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December 23, 2011

Shareowner Activists Pressure Chevron for Transparency Over Payments to Burmese Regime
    by Robert Kropp

Amid news of a possible normalization of relations between the US and Burma, sustainable investors and other activists argue that most of Chevron's payments line the pockets of the military. First of a two-part series.

SocialFunds.com -- The news out of Burma over the past several weeks can seem as confusing as the country's name. US Secretary of State Hillary Clinton met recently with Thein Sein, a former general who was elected to the Presidency of the country in March. Clinton praised such "incremental steps