—and Walden continues to speak with management about a variety of issues. The difference between now and 1994 is Pfizer’s demonstrated dedication to continuous improvement on environmental, social, and corporate governance issues, and, of equal importance, its responsiveness to shareholder input.
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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