Social Watch Report 2010

in this direction and may contribute to increase democratizationand accountability of private sectoroperations.International networks and initial resultsIn several European countries, as well as in the US,active shareholder engagement has become a widespreadpractice. The interventions and proposals ofsmall active shareholders helped in many cases toimprove companies´ environmental and social responsibility,governance and accountability, and longterm sustainability. This strategy has already beenused in campaigns targeting Northern corporationresponsibility in solidarity with affected communitiesin the global South in order to promote their right todevelopment.The pioneer in shareholder engagement practicesis certainly the Interfaith Center on CorporateResponsibility (ICCR) based in New York. 2 As acoalition of 275 religious orders, Catholic, Evangelicand Jewish, ICCR engages US companies it investsin, filing and voting resolutions at the companiesAnnual General Meetings (AGM) and meeting thecompanies’ directors and managers. The first ofsuch resolutions was submitted in the early 1970s,asking companies such as General Motors to withdrawtheir financial and commercial support fromApartheid South Africa. ICCR South Africa resolutions,presented by the Episcopal Church, never gotmore than 20% of shareholders votes, but indeedhelped influence public opinion and put Apartheidunder the spotlight of financial markets. In the yearsbefore the end of Apartheid (1994), the direct investmentsof US companies in South Africa declined by50% and, as Timothy Smith – one of the first executivedirectors of ICCR – put it: “Without responsibleshareholding initiatives the fight against Apartheidwould have been far less effective.”The ICCR mission statement declares: “Webelieve that investments should offer somethingmore than an acceptable financial return.... Insteadof selling the shares of companies that acts againstenvironmental, human rights or governance rule, weprefer to act as shareholders and press for change.”As of 2010 it has submitted more than 200 differentresolutions at AGMs of US companies on issuessuch as excessive executive compensation, toxicchemicals in products, animal testing, weaponizationof space or foreign military sales. Many resolutionshave been withdrawn before the AGMs, because thecompanies have agreed to negotiate with ICCR members.The percentage of shareholders that voted forICCR resolutions varies from the nearly 40% of derivativesresolutions submitted at Bank of America,Citigroup and Goldman Sachs’ AGMs, asking formore transparency in the trade in financial deriva-2 For further information see: .tives, to the record 97.9% of HIV/AIDS resolutionssubmitted at Coca Cola’s AGM in 2004, asking themultinational to disclose a report on the potential financialimpacts of HIV/AIDS and other pandemics onthe company’s balance sheet and business strategiesin developing countries. After the resolution, whichwas meant to make Coca Cola aware of the HIV/AIDSemergency in East Asia and Africa, the company hasstarted publishing a detailed report, as required bythe active shareholders, investing in prevention andhealth care for its employees in poor countries.Similar ICCR resolutions have convinced theUS clothing giant The Gap, to disclose the full list ofits subcontractors in developing countries as well asan assessment of social and environmental risks foreach of them.But not only religious investors are putting thecompanies under the spotlight in shareholders meetings.In the last 10 years also the big pension fundshave started to raise their voice. In the US the mostknown is Calpers (Californian Public Employees RetirementSystem). Calpers, with 1.4 million membersand nearly 200 billion dollars under management,have started to use its investment shares as a wayto engage US corporations. Calpers’ campaigns,aimed mainly at condemning bad governance practices(e.g., excessive executive compensation), haveobtained a broad and unexpected success, so thatSean Harrigan, Calpers’ chairman until 2004, hadto resign due to mounting pressure from US multinationals.On September 2006, California GovernorArnold Schwarzenegger, supporting the Sudan DivestmentTask Force, adopted a targeted divestmentpolicy from companies that operate in South Sudan(where the Darfur civil war continues) for the CaliforniaPublic Employees Retirement System (CalPERS)and California State Teachers Retirement System(CalSTRS) and decided to indemnify the boards ofboth funds for this action.Besides Calpers and Calstrs, many other publicemployee pension funds have started putting pressureon US companies in their AGMs, includingthe New York State Common Retirement Fund, theConnecticut Retirement and Trust Plans of the NewYork City Comptroller’s Office. “In the last years,”according to a survey by the US Social InvestmentForum, “these funds have submitted tens of socialresolutions based on ILO (International Labour Organization)Conventions, on climate change issuesor equal opportunities.”In Canada the attention of pension funds forsocial and environmental issues is stimulated byBatîrente, the Quebec-based pension funds of Caissed’économie Desjardins (a bank created and entirelycontrolled by trade unions). 3 Batîrente managesabout EUR 350 million, has more than 20,000 mem-3 See: .bers and selects the shares it invests in according toESG (environmental, social and governance) criteria.“In the beginning we have supported resolutionssubmitted by other funds or organizations”, saysDaniel Simard, Batîrente’s coordinator. “But in thelast few years we have started presenting our ownresolutions.” Together with Oxfam, Batîrente hasconvinced Metro, a retailer in which the fund invests,to sell fair trade coffee, while it has asked Sears, anotherretailer, to publish a social report according toGRI (Global Reporting Initiative) guidelines.With the exception of Great Britain, wheresome financial institutions such as the Co-operativeBank, Hermes or F&C Asset Management have beenpioneering shareholder engagement, in Europe thispractice is still marginal and rarely hits the headlines.In the continent of familial and banking capitalism,stock exchanges have never played an importantrole. And, as a consequence, activists have preferredother ways of pressuring companies. But somethingis changing also in continental Europe. The mostinteresting news comes from Switzerland. Its nameis Ethos. Born in 1997 by the initiative of two publicpension funds, Ethos Foundation for sustainableinvestment, manages today EUR 500 million on behalfof some 90 public pension funds in Switzerland.Ethos is delegated by pension funds to exercise votingrights (connected to the shares the funds investin) at Swiss companies AGMs. Excessive managerremuneration, directors’ reputation and mismanagement,and scarce transparency when dealing with“toxic” financial products are the main issues thatEthos presents. Most of the targets are financial orpharmaceutical corporations, like UBS or Roche.In some cases Ethos’ proposals are backed also byother investors or by common shareholders and areable to get more than 50% of shareholder votes, as ithappened this year in the UBS Annual General Meeting,where the Board proposed to discharge formerUBS board members of their responsibility for thecompany’s financial collapse. Ethos voted against,and with it the majority of shareholders, who are nowthinking of suing the company for mismanagementand financial damage to its customers. Ethos votesin more than 100 Swiss company AGMs each year.For non-Swiss companies it delegates internationalpartners belonging to ECGS (European CorporateGovernance Service).In some cases, shareholder engagement is associatedwith traditional campaigning strategies. InMarch 2010, a coalition of UK trade unions, NGOsand investors attempted to get thousands of pensionscheme members to join an e-mail bombing campaignaiming at forcing oil giants BP and Royal DutchShell to reconsider investments in environmentallycontroversial oil sands developments in the Albertaprovince of Canada. The coalition included UNISON,the UK and Europe’s biggest public sector union withThematic reports 26 Social Watch