This is a printer friendly version of the article. To print, please use your browser Print function.


August 26, 2005

Shareowner Resolution Asks Monsanto to Create Ethics Oversight Committee
    by William Baue

The company stonewalls inquiries related to the resolution, which springs from a $1.5 million settlement with the SEC and DOJ earlier this year regarding a bribe Monstanto paid in Indonesia.

SocialFunds.com -- Earlier this week, Harrington Investments Inc. (HII) filed a shareowner resolution with Monsanto (ticker: MON) asking its board to create an ethics oversight committee of independent directors to monitor compliance with laws as well as the Monsanto Pledge and Code of Business Conduct. Why make such a request?

The resolution recounts the company's $1.5 million settlement with the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in January 2005 over violations of the Foreign Corrupt Practices Act (FCPA). In a nutshell, a senior Monsanto manager authorized a $50,000 bribe to get a senior Indonesian Ministry of Environment official to repeal a 2001 environmental impact assessment decree obstructing market entry for genetically engineered crops.

"Although the payment was made, the unfavorable decree was not repealed," notes the SEC enforcement document without commentary on this irony. "In addition, from 1997 to 2002, Monsanto inaccurately recorded, or failed to record, in its books and records approximately $700,000 of illegal or questionable payments made to various Indonesian government officials."

Such breaches of corporate ethics are unfortunately not anomalous. On Monday of this week, the SEC charged former Bristol-Myers Squibb (BMY) CFO and another officer with orchestrating a fraudulent earnings management scheme to the tune of $1.5 billion. On Tuesday, the commission charged the former Kmart (KM) CEO and CFO with financial fraud leading up to the company's declaration of bankruptcy.

"Bribery is illegal, and Monsanto's violation of federal law and the company's own voluntary code of conduct prove that management cannot be trusted to protect shareholders," said John Harrington, CEO of HII, a Napa, California-based socially responsible investment (SRI) firm. "Monsanto's management has once again shown its disregard for its fiduciary duties and for U.S. law."

After several attempts to contact Monsanto for comment, SocialFunds.com spoke briefly with Monsanto Public Affairs Director Chris Horner. The phone call abruptly ended before Mr. Horner answered any questions and he did not respond to follow-up phone calls and email.

The DOJ/SEC settlement requires Monsanto to retain an independent compliance expert. A search of SEC filings posted on Monsanto's website since January 6, 2005 did not disclose the retention of an independent compliance expert, so it is unclear whether the company has fulfilled this requirement.

The SEC enforcement document asserts that Monsanto "lacked internal controls sufficient to detect or prevent the illicit payment schemes operated by the Indonesian affiliates."

"In fact, from 1996 to 2001 Monsanto did not conduct any internal audits of its Indonesian affiliates," the document continues. "The absence of effective internal controls enabled the Indonesian management team to conceal their illicit payment scheme."

It is unclear what changes Monsanto has made to its internal controls in the wake of the settlement, if any. Monsanto's January 10 First Quarter 2005 Form 10Q, the most recent SEC filing posted on its website addressing the bribe in Indonesia, does not mention any changes in internal controls.

The Monsanto Pledge, which is "the foundation of all that we do," states that "integrity includes honesty, decency, consistency, and courage." The Pledge also commits the company to several intentions, including transparency.

"We will ensure that information is available, accessible, and understandable," the Pledge states.

© SRI World Group, Inc. All Rights Reserved.

Order reprints | Print it | Save it

Related Articles

Top


Home | Individual Investors | Institutional Investors | Financial Professionals | Media Center
Do your own Research | Work with a Professional | News | Learning Center
home | about | search | register | login | contact

© 1998-2017 SRI World Group, Inc. All Rights Reserved.
Terms of Use
| Privacy Statement| Reprint Policy | OneReportTM Network

Do your own research Work with an advisor SRI News SRI Learning Center Home