Research & Advocacy In Action

by Heidi Soumerai, Director of Social Research

Braced in the seatbelt of a long-term outlook, investors pursuing a “sustainability” approach may be better prepared than others to endure the turbulent financial markets and increasing economic uncertainty we are witnessing in 2008.Walden’s successes this year, however, suggest that these investors need not put their environmental, social, and governance (ESG) performance expectations on hold. 

Mounting Withdrawals

Of the 16 Walden-led shareholder resolutions (see 2008 Shareholder Resolutions at right), eight have already been withdrawn based on significant company progress – a strong indication that we may reach or exceed our all-time high of a 60 percent withdrawal rate achieved in 2007.

In the midst of 24/7 media coverage of the U.S. presidential race that frequently talks about the influence of corporate lobbying, and with the help of the Center for Political Accountability (see page 3), all four of our resolutions advocating political spending disclosure resulted in substantial new company commitments that led to their withdrawal. UPS’ board approved a new contributions policy, and along with Adobe, Praxair, and Texas Instruments, agreed to regular Web-based reporting, beginning in 2008, on policies, procedures, and oversight, as well as disclosing actual dollar contributions and recipients.

Resolutions requesting sustainability reports were withdrawn at Waters, Sigma Aldrich and Parkway Properties. Waters and Sigma Aldrich both prepared broad outlines for their planned reports detailing expected content in corporate governance, environment, products and customers, employee, and community sections. Parkway agreed to develop its first sustainability report as well and plans to include it in its 2008 annual report to shareholders. The latter approach has the benefit of fully integrating ESG reporting with financial reporting and, as such, emphasizing that ESG matters are of consequence to all investors.

New this year,Walden is working with a coalition of human rights organizations and concerned investors to focus on financial institutions with significant investments in companies with strategic links to Sudan, asking them to use their influence to help put an end to the tragic, wide-scale violence in Darfur. Walden is taking the lead with T. Rowe Price, whose chair met with us in December to initiate discussions on the company’s role and its response to investor concern. Since then T. Rowe Price has committed to add a new policy statement on its website describing its integration of “extrafinancial” and corporate social responsibility factors into investment decisions. T. Rowe also told Walden that it retained third-party researchers to identify companies with significant exposure in Sudan to help its “investment professionals remain informed of additional risk factors unique to Sudan, such as reputational loss, product boycotts, or even divestiture campaigns.” Additionally, T. Rowe recently sold significant positions in targeted holdings, such as PetroChina, in its managed accounts. T. Rowe Price’s thoughtful response, along with its willingness to continue to dialogue, led us to withdraw the resolution.

New and Ongoing Dialogues
With AFSCME (American Federation of State, County, and Municipal employees),Walden continues to lead a broad coalition of investors that formed last year to urge companies to give shareholders an advisory vote on executive compensation packages. Dubbed “Say on Pay,” shareholder resolutions addressing this governance reform were filed at more than 90 companies this year. In 2007 these resolutions averaged over 40 percent support, including eight that were backed by a majority vote. Meanwhile, Walden, AFSCME, and Pfizer created the Working Group on the Advisory Vote on Executive Compensation that also includes other institutional investors, governance experts, and industry representatives. As a result of this collaboration, approximately 20 companies are studying the advisory vote and a few, such as Verizon, have committed to implement the policy.

Walden began researching and monitoring Weatherford International after discovering late last year that it provided oilfield services in Sudan through a Dubai-based subsidiary. In December Weatherford confirmed for us its plans to cease all activities in Sudan within one year and described its various humanitarian efforts, such as providing potable water, in the Darfur region. These actions render Weatherford outside the scope of most divestment mandates and led the Sudan Divestment Task Force, the leading information source on companies with strategic links to Sudan, to acknowledge the company’s diminishing involvement there.

In October, Walden joined a long-running stakeholder dialogue with Target’s director of compliance and production services and the senior manager of global compliance led by the Center for Reflection, Education and Action (CREA). We were pleased to learn about Target’s programs to track, monitor, and respond to violations of its labor code of conduct. However, we encouraged the company to more actively consider ways to reach out to its subcontractors and to increase its public reporting around this work. In a similar vein, Walden recently began addressing vendor standards policies and reporting at
General Mills.