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August 16, 2000
Labor Takes Lead Role in Shareholder Activism
Shareholder resolutions supported by labor shareholders indicate a growing consensus with other
social investors.
SocialFunds.com --
As the proxy season winds down to a close, with most annual meetings having taken place in the
early summer, shareholders supporting social and environmental resolutions are tallying up their
gains and losses. One significant outcome of the 2000 season has been the increased involvement of
labor shareholders in social and environmental issues.
 For the fourth year, the AFL-CIO has published their
"Key Shareholder Votes," indicating shareholder resolutions on issues of interest to union pension
fund managers. While many of these resolutions focus on corporate governance issues, such as board
declassification, independent board elections, and an end to "poison pill" provisions, several of
them deal with issues more familiar to social investors.
"For the first time this year
labor included environmental issues as part of its key votes," said Richard Ferlauto, Managing
Director of Proxy Voter Services (PVS), the Rockville, Maryland-based proxy advisory firm and
voting service for labor-friendly asset managers. "Labor shareholders are in a cutting edge
position to move corporations toward acting more responsibly and accepting the important role of
stakeholders as well as shareholders."
The AFL-CIO Key Votes for 2000 consisted of 35
shareholder resolutions, receiving an average of 33.8 percent support from shareholders, boosted by
six resolutions on corporate governance issues that received majority support. Nine of the key
votes dealt with social or environmental issues, representing a broader set of proponents and an
expansion of labor's active ownership agenda.
One of the highlights of the season was the
first internationally coordinated shareholder battle, in which the Australian, U.K., and U.S. labor
movements jointly sponsored shareholder resolutions at Rio Tinto PLC, the British mining giant. A
shareholder resolution asking for compliance with international workplace codes of conduct, sparked
by Rio Tinto's long history of human and labor rights problems, sent a strong message of labor
shareholder concern to the company's management.
"Much of the labor agenda looks to raise
standards around the world for corporate conduct," said Ferlauto, who recently co-authored an
article on labor shareholder activities this year for the PVS newsletter. "For example, labor funds
have made an issue of excessive executive pay and what it means for wealth inequality." The
alliance with socially concerned shareholders is therefore a natural one.
Shareholder
resolutions supported by labor this year also include the highly publicized battle for compliance
with international codes of conduct at Talisman, the Canadian petroleum company with involvement in
war-torn Sudan. A phenomenal 27 percent vote of support was due in large part to the efforts of
NYCERS, the New York City public employees pension fund.
Other key votes of a social or
environmental nature were resolutions on environmental liabilities, equal employment opportunity
reporting, child labor, and international operating or vendor standards. Several of these
resolutions, such as the one asking General Electric to adopt the International Labor
Organization's workplace human rights standards, were actually sponsored or co-sponsored by labor
shareholders.
Altogether, more than 50 shareholder proposals sponsored or co-sponsored by
labor interests went up for an annual meeting vote this year. The emergence of the American
Federation of State County and Municipal Employees (AFSCME) and the Sheet Metal Workers National
Pension Fund as active shareholders added to the fray, sponsoring several resolutions on corporate
governance issues.
Labor shareholder support of shareholder initiatives is nothing to
sneeze at. Taft-Hartley pension funds, those funds of unionized workers, have an asset base of
about $400 billion. Another $600 billion is invested in labor union member 401k plans, and $800
billion in collectively bargained plans representing union members. This is not to mention the $2.5
trillion in public pension plans of public employees like CalPERS and NYCERS, funds very active in
the shareholder activism process.
The support of social and environmental shareholder
activism by labor funds, like Taft Hartley funds and public pension funds, could make a significant
contribution to their future success. "Similar to the coalition efforts at the WTO against
globalization, there is a natural coalition between labor and social shareholders that seeks
standards for corporate activity in the global economy," said Ferlauto.
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SRI World Group, Inc. All Rights Reserved.
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