|
Annual Report of the Barnard College Advisory Committee on Socially Responsible Investing
Date: April 13, 2004
Advisory Committee Members:
Gretchen P. Collazo (Chair, Alumni Representative)
Jessica Eisen (Student Representative)
Richard Pious (Faculty Representative)
Katherine Plourde (Alumni Representative)
Rajiv Sethi (Faculty Representative)
Adelle Tilebalieva (Student Representative)
Lewis Wyman (Administrative Representative (non-voting))
I. Introduction
In the summer of 2002, the Barnard Board of Trustees approved a proposal to create an Advisory Committee on Socially Responsible Investing ("the ACSRI" or "the Committee"). As stated in the proposal, the purpose of the ACSRI is to advise the Trustees on "the social implications of Barnard's institutional investment program and to advise the Board's Committee on Investments on social and ethical issues that arise in the management of the College's endowment."
The ACSRI has relied on two (2) principles when reviewing and making recommendations on Barnard's portfolio. The first principle is that as a non-profit institution, Barnard has a unique responsibility to act in the public interest when making investment decisions. The second principle is that as an educational institution, Barnard has a special obligation to ensure that our investment decisions reflect and encourage the values nurtured within our school. The Committee also recognizes that in considering our recommendations, the Investment Committee will be taking into account the fiscal impact of its investment decisions on the health and long-term growth of the endowment.
II. Community Input
The Committee has sought community input in order to review and make recommendations on Barnard's portfolio. The primary mechanism agreed upon by the Committee to provide information about our work, and to solicit community feedback, is through the creation of a website. The website was submitted in the fall of 2003 for review to Andrew Manshel, former Administrative Representative to the Committee, and was uploaded in early 2004. The URL for this website is http://www.barnard.edu/sri . The website contains information such as the Committee's charter, meeting minutes, and the history of socially responsible investing at Barnard. The website also has a Feedback page, in which we encourage community members to submit their suggestions and ideas to the Committee for consideration.
The second agreed upon mechanism for soliciting community feedback is through holding an annual Community Forum, at which community members and experts can present to the Committee on any topic relating to socially responsible investing at Barnard. This year's community forum was held on November 25, 2003. There were fifteen (15) speakers, and approximately thirty (30) community members in attendance. In addition to community representatives, the Committee also invited the Rev. David Schilling from the Interfaith Center on Corporate Responsibility (ICCR) to speak. The presenters focused on a wide range of issues for the upcoming proxy season including the environment, labor, board diversity and Committee issues.
The third mechanism for ensuring that the Committee represents the community is intrinsic to its composition. The faculty representatives were nominated by the Faculty Governance and Procedures Committee, the student representatives were nominated by the Student Governing Association and the alumnae representatives were nominated by the Associate Alumnae of Barnard College. These nominations were then confirmed by President Judith Shapiro.
III. Research
In addition to soliciting input from the community, the Committee also sought information from outside sources as necessary. The Committee primarily utilized the two organizations Barnard subscribes to in order to perform background research: the ICCR, and the Investor Responsibility Research Center (IRRC). In addition, each member used other resources as necessary, such as government agencies, non-profit organizations and newspapers.
IV. Agenda Setting
There were approximately 30 (thirty) resolutions relating to social and ethical issues proposed at companies Barnard is invested in, according to the most recent investment information provided to the Committee. In order to review the resolutions, the Committee divided the resolutions according to topic, and assigned each member approximately six (6) resolutions to research. Each member then performed the necessary background research, and presented on the topic to the Committeefor discussion.
V. Recommendations
The Committee has agreed to support four (4) of the resolutions researched over the course of the past year. These resolutions are presented to you below in table format. Following the table is a brief summary of why the Committee has chosen to support these resolutions.
