SOCIAL TOPICS (Archive): ENVIRONMENT

Published, March 1997

       Spring arrives with a burst of shareholder activity. Literally hundreds of conversations between socially concerned investors and corporate managements are now underway, with most leading on a path toward positive changes in the ways companies conduct business. Less fruitful discussions, however, will lead to shareholder votes at annual meetings. Finally, other conversations will end abruptly when the SEC gives “permission” to firms to omit specific ballot initiatives. (See SEC Again Turns Blind Eye to Social Investors, March 1997)

       USTC has continued to promote progressive corporate change via the shareholder proposal process. Our recent experience reflects the gamut of possibilities cited above.

       AT&T became the icon of “downsizing” when in 1995 it announced plans to eliminate the jobs of 40,000 employees, among the largest job cuts in U.S. history. Less well known is that Robert Allen, AT&T’s CEO, received a compensation package worth over $15 million that same year, an increase far greater than 100% over 1994. This inevitably raises questions about the merits of AT&T’s executive compensation policies, considering also that investment in AT&T has yielded inferior results relative to fellow telecommunications firms MCI and Sprint during Mr. Allen’s tenure.

       All AT&T shareholders this year will have the opportunity to support USTC’s resolution requesting the board to institute a comprehensive executive compensation review. Among specific recommenda-tions, we urge the company to consider freezing compensation of corporate executives during periods of significant downsizing and cost cutting.

       Ironically on the heels of the Texaco debacle, concerned shareholders are finding their right to press companies to institute discrimination-free workplaces challenged by the SEC. We imagine the SEC would be hard-pressed to find investors arguing that a $176 million settlement, along with an unquantifiable effect on the firm’s image, is inconsequential to shareholder value.

       USTC has not let up in its efforts to engage corporations in this dialogue. We have joined the Adrian Dominican Sisters requesting that Texaco prepare an updated diversity report — an initiative that will be going to ballot. Analyst Ann Taylor, who recently participated in a meeting with representatives from Texaco, found it disconcerting that, in the face of such a large racial discrimination suit, the firm chose to highlight its progress by noting that a Caucasian woman has advanced to a senior line position.

       Also going to a vote is a petition for Southwest Airlines to publicly disclose specific equal employment opportunity (EEO) information. Though the airline did not engage in a dialogue with us, it nonetheless respected the right of shareholders to cast their votes on the issue. This is in stark contrast to MCI, the subject of a similar USTC-sponsored EEO disclosure resolution, that offered to share information with us on a private basis only and eventually sought and received permission from the SEC to omit our proposal.

       USTC joined in on two additional resolutions that were successfully negotiated and consequently withdrawn from the ballot. When we requested that Xerox sign the CERES Principles, the company agreed to enter into a discussion exploring a CERES connection under the guidance of USTC Analyst and CERES Director Kristin Finn. Asked to review and amend its global set of corporate standards, Johnson & Johnson responded by working to establish a better procedure for shareholder dialogue on international issues.

       The status of two additional proposals co-sponsored by USTC has not yet been determined. American International Group (AIG) has been asked to issue a policy publicly committing the company to board inclusiveness. An Atlantic Richfield resolution calls for the development of human rights guidelines for country selection, particularly given the firm’s ties in Burma.