Shareholder Activists’ “Most Wanted” List
ExxonMobil, Wal-Mart, Chevron are targets.
In January 2006, ExxonMobil achieved two dubious distinctions. It reached the peak profit in the history of American capitalism of $36.13 billion for 2005, the year identified by many analysts as the peak in global production of oil — the resource primarily associated with global warming. Second, ExxonMobil received the most shareholder resolutions — a dozen — from members of the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 faith-based institutional investors holding companies socially accountable for over 30 years. The two distinctions may be related, as profiting from planetary destruction tends to draw the attention of nuns and ministers who own your stock.
Placing second on the ICCR list was Wal-Mart with seven resolutions, and rounding out the top three was Chevron with six resolutions. These three companies provide a snapshot view across a range of concerns voiced by shareholder activists in the 2006 proxy season.
“The fact that so many resolutions appear on these companies’ proxies indicates a level of concern about their responsiveness to shareholders over time,” said Sister Pat Wolf, executive director of ICCR. “In the case of ExxonMobil, concern is focused on the company’s approach to climate change. In the case of Wal-Mart, we believe the company’s business model is in need of reform. And in the case of Chevron, we’re particularly concerned with the company’s presence in the developing world.”
ExxonMobil faces three distinct resolutions on climate change, according to in-formation provided by ICCR’s EthVest data-base covering resolution filings back to the 1970s. One asks for a report on plans to meet greenhouse gas reductions required by the Kyoto Protocol, and the company has petitioned the Securities and Ex-change Commission (SEC) to block it from the proxy. The company told the SEC it intends to issue the requested report this year.
A less adversarial approach would have been to negotiate directly with resolution filers. When companies agree to comply with requests, shareholders nearly always withdraw resolutions. “If negotiation and withdrawal isn’t happening, there is a problem with companies’ responsiveness,” said Wolf.
Wal-Mart invoked the “ordinary business” rule (intended to prevent shareholders from micromanaging) in challenging two ICCR resolutions — one on pay disparity (CEO Lee Scott earned 1,000 times the average U.S. Wal-Mart worker in 2005) and one on Wal-Mart’s impact on public health systems. According to an internal board memo leaked to the press in October 2005, almost half of Wal-Mart workers’ children are on public assistance or uninsured. The resolution argues that Wal-Mart’s skimping on health insurance places undue burden on public health systems.
“Wal-Mart claims the resolution is about ordinary business, but our resolution inter-sects with emerging public policies, as well as transparency about the subsidies the corporation receives through these programs,” said Margaret Weber, coordinator of corporate responsibility for the Basilian Fathers of Toronto, lead filers of the resolution. “With budgets strained, states are seeking redress.” Up to 30 states are considering following Maryland’s lead in enacting laws requiring large companies to cover employee health benefits — suggesting that this issues sur-passes the “ordinary business” threshold.
One ICCR resolution filed at Chevron this year asks for a report on what was spent fighting liability for environmental damage in Ecuador — on lawyers’ fees, expert fees, lobbying, and public relations — to illustrate how much could have been spent instead on cleanup. The inadequacy of environmental standards in Ecuador spurs another resolution asking Chevron to apply the strict environmental standards of California (where it is headquartered) everywhere it operates.
“As a moral and ethical proposition, the human body and human health are the same whether you’re talking about North America, South America, or Africa,” said Leslie Lowe, director of ICCR’s energy and the environment program. “It doesn’t mat-ter the complexion of the person or the culture they come from — a known carcinogen will harm someone whether they’re in California or Ecuador.”
Bill Baue (bbaue@socialfunds.com) is a Sun-derland, Mass., freelance writer specializing in social investing.