No. |
Shareholder Proposal |
Company |
Meeting Date |
Shareholder
Proposal No. |
1 |
Report on Waste Storage
at Nuclear Plant |
General Electric |
April 28, 2004 |
3 |
2 |
Disclose Costs of
PCB Cleanup |
General Electric |
April 28, 2004 |
4 |
3 |
Report on EEO |
Wal-Mart |
June 4, 2004 |
This information is
not yet available. |
4 |
Report annually to shareholders on political donations |
Pfizer |
April 22, 2004 |
6 |
1. Report on Waste Storage at Nuclear Plant (General Electric)
General Electric operates nuclear power plants that use fuel rods to produce heat. These rods must be periodically replaced. Rods that are used up are referred to as "spent fuel rods." Spent fuel rods are highly radioactive, and contain plutonium, cesium-137, small quantities of uranium and other materials. Initially, these rods are placed in "spent fuel storage pools" for five years. After the rods have cooled, they may remain in wet storage, or be moved to dry storage casks. Because it is cheaper to keep the spent pool rods in the wet storage, many companies will simply "rerack" spent fuel rods, moving the rods closer together in order to create more space. Eventually it is hoped that the rods will be moved to long-term storage, either on-site or at a national waste center. Currently, however, there are very few options for long-term storage, and it is unlikely this situation will change in the near future.
Spent fuel rods are a danger to the public. The IRRC states that according to a 2003 report published in Princeton's Science and Global Security , "an accident or successful terrorist attack on a storage pool could have consequences 'significantly worse than Chernobyl.'" Additionally, because the rods are now packed too close together:
"if the water in the pool boils away, or is released by an accident or terrorist attack, spent fuel rods recently removed from the reactor core would self-ignite, burn away the boron covers surrounding them and possibly ignite other rods in the pool. This fire would be extremely radioactive and hot, nearly impossible to extinguish, and would
contaminate the surrounding environment for several decades." (IRRC)
Additional evidence shows that environmental contamination would lead to severe risk to the health of the population within the area, making thousands of people vulnerable to both immediate death from radiation poisoning and eventual death from cancer.
The shareholder resolution requests that General Electric prepare a report describing "the current vulnerability and substantial risks of the interim storage of irradiated fuel fords at all GE-designated reactor sites and that proposes measures to reduce those risks. A copy of the report, omitting proprietary and security information, should be available to shareholders on request by August 2004."
The Committee concludes that neither the government regulators nor the plant operators have taken sufficient steps to resolve the problem of storing nuclear waste, and as a result agrees with the filers that "this study is essential for realistic and responsible security, economic and ethical planning." This report is a necessary first step to assessing and responding to the security and health risks posed by the storage of nuclear fuel rods.
2. Disclose Costs of PCB Cleanup (General Electric)
According to the Environmental Protection Agency (EPA), "it is estimated that more than one million pounds of PCBs were discharged into the Hudson River from two General Electric (GE) capacitor manufacturing plants in Fort Edward and Hudson Falls, New York over a 30-year period ending in 1977." Polychlorinated biphenyls (PCBs) are a mix of chlorinated compounds which are dangerous to the environment and to people. According to New York State Attorney General Eliot Spitzer, "human exposure to PCBs is a concern because of the wide range of adverse health effects including skin irritation, reproductive and developmental effects, immunologic effects, liver damage and cancer." As a result of this contamination, 200 miles of the Hudson River have been declared a Superfund Site, reaching from Hudson Falls to the Battery in New York City.
General Electric has been running a legal and public relations campaign for years, asserting that the Hudson River is not polluted, and that if it is polluted, they are not legally responsible. Many experts have concurred that PCBs are in fact dangerous; it is for that reason that they were outlawed in the 1970's by the federal government. Yet, as recent as 2000, General Electric's comments prepared in response to the Mid-Hudson River Human Health Risk Assessment (Mid-HHRA) stated that "despite the ominous language that EPA favors, the central conclusion in the Mid-HHRA is that PCBs pose no unacceptable risk to people who swim, wade, boat in or drink water from the mid-Hudson River or breathe the air near the river."
