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May 08, 2003
Shareowners Press Avon to Walk the Walk
by William Baue
Shareowners vote overwhelmingly for board independence at Avon while questions about potential
carcinogens in its products linger.
SocialFunds.com --
Three shareowner resolutions were voted on at the Avon (ticker: AVP) Annual General
Meeting (AGM) last week. The two corporate governance resolutions received exceedingly high levels
of support, and a first-year social resolution on product safety received ample support to be
re-filed next year.
 The International Brotherhood of Electrical
Workers Pension Fund resolution requesting that Avon expense stock options, or assign a fair
monetary value to them, received an unprecedented 56 percent of the vote. Even more astonishing
were the results for the resolution calling for annual board elections, a measure corporate
governance advocates consider to be a key to creating board independence. This proposal received a
staggering 80.5 percent support from voting shareowners.
Avon CEO Andrea Jung stated that
this vote represented a "groundswell" of shareowner support, and promised that the board's
Governance Committee would consider the proposal with the utmost seriousness.
"This vote
ranks as one of the top ten votes ever in U.S. corporate history, where the resolution was opposed
by the Board," said Tim Smith, senior vice president of Walden Asset Management, the socially
responsible investment (SRI) firm that filed the resolution.
Walden has filed the same
resolution at several other companies, including McDonald's (MCD) and Gillette (G).
Walden decided to file the resolution at Avon not only because of the need for the company to
address this specific issue, but also to provide additional support for other shareowner action
being conducted there.
"We felt there were other issues being raised by shareholders and
breast cancer activists that Avon was not being responsive to," Mr. Smith told SocialFunds.com.
In the absence of meaningful dialogue, these shareowners and stakeholders filed a resolution
asking Avon to study the feasibility of removing parabens, a chemical preservative that may
increase breast cancer risk, from 82 Avon products. Parabens mimic the behavior of steroidal
estrogens, which were recently added to the federal list of known carcinogens in the 10th Report on
Carcinogens published in December 2002 by the U.S. Department of Health and Human Services.
Steroidal estrogens not only block the normal function of natural estrogens, but they also
increase the risk of breast cancer.
"Avon's image as a leader in the fight against breast
cancer is one of its biggest assets," said Adam Kanzer, general counsel and director of shareholder
advocacy for Domini Social Investments, which co-filed the resolution with Breast Cancer Action, a
San Francisco-based advocacy organization. Walden and Trillium Asset Management also supported
this resolution.
"The fact that chemicals found in Avon's products may increase the risk
of breast cancer undermines Avon's efforts on behalf of women's health," added Barbara Brenner,
executive director of Breast Cancer Action.
This resolution received 6.18 percent support
from voting shareowners, surpassing the Securities and Exchange Commission's 3 percent threshold
for re-filing resolutions after their first year. Shareowners and stakeholders also expressed
concern over Avon products containing dibutyl phalate (DBT), a chemical linked to reproductive
disorders that the European Union has banned from cosmetics.
The integrity of the Avon
Foundation's Breast Cancer Crusade and its famous Breast Cancer Walk has also been called into
question.
"We are very concerned about the lack of transparency in the company's
transactions around the walk," Ms. Brenner told SocialFunds.com.
Last summer, Breast
Cancer Action compared Avon's claim that it raised $190 million for breast cancer since 1992 with
its claim to have distributed $147.8 million for breast cancer research, education, and screening
programs. Avon could not account for the difference of approximately $42 million.
Avon
did not respond to SocialFunds.com's requests for commentary.
"Avon has a lot of goodwill
in the SRI community, and the time to talk to its critics is right now, before it's eroded by
unanswered critiques," said Shelley Alpern, Trillium's director of social research and advocacy.
"The social investment community may be too impressed by philanthropy, and we need to take a closer
look at how responsibly philanthropy is being conducted."
©
SRI World Group, Inc. All Rights Reserved.
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