SHAREHOLDER ADVOCACY: Investing in Social Justice

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SHAREHOLDERADVOCACYInvesting in Social Justice

• General Assembly 2005
• Sponsored by UUSC and UUAs Committee on
  Socially Responsible Investing (CSRI)
• Presented by Jim Gunning (UUSC CSRI)
  Stephanie Leighton (CSRI), Portfolio Manager and
  Director of Equity Research of Trillium Asset
  Management

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UUSC UU voice for human rights
Vision statementThe UU Service Committee
envisions a world free from oppression and
injustice, where all can realize their full human
rights.Mission statementThe UU Service
Committee advances human rights and social
justice around the world, partnering with those
who confront unjust power structures, and
mobilizing to challenge oppressive policies.
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COMMITTEE ON SOCIALLY RESPONSIBLE INVESTING

• Founded by the UUA Trustees in 2001
• Joan Cudhea, Chair
• Tim Blackwood
• Jerry Gabert, UUA Treasurer
• Jim Gunning
• Larry Ladd, UUA Financial Advisor
• Stephanie Leighton
• Susan Leslie, Staff Liaison
• Eva Marx, Board Trustee
• Rev. Sydney Morris, UUMA
• Rev. James Sherblom, Investment Committee

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THREE PARTS OF SRI

• To achieve a triple bottom line social,
  environmental, as well as financial returns
• Screening investments
• Community investing
• Shareholder activism

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SCREENING INVESTMENTS

• Positive and negative screens
• Selection criteria
• Financial
• Social
• Environmental

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POSITIVE SCREENS

• Characteristics of companies and industries to
  favor
• Good employment practices
• Sound environmental policies
• Good community relations
• Safe products
• Diverse boards

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NEGATIVE SCREENS

• Characteristics of companies and industries to
  avoid
• Weapons and military contractors
• Tobacco products
• Gambling
• Nuclear energy
• Alcoholic beverages

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COMMUNITY INVESTING

• Modest portion of portfolio (3-5)
• Low or no financial return
• Examples
• Community banks
• Affordable housing
• Micro-lenders
• Others

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SHAREHOLDER ENGAGEMENT

• Use share ownership to press for corporate
  accountability on
• Social and environmental issues
• Corporate governance/accountability
  issues

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SHAREHOLDER ENGAGEMENT

• Methods
• Proxy voting
• Engagement with executives
• Shareholder resolutions
• Divestment (as a last resort)

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HISTORY OF SHAREHOLDER CAMPAIGNS
1970s 1980s 1990s
South Africa South Africa Human rights
Environment Environmental reporting Global warming
Global codes of conduct
Equal employment Equal employment Sweatshop labor
Tobacco Unsafe products
Nuclear power MacBride principles Sexual orientation non-discrimination
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CURRENT ISSUES SOCIAL

• Global human rights policies
• Contract supplier standards
• HIV/AIDS reporting
• Sexual orientation non-discrimination
• Water rights
• Enabling access to capital

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CURRENT ISSUESENVIRONMENTAL

• Global warming climate change reporting
• Emissions reduction energy efficiency
  reporting
• Renewable energy sources
• Indigenous rights policy
• Recycling
• Pesticides and other toxic chemicals
• GMOs

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CURRENT ISSUESGOVERNANCE

• Board diversity and independence
• CEO compensation
• Pay disparity
• Political contribution disclosure
• Separate CEO and Chair

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EMERGING ISSUES

• Sustainability reporting
• Environmental justice
• Gender identity non-discrimination
• Alternatives to toxics
• Animal testing
• Israeli-Palestinian conflict

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HOW CAN I GET INVOLVED?

• Vote your proxies
• Identify your issues in coalition with others
• Choose companies to approach
• Engage company executives letters or meetings
• File resolutions for annual meetings
• Have patience and persistence

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PROXY VOTING

• Company annual meeting materials
• Unmarked proxy ballots are voted by management
• Institutional investors hold many shares
• Investment managers (and mutual funds) must now
  disclose how they vote

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ENGAGEMENT OF EXECUTIVES

• Stress ownership status its OUR company
• Raise awareness about issues
• Propose meaningful actions
• Consider going public on issue
• Agree on target dates

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WHO FILES RESOLUTIONS?

• Religious organizations -- including the UUA,
  UUSC some UU churches
• Socially responsible investment firms
• Labor unions
• Public pension funds
• Other non-profits (NGOs)
• Individuals

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HOW TO CHOOSE ISSUES

• Work in coalition with others
• Major resource is ICCR (Interfaith Center on
  Corporate Responsibility)
• Includes both faith-based and secular
  organizations
• Both UUA and UUSC are members
• UUA based on stated UU valuesUUSC
  mission-related issues

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WHAT DOES SUCCESS LOOK LIKE?

