Church agency draws corporate world into dialogue on issues
7/14/2003 News media contact: Tim Tanton · (615) 742-5470 · Nashville, Tenn. For
related coverage, see UMNS story #359. A photograph of Bishop Felton
Edwin May is available at http://umns.umc.org/photos/headshots.html. By United Methodist News Service
As a major investor, the United Methodist Church has been
able to nudge some well-known companies into taking steps that address
corporate governance and social concerns this year.
Financial
giants such as Citigroup and Morgan Stanley have agreed to enter into
dialogue about keeping financial analysts independent from other areas
of their businesses - a step that would help avoid the types of
conflict-of-interest scandals that have hit Wall Street in recent years.
Pharmaceutical giants Merck and Pfizer are entering into dialogue about
providing affordable medicine to fight HIV-AIDS, tuberculosis and
malaria, which are devastating parts of the developing world. And
Gillette and Reebok are in discussions with the board about factory
emissions that affect the global climate.
Those are a few of the
reasons why Vidette Bullock Mixon, director of corporate relations and
social concerns for the United Methodist Board of Pension and Health
Benefits, is pleased with this year's series of annual shareholder
meetings.
"We feel that it was a successful year," she says from her office in Evanston, Ill.
Each
year, from March through June, many if not most publicly traded
companies in the United States hold meetings where stockholders vote on
policies and conduct other business. As an institutional investor, the
Board of Pension and Health Benefits uses the meetings to advocate for
the church's official positions on a range of concerns.
With
more than $10 billion in assets, the board manages the largest pension
fund of any Protestant denomination. Using the church's Social
Principles and other policies as a guide in its investing, the board
screens out companies that draw income from tobacco, alcohol,
pornography, gambling or weapons-related businesses. Church policies
also inform the board's advocacy work with companies in which it
invests.
This year, the board filed resolutions for consideration
at 32 shareholder meetings - an increase from 25 last year. Most of
those resolutions were withdrawn ahead of time. "Of the 32 resolutions
that were filed, a total of 20 shareholder resolutions were withdrawn
due to constructive dialogue" and a willingness by the companies to
address the concerns raised, Mixon says.
The fact that so many
companies are willing to engage the board in conversation, particularly
about corporate governance, is significant, she says. After so many
issues around corporate misconduct came to light in 2002, companies this
year seem more interested in showing investors that they're trying to
be open and transparent, she says.
Investors also have been more vocal in expressing concerns and offering recommendations to their companies, she says.
Shareholder
groups filed 862 proposals for corporate reform - an increase from 802
last year, according to the board, citing figures from the Interfaith
Center on Corporate Responsibility and the Investor Responsibility
Research Center. The Interfaith Center teams up with the board and other
partners in filing resolutions and attending meetings.
The board
and its ecumenical partners were able to get many companies to commit
this year to greater disclosure about practices and policies. Those
concerns include ensuring proper governance in companies where the same
person is both chairperson and chief executive, and promoting global
standards for how corporations treat their workers and the environment.
"An
issue that continues to be a priority with the general board is the
environment and climate change and global warming," Mixon says.
After
Gillette and Reebok agreed to disclose efforts to address carbon
dioxide emissions, Mixon attended their annual meetings to commend them.
Providing that positive reinforcement is part of building a rapport
with companies, a process that takes years and involves trying to raise
issues in a non-confrontational way.
"The general board's
preference is to be in dialogue with corporations in which we invest,
especially over the long term," Mixon says. The board finds that it gets
more accomplished when it spends several hours talking with a company
about policies instead of a few minutes at a shareholders' meeting
stating a position on a resolution, she says. It is in ongoing
conversations with about 60 companies, such as Abbott Laboratories,
Coca-Cola, Disney, Nike and McDonald's.
This year, the board will
begin a second round of conversations with six to eight major
institutions, including Citigroup, Morgan Stanley, Merrill Lynch and
Bank of America, about ensuring financial analysts' independence, says
Laurie Michalowski, the board's coordinator for socially responsible
investing. The board plans similar conversations with international
companies, such as Credit Suisse.
As a long-term investor, the
pension agency wants the companies to do well and generate good
financial returns for United Methodist constituents, Mixon adds.
Along
with the successes, Mixon says there were "several disappointments"
this year. Companies have the right to challenge shareholder resolutions
at the Securities and Exchange Commission, and it seemed the SEC's
opinions varied from the past, she says. For example, the SEC allowed
Johnson & Johnson to omit a resolution on glass-ceiling concerns,
and Conoco Phillips was allowed to drop a resolution on climate change.
Other
resolutions simply went to a vote. A statement calling on Delphi Corp.
to adopt global standards for labor practices and human rights at its
facilities drew a 27.5 percent vote. Another resolution urging Exxon
Mobil to address climate-change concerns drew a 22 percent vote.
Shareholders with about 20 percent of Bed, Bath & Beyond's stock
supported a resolution on glass-ceiling concerns. And the board got a 9
percent vote supporting its call for PG&E Energy Corp. to report on
gas emissions at two Massachusetts power stations - emissions cited by
the Environmental Protection Agency as harmful.
The percentages
are significant, though they may seem small. Michalowski explains that a
3 percent vote is enough to bring a resolution back to the
shareholders' meeting the following year, and that can be an incentive
for a company to go ahead and address a concern through dialogue. A vote
in the 20 percent range sends a clear message to management that "there
are significant institutional investors" who are concerned about a
particular issue, she says.
For the Board of Pension and other socially responsible investors, change is often a gradual process, not a sudden outcome.
"In
many cases," Michalowski says, "it will take several years before we
see the result that is expected or hoped for. It is a sustained effort."
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