It is reasonable and necessary for shareholders to know how much these efforts to avoid responsibility for this environmental disaster are costing the company, as it has a) a direct impact on the company's finances; and b) possible linked effects on the company's finances due to the resulting negative image of General Electric among consumers. It is clear that this is a concern shared by other shareholders, as the IRRC reports that support for this resolution doubled between 2001 and 2001, to reach to 22 percent.
We are therefore in agreement with the resolutions requesting:
"the Board of Directors to report by August 1, 2004, at reasonable cost and excluding confidential information, its annual expenditures by category and specific site (where applicable) for each year from 1990-2003, on attorney's fees, expert fees, lobbying, and public relations/media expenses, relating in any way to the health and environmental consequences of PCB exposures, GE's remediation of sites contaminated by PCBs, and/or hazardous substance laws and regulations, as well as expenditures on actual remediation of PCB contaminated sites."
3. Report on EEO (Wal-Mart)
Discrimination still exists in the workplace. According to the IRRC "two recent studies on the gender wage gap by the President's Council of Economic Advisors found that after accounting for measurable factors that affect employee compensation, there still is a 12 percent unexplained pay gap between men and women that could be the result of employment discrimination, according to a December 2000 Press release by the EEOC." There is evidence to suggest that discrimination may exist at Wal-Mart.
A discrimination lawsuit ( Dukes vs Wal-Mart) has been filed against Wal-Mart, accusing it of favoring men over women in promotions and pay. The lawsuit may include all 700,000 women who worked at Wal-Mart from 1996-2001, which would make it the largest employment discrimination class action in American history. Hearings have been held on class certification and are waiting for the judge's decision, which should come out later this year (2004). The suit claims that women compose 65 percent of Wal-Mart's hourly employees, but only 33 percent of its managers. A statistics professor hired by the plaintiffs found that full-time women hourly employees working at least 45 weeks at Wal-Mart made about $1,150 less per year then men in similar jobs, a 6.2 percent wage gap. The plaintiffs also claim that women store managers made an average of $89,280 a year, $16,400 less than men.
Discrimination lawsuits can be extremely costly. In 1997 Home Depot agreed to pay $87.5 million to settle a sex discrimination lawsuit. In 2001, Coca-Cola agreed to pay $192 million in a race discrimination settlement. In 2002, Rent-a-Center agreed to a $47 million settlement of two sex discrimination class action lawsuits. Furthermore, according to the IRRC, "Another study published in a 1995 issue of The Academy of Management Journal found that 28 companies that won Labor Department awards for exemplary affirmative action programs saw an average increase in their stock prices of 1 percent on the day of and the day following the award's announcement. Companies that lost discrimination suits experienced about a 0.5 percent loss in stock price, according to the study."
Discrimination can also lead to negative press, and a consequently, a negative image in the eyes of consumers, who may avoid shopping at Wal-Mart. The Wal-Mart discrimination lawsuit has garnered coverage in most major newspapers. Additionally, the National Organization for Women (NOW) has labeled Wal-Mart a "Merchant of Shame," and has launched a national campaign against the company.
The EEO resolution at Wal-Mart requests that the company prepare a report including the following information:
• a chart identifying employees according to their sex and race in each of the nine major EEOC-defined job categories for the last three years, listing either numbers or percentages in each category;
• a summary description of any affirmative action policies and programs to improve performances, including job categories where women and minorities are underutilized;
• a description of any policies and programs oriented specifically towards increasing the number of managers who are qualified females or minorities; and
• a general description of how the company publicizes its affirmative action policies and programs to merchandise suppliers and service providers.
The IRRC reports that this resolution was filed in 2002, and received 11.3 percent of the shares voted in that year, a significant amount.