• Company agrees to meaningful discussions
• Company agrees to adopt our requests
• In both cases, we would agree to withdraw
  resolution
• If the resolution remains on the annual meeting
  agenda, we present the issue and discussion
  follows
• Voting occurs, results are reported

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NEXT STEPS OF PROCESS

• Depending on vote size, further meetings with
  company executives
• Re-filing resolution in subsequent years
• SEC allows resubmission if resolution gets at
  least 3 of vote (6 after second year, 10 after
  third year)

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2004 RESULTS LABOR STANDARDS

• 17 proposals voted on -- average support 12.2
• Disney vote was 29 (China operations)
• Delphi vote was 23 (low wages in Mexico)
• 99 Cents Only (19) and Visteon (17)
• Successful withdrawals at ExxonMobil (UUSC
  co-filed), Big Lots, Jones Apparel
• Note statistics provided by IRRC Investor
  Research Responsibility Center (www.irrc.org).

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2004 RESULTS EQUAL EMPLOYMENT OPPORTUNITY

• Four proposals voted on -- ranged from 11 - 16
• 24 sexual orientation non-discrimination
  proposals
• 21 withdrawn when companies agreed to adopt
• 3 were voted on ranged from 27 - 62
• ExxonMobil was 29 (UUA co-filed) ALLTEL was
  27 (UUSC co-filed) and in 2005 agreed to adopt
• Note statistics provided by IRRC Investor
  Research Responsibility Center (www.irrc.org).

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RECENT UUA SHAREHOLDER ACTIVISM

• Primary filer at Home Depot and Conoco Phillips
  Both adopted policies of non-discrimination based
  on sexual orientation
• Co-filer at HJ Heinz Agreed to global code of
  conduct but is resistant to independent auditors
  of overseas operations
• Co-filer at Chevron and Glaxo SmithKline on
  HIV/AIDS Participated in meetings with
  executives Chevron adopted a global workplace
  policy for employees and their families

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RECENT UUA SHAREHOLDER ACTIVISM

• Co-filer at ExxonMobil on sexual orientation
  non-discrimination -- company may be relenting on
  this issue
• Leveraged efforts of NYC Retirement System and
  others by recruiting local UUs to attend annual
  meetings and present resolutions

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UUA CAMPAIGN FOR EQUALITY

• Wrote most companies in our portfolio about
  200 letters
• Asked what they were doing with respect to 10
  Equality Principles
• Principles include non-discrimination on the
  basis of sexual orientation, gender
  identity/expression, domestic partner benefits
• Next steps call company executives to verify
  responses and/or explain issues
• Ask for adoption of Principles, or face a
  resolution in coming year

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RECENT UUSC SHAREHOLDER ACTIVISM

• Unocal agreed to settle lawsuit on Burma
  (Myanmar) for subjecting people to slave labor
  and other crimes
• ExxonMobil agreed to engagement on shaping a
  global labor standards policy
• ALLTEL adopted policy of non-discrimination
  based on sexual orientation, after several years
  of resolutions
• Wal-Mart asked to report on sustainability

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RECENT UUSC SHAREHOLDER ACTIVISM

• Unocal (now merged with Chevron) adopted a global
  code of conduct
• Merck and PepsiCo asked to address the HIV/AIDS
  pandemic
• Merck agreed to publish an annual report on their
  corporate responsibility efforts including
  HIV/AIDS
• PepsiCo agreed to formulate a global workplace
  policy for its employees and their families
• TJX agreed to a strong vendor standards program,
  but remains resistant to increased public
  reporting

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HOW CAN MY CHURCH GET INVOLVED?

• Local churches may invest based on SRI
• UUAs General Investment Fund, which has screens
  for social and environmental issues
• Investment firms that specialize in SR investing
• SR mutual funds
• Vote proxies based on SR guidance
• Join coalitions such as ICCR
• Write letters to local companies on social issues

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INFORMATIONAL RESOURCES

• Interfaith Center on Corporate Responsibility
  (UUA and UUSC are members) www.iccr.org
• Social Investment Forum (UUA is a member)
  www.socialinvest.org
• Shareholder Action Network www.san.org
• Information on proxy voting
• UUA www.uua.org/finance/sri/investing/proxy.html
• As You Sow Foundation www.asyousow.org
• Rockefeller Foundation www.rockpa.org

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QUESTIONS ANSWERS
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THANK YOU FOR ATTENDING
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