Social Research and Advocacy in Action
by Heidi SoumeraiFrom the issue of Values
The most noteworthy corporate change to emerge from the shareholder resolution process often occurs before company proxy statements cram shareholders’ mailboxes. At this writing, of the 20 shareholder resolutions led or cofiled by Walden for the 2007 shareholder resolution season, seven have been withdrawn based on constructive, forward moving agreements with the companies in question. Though the issues raised by the resolutions will not be formally presented to shareholders, and there will be no votes to be tallied, the results confirm the power of the proxy to encourage meaningful collaboration.
Resolutions Withdrawn Successfully
Our Wrigley resolution requested that the company adopt a vendor code of conduct based on International Labour Organization standards, establish an independent monitoring process to assess adherence to the standards, and report publicly on the company’s progress. We withdrew the resolution based on Wrigley’s communication of its commitment to the establishment of both a code and an audit process. Although those things are not yet in place, progress is being made and a reasonable timetable for implementation has been laid out. Additionally, Wrigley expressed openness to input from third parties during the development process and a willingness to make the code and the audit process publicly available through its website and other communication vehicles.
Two other vendor standards resolutions submitted at portfolio companies were withdrawn. Like at Wrigley, Walden withdrew its resolution at Hershey’s when the company committed to establishing a credible supplier code of conduct. It will also develop a monitoring and implementation plan as part of its broader corporate social responsibility activities. It expects this code to be a "living document," evolving over time as it gains experience in this area. Hershey’s will be working with BSR, a non-profit advisory organization with expertise in responsible business practices, and Verite, a non-profit social auditing and research organization that specializes in safe, fair, and legal working conditions. Hershey's goal is to expand its existing quality audit process to include code criteria beginning in 2008. Walden and Hershey will continue to maintain an open dialogue regarding the company's progress in this as well as other social responsibility areas. The company is already participating in an industry coalition to try to address child labor concerns in cocoa production.
Similarly, in our conversations with Applied Materials, a producer of nanomanufacturing technology, we learned much more about that company’s standards of conduct and the steps it is taking to translate policies into action. Importantly, Applied Materials agreed to expand its auditing and reporting on vendor standards in its 2006 Environment, Health & Safety report scheduled for publication in April.
In response to public outrage over exorbitant executive pay, Walden is advocating that shareholders be given the opportunity at company annual meetings to cast an advisory vote on Board compensation committee reports. (See opposite page “Executive Pay’s Perfect Storm.”) This practice would provide a mechanism for investors to express an opinion on remuneration decisions. Walden filed a resolution requesting this governance reform at Pfizer, whose own former CEO, Henry McKinnell, was a recent headline-maker with his $180 million package as he left office. Along with more than 20 other filers, Walden withdrew the resolution after Pfizer agreed that the requested governance reform had merit and that it would work toward its implementation.
Wall Street’s Lehman Brothers responded positively to our request for greater disclosure of equal employment opportunity information by detailing its workplace diversity programs and providing comprehensive workforce composition statistics. The investment firm has a strong, firm-wide commitment to diversity that starts at the highest levels of management. We agree wholeheartedly with Lehman president Joe Gregory, who told the New York Times last August, “You can’t build a great company without great people, and great people are not just white, straight men aged 25 to 40.”
Initiatives at filtration products provider Clarcor and telecommunications company CenturyTel continue Walden’s longstanding efforts to encourage corporations to adopt inclusive nondiscrimination policies. Clarcor confirmed that its equal employment opportunity policies were inclusive of sexual orientation and added explicit language on the Career Opportunities page of its website. CenturyTel internally formalized its inclusive nondiscrimination policy, posted its policy publicly and shared with us information on internal diversity training programs.
First Vote of 2007
In January, in what we hope is a harbinger of investor sentiment this proxy season, approximately 43 percent of shareholders voted in favor of Walden’s resolution asking Commercial Metals to adopt an inclusive nondiscrimination policy. Among the highest votes ever on this issue, the result signals increasingly mainstream approval of equal protection in the workplace.
In November, Nike told us that it had ended its relationship with a factory in Pakistan that for a decade had supplied hand-stitched soccer balls. A May audit had uncovered widespread problems including harassment, extensive home work, and wage and hour violations. Attempts to work with factory management to remediate the problems were unsuccessful. Importantly, Nike’s commitment to the approximately 3,000 factory workers did not cease with the termination of the contract. It is working with local nongovernmental organizations to address worker displacement. Walden appreciated that Nike reached out to communicate to investors personally, a response that we believe is indicative of the positive relationship we have built over the past several years.
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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