SOCIAL TOPICS (Archive): INTERNATIONAL SOCIALLY RESPONSIVE INVESTING

Published, Summer 2001

       Walden, a lead proponent of the attempted filing of a BP Amoco resolution against drilling in the Arctic National Wildlife Refuge (ANWR), was among 2,000 shareholders attending the company’s three-hour long Annual General Meeting (AGM) on April 19, 2001, in London. As shareholders filed in, they were greeted by a 14-foot antelope prop brought by U.S. PIRG and were handed protest leaflets from the Students for a Free Tibet and Greenpeace about PetroChina and climate change.

       During the meeting, Walden’s Lauren Compere questioned BP Amoco management’s recent discriminatory actions toward the owners of BP American Depository Receipts (ADR) and beneficial owners of BP Ordinary shares who cofiled the Arctic resolution earlier this year. (ADRs are securities issued by a U.S. bank in place of the foreign shares held in trust by that bank. They are issued to facilitate the trading of foreign shares in U.S. markets. Beneficial owners of BP ordinary shares hold their shares through financial intermediaries, or nominees.) With nearly 150 cofilers signing on to the resolution, the coalition had well exceeded the requirement under British law that a proposal must have at least 100 proponents. However, BP successfully blocked the resolution, arguing that under U.K. Company Law, ADR holders and beneficial owners are not “members” in the company for the purpose of filing resolutions.

       Walden also questioned why BP required shareholders to file a “special” versus “ordinary” resolution, which raised the required level of shareholder support from 50 percent to 75 percent. This requirement also changed the resolution from an advisory request (as is the case of most U.S. resolutions) to a binding instruction to management—in effect diluting shareholder support since most institutional investors will not support resolutions that bind management to a certain action.

       Clearly, BP’s legal and procedural tactics this proxy season may have already diminished its reputation as an industry leader interested in working constructively with all of its stakeholders. Additionally, if BP ADR investors come to be viewed as having different rights than BP Ordinary share investors, the company runs the risk that these shares may be priced differently by the market. This is especially significant for a global company like BP, with over 30 percent of its stock held in the form of ADRs. These issues should not only be of concern for social investors, but for all those investing in overseas markets through ADRs or financial intermediaries.

       At the April AGM Peter Sutherland, BP’s Chairman, committed to have BP management meet with Walden. Consequently, in early June Walden hosted a meeting with senior executives from BP’s investor relations and corporate secretary’s offices. The meeting also included representatives from the company’s depository, J.P. Morgan, and several other concerned shareholders.

       Two shareholder resolutions, filed primarily by U.K. investors, did make it on BP’s ballot this year. One resolution dealt with BP’s investment in PetroChina and highlighted concerns over operations in Tibet. The other resolution challenged the substance of BP’s climate change policies. The resolutions garnered 5 percent and 7 percent shareholder support, respectively.