The Committee considers the proposed report to be entirely feasible. The first clause of the report has already been compiled, as it is, in essence, a copy of the information contained in the annual consolidated EEO-1 reports filed with the US EEOC. It is also highly probable that other information has already been researched, considering the pending sex-discrimination case. Finally, it specifically states that the report should be produced at "reasonable cost and omitting confidential information."
The Committee also deems this report to be a necessary first step towards eliminating discrimination at Wal-Mart. We concur with the information provided in the resolution, which cites the following finding of the Glass Ceiling Commission: "public disclosure of diversity data - specifically, data on the most senior positions - is an effective incentive to develop and maintain innovative, effective programs to break the glass ceiling barriers." This report will signal whether sufficient progress is being made towards equality at Wal-Mart, and encourage further actions. It will also signal to the general public that Wal-Mart is making good-faith efforts to create a workplace free of discrimination. As a women's college that has affirmative action policies, the Committee believes that Barnard should ensure that our investments reflect our dedication to the advancement of women and minorities in all areas of our lives, including where we work.
4. Report annually to shareholders on political donations (Pfizer)
As the 2004 election approaches, several shareholder resolutions relating to corporate political contributions have been filed this proxy season. According to the IRRC's Background Report on Political Contributions and Related Issues, the Democratic and Republican parties have nearly doubled their money raised over the past 10 years. Corporate contributions represent a vast majority of this funding; according to the Center for Responsive Politics, business interests gave over a billion dollars to political campaigns during the 2002 election cycle.
Political contributions are a particularly important issue in the pharmaceutical industry, which is subject to direct government regulation and therefore has a strong interest in the outcome of public policy debates. Supporters of these shareholder resolutions have pointed out that the pharmaceutical industry business model that relies on political support for high price levels, patent protection and control of international supply may be vulnerable to changes resulting from growing pressure on policymakers to ensure affordable pricing, responsible marketing and ethical scientific practices.
The debate surrounding the McCain-Feingold bill brought the issue of campaign finance into the public eye and raised concerns regarding the impact of corporate political contributions on democratic processes. The McCain-Feingold legislation, however, has only restricted contributions at the federal level, effectively moving political contributions to the state and local levels and to 527 organizations (which are mentioned this year for the first time in shareholder resolutions.) The Center for Public Integrity has dubbed 527s "the new soft money" since they are able to raise unlimited amounts of money to influence elections" while "avoiding regulations by state or federal election authorities." Limits on contributions to and by political action committees (PACs), moreover, remain unchanged.
Given the Committee's commitment to transparency and accountability, we recommend that the Trustees vote in favor of the resolution filed with Pfizer by the Nathan Cummings Foundation, requesting that the corporation:
"report annually to shareholders in a separate report on corporate resources devoted to supporting political entities or candidates on both state and federal levels. The report should be prepared at reasonable expense and omit proprietary information. We suggest that the requested comprehensive report set forth and quantify, specifically and not in aggregate, company resources devoted to supporting political entities and candidates, to supporting third-party organizations that engage in political activity including section 527 organizations, and related expenditures of money and other resources."
The Committee believes that such a report should be fairly easy for Pfizer to prepare since much of the data is already collected and disclosed in federal, state, and IRS filings; this report would make information that is already publicly available more accessible to shareholders as well as providing them with timely access to information about 527 contributions.
VI. Plans
As required in the Charter, our agenda for the final months of this academic year includes a review of the Charter, and the Committee's operations over the past two (2) years. We will report any recommendations we have regarding to the Charter to the Trustees either in written format, or at our next meeting. We additionally plan to begin planning for next year, focusing on expanding our community outreach, and increasing the number of resolutions examined.
VII. Conclusion
The Committee wishes to thank the Trustees for their continued support of socially responsible investing. We believe that ethical investing can help promote the College's values on a larger scale, and demonstrate to the student body the myriad ways in which an individual citizen or institution can impact society. The Committee looks forward to the next proxy season, where we hope to expand our agenda, and broaden our outreach efforts.
|
