Faith-based coalition investors push social and environmental-based resolutions at shareholder meetings
It must be handy having God on your side, especially when taking on a large corporate – but that’s exactly what the Interfaith Center on Corporate Responsibility (Iccr) can reasonably claim. Year after year, it files social and environmental- based resolutions to argue its case at shareholder meetings in order to pressurize company executives to do the right thing, from improving supplier factory conditions in China to exhorting GE to clean up the Hudson after it tipped 1.3 mn pounds of harmful Pcbs into it.
The Iccr, whose 275 faith-based coalition members include institutional investors, pension funds and unions, has a combined portfolio of truly biblical proportions: $115 bn. Reverend David Schilling, director of global corporate accountability at the group, says the difference between the Iccr and the average bread-and-butter socially responsible investment (Sri) fund comes down to emphasis. ‘Our motivating force is a moral commitment to engag ewith corporations to encourage them to adopt and move practices on a range of human rights and environmental issues,’ he explains. ‘We bring a moral voice. The motivation may be different, but the approach is similar.’
Not all Iccr members have a direct religious connection – Calpers and the New York City Pension Fund certainly don’t. Yet there is enough shared common ground on a wide range of Sri issues to bring both groups under the Iccr umbrella. When Schilling is asked which sector he considers the most progressive in corporate social responsibility (Csr) commitment, his answer is surprising.
‘The mining industry is made up of a lot of engineers – not necessarily the sort of people you would think would have a natural aptitude or affinity toward Csr,’ he says. ‘Because of the exposure the sector has received over the last 10 years, however – like Shell’s involvement in Nigeria and the attendant human rights allegations – it’s an industry that’s had a substantial amount of scrutiny. A decade ago this industry was quite intractable, but now there is such concern about environmental damage or complicity with human rights violations, there’s much more movement.’
Schilling cites Nike as another company that has made notable strides, particularly with supplier workforce conditions. Many big companies with a clear, instantly recognizable brand logo have improved, he says. ‘The Nike swoosh is a clear identification of Nike in 90 countries,’ he points out. ‘But what do you know about Johnson Controls? It’s a fairly large company supplying parts to the automotive industry, making heating and cooling systems. But would you know if your building had a Johnson Controls system in it?’
Probably not. Schilling’s point is that mid-sized companies can fly under the wire when it comes to Sri issues, at least until the larger companies start cleaning up their own act and often forcing everyone – suppliers included – to up their game.
Schilling acknowledges that some sectors, like the auto industry, have supply chain issues that can’t be tackled by one company alone. That’s why the new Automotive Industry Action Group, launched in December with the Iccr’s support, includes DaimlerChrysler, Ford, GM and Honda working together to improve workplace conditions down their respective supply chains. It’s another win for the faith-based network.
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Schilling is quick to acknowledge the pivotal role of Iros in the Iccr’s day-to-day company communications, but he expresses frustration with Iros who don’t open up as much as they could. ‘If we haven’t had an ongoing relationship and we’re filing a resolution for the first time, an Iro often tries to control the interaction between the company and the shareholders,’ he says.
‘Iros may be relying too much on legal counsel, as opposed to opening the door and saying: We understand the issues and these are the people who can help. In other words, be a door-opener, not a door-closer.’ Schilling says Iros still stumble when it comes to training and education on social, environmental and governance issues. ‘Generally they’re better at governance, but some Iros still don’t see the connection when we ask such questions about human rights. For example, they might say, Why are you asking these questions relating to human rights? These are the sphere of government. We hear that a lot.’
Such a hands-off attitude is changing, however, because there’s more robust discussion about human rights generally from shareholders, and not just within the confines of the Iccr and other like-minded investors. ‘It’s about ordinary retail and institutional shareholders supporting corporate human rights policies as a way to mitigate risk while doing the right thing,’ Schilling explains.
‘We’ve seen a trend for larger votes on human rights resolutions at annual shareholder meetings. The average vote in 2004 was 8.89 percent and the highest was 17.36 percent. In 2006, the average was 16.69 percent and the highest was 36.82 percent. These votes send a signal to firms to pay attention to human rights as a business issue.’ Influential force
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, agrees the Iccr is an organization to be reckoned with. ‘It is much more effective than the number of votes it has,’ he points out. ‘Of all the social groups, it has the most influence.’
Elizabeth McGeveran, vice president of governance and sustainable investment at Foreign & Colonial Asset Management, is another admirer. ‘Companies that ignore the Iccr take a big risk,’ she warns.
‘It’s an organization very focused on engaging with companies and it has been doing it for well over a decade – Monsanto, Wal-Mart, you name it. It has also put serious public pressure on companies. Firms that engage with it learn an awful lot from their activist shareholders, who serve as barometers. If the Iccr is asking you a qu estion about a particular aspect of the environment or human rights, for example, in five years’ time that issue will have entered the mainstream.’