Social Research & Advocacy in Action
Fall 2005

As we head into the winter and the 2005- 2006 proxy ballot season, we have hopes for positive corporate changes on a range of social issues. Developments over the summer support this outlook.

Issue Area: Environment

CEO Steven Farris of Apache, an oil and natural gas production and exploration company, met with investors concerned about the company’s management of climate change issues. He expressed his commitment to this and other environmental concerns, while shareholders emphasized the importance of planning for the longterm. We will continue to monitor Apache closely as it develops its public statement on climate change and expands its environmental reporting— steps the company committed to pursue when shareholders withdrew their climate change resolution last proxy season.

The Carbon Disclosure Project (CDP), a coordinating body for institutional investors that asks Financial Times Global 500 companies for their climate change management plans, has released the results of its third survey. With 71 percent of companies responding, the CDP found that “A sea-change in corporate positioning on climate change is discernible over the past 18- months. Perceptions are changing most noticeably among U.S. based companies, many of which have publicly asked for greater regulatory certainty on greenhouse gas emissions.” Walden has been a CDP signatory for all three years of the project. Each year we write to companies held in client portfolios encouraging them to answer the CDP questionnaire.

Issue Area: Workplace

We’ve had heartening news from companies relating to their Equal Employment Opportunity (EEO) policies. Companies held in many Walden client portfolios—Carver Bancorp, Cincinnati Financial, Commerce Bancshares, and First Midwest—have confirmed to Walden that they have non-discrimination policies that include protection for employees against discrimination based on sexual orientation. Perhaps most encouragingly, after several years of shareholder pressure, Emerson Electric has modified its policy to be inclusive. Company spokesman Mark Polzin stated, “We felt it is appropriate to make the change at this time, consistent with the clear trend in industry.” Walden had co-filed the shareholder resolution at Emerson this year asking that the company change its policy. The resolution has now been withdrawn.

Nike went on record to support a bill in Oregon that would make it illegal to discriminate against lesbian, gay, bisexual, and transgender employees, as well as a bill that would allow for civil unions. As Wes Coleman, Nike’s vice president of global human resources, wrote, “One of the Nike Maxims is to ‘Do the Right Thing,’ which asks our employees not to look for things that make us different, but to look for things that make us better. Many of our employees’ lives will be better because of the passage of these bills.”

The International Brotherhood of Teamsters and American Rights at Work have commended Costco’s employee practices for strong benefits, high wages, and moderate executive compensation, relative to the industry. Costco’s CEO, Jim Senegal, has stated that he believes customers choose Costco partly because of its labor stance.

Issue Area: Corporate Governance

We believe that requiring a board member to receive a majority of support votes increases accountability and responsiveness to shareholder concerns. As such, we have signed onto the Boston College Center for Corporate Citizenship’s Institute for Responsible Investment’s public statement supporting majority vote elections for corporate boards. We were pleased to note that Automatic Data Processing is one of the many companies to recently adopt a majority vote policy. Other companies, such as Pfizer, Microsoft, and Wells Fargo have compromised on this issue, deciding that a board member must resign if he/she does not receive a majority vote. The remaining directors will then consider whether to accept that resignation.

Issue Area: HIV/AIDS

A number of pharmaceutical companies have reached an agreement with officials from 11 Latin American countries for discounts on antiretroviral drugs used to treat HIV. The two-year agreement creates a pricing structure that allows the countries affordable access to antiretrovirals. Participating drug companies include GlaxoSmithKline and Merck. The discounts will range from 15 to 66 percent, varying according to the medicine and the country.

Issue Area: Fair Lending

Advocates concerned about predatory lending are lauding Wells Fargo’s recently announced changes to its subprime lending practices. Changes include: reducing pre-payment penalties; standardizing loans according to credit history, regardless of the holding company a customer is working with; eliminating mandatory arbitration clauses; and capping sub-prime origination fees at $1,500. With the implementation of these changes Wells Fargo will be adopting “best in class” subprime lending standards, although its payday lending practices remain a controversial issue.

Constructive Conversations

In August, Intel was the first company to be hosted at our new offices, meeting with Walden and other investors as a part of an annual accountability session. Company representatives affirmed Intel’s commitment to stakeholder engagement and answered investor questions on topics ranging from stock options to water conservation.

At a meeting with Walden and other investors, BP emphasized its commitment to addressing climate change and detailed the ways in which it is trying to respond to this issue, including the development of a controversial deep sea carbon sequestration project. While BP’s response to climate change still has significant challenges, we are pleased by the company’s responsive and communicative approach.

Coca-Cola, having added a director of global stakeholder relations, came to Walden’s offices twice over the summer. The meetings focused on effective forms of engagement and appropriate processes for relationship building with advocates.

Having Our Say

Walden made sure to weigh in as the U.S. Banking, Housing, and Urban Affairs Committee looked to elect a new director of the Securities Exchange Commission (SEC). With other investors, we wrote of our belief that the new Chair must be a staunch supporter of participatory corporate governance and strengthened corporate disclosure, and that the SEC must support vigorous and independent regulation of our financial systems.
^__ M.Benton