|
April 06, 2000
PetroChina IPO Raises Social Concerns
The initial public offering of a Chinese state-owned enterprise raises concerns over human rights,
environment, and corporate governance.
SocialFunds.com --
Human rights, labor, and environmental groups have been increasingly sensitive about the costs
of corporate globalization and free trade since the World Trade Organization meeting last November.
But a Chinese company's debut on the New York Stock Exchange today represents an expansion in the
globalization debate to include capital markets.
 Today's initial public offering (IPO) of
PetroChina was intended to lay the groundwork for other capital-starved Chinese state-owned
companies on the U.S. stock market. But a broad campaign of resistance by citizens' groups has
highlighted the risks of investing in foreign companies with checkered human rights and
environmental records.
"For the first time, public policy makers are questioning how the
capital-raising activities of foreign entities on Wall Street may be affecting US national security
and human rights interests," said Michelle Chan-Fishel, Director of the Green Investments Program
at Friends of the Earth.
Nine Chinese companies are already listed on the NYSE. But
PetroChina is the first IPO in a series of planned public offerings of "old economy," state-owned
enterprises looking to privatize or semi-privatize. These companies include China National
Petrochemical Corp., China National Offshore Oil Corp., and Baosteel of Shanghai.
PetroChina is a subsidiary of the state-owned China National Petroleum Corp., which holds a 40
percent stake in an international oil joint venture that is fueling the civil war in Sudan. Critics
claim that the war, which has claimed 2 million civilian lives since 1983, is largely being funded
and exacerbated by the oil development project.
The company is ostensibly insulated from
the Sudan debacle by the corporate restructuring that puts PetroChina in charge of domestic
holdings only. But even without Sudan, the company's lack of transparency is a red flag for
concerned investors.
Environmentalists charge that the company will not operate in an
environmentally responsible manner because of its technology, its cost-cutting priorities, and the
regulatory environment in China. Human rights groups fear that PetroChina's plans to expand oil and
natural gas production in Tibet will further marginalize Tibetans, and unions rage against reports
that the company plans to downsize a staggering sum of up to one million workers.
Investors are also concerned about the limitations on shareholder rights and other corporate
governance issues raised by PetroChina's offering. The company only intends to make 10-15 percent
of its shares available to the public, leaving the controlling interest to the parent company.
Securities laws are also very restrictive in China, limiting shareholder rights.
"It's
pretty clear that PetroChina wants American money, but is unwilling to relinquish any of its
power," said Chan-Fishel. "This bodes very poorly for shareholder rights."
The campaign to
stop the IPO of PetroChina has involved a diverse coalition of environmental, human rights,
religious, and conservative activists. Several members of Congress called on the Securities
Exchange Commission (SEC) to postpone the IPO, and Friends of the Earth reported that PetroChina's
registration document was missing required information.
The coalition launched a national
boycott against BP-Amoco after the international oil giant announced their decision to purchase a
20 percent stake in the IPO. The AFL-CIO wrote letters to 42 mutual fund managers, asking them to
boycott the offering. Just yesterday the American Anti-Slavery Group announced a divestment
campaign against PetroChina, calling it a "slave stock" and linking it with human rights violations
in Sudan.
Many institutional investors have responded to the campaign by vowing not to
invest in PetroChina, shrinking the plan to generate $10 billion through the IPO to a mere $3.1
billion. These include TIAA-CREF, the world's largest pension system, and the California Public
Employees' Retirement System (CalPERS), together with assets totaling $450 billion.
PetroChina's IPO and the ensuing debate about the social implications of international
offerings comes at a time when the SEC is considering easing the environmental requirements for
foreign companies on U.S. stock exchanges. Their decision in May, whether to abolish the rule that
requires foreign companies to adhere to the same environmental accounting standards as U.S.
companies, may be colored by the PetroChina experience.
"Investors and public policy
makers are waking up to the fact that increased trade and investment without appropriate human
rights, environmental, labor, transparency and accountability standards will not protect their
concerns," said Chan-Fishel.
"The market's rejection of the PetroChina IPO, and the
efforts by public policy makers to stop it, illustrates how Americans will not allow their
closely-held principles to be trampled the effort to meet the goal of financial and trade
liberalization."
©
SRI World Group, Inc. All Rights Reserved.
Top
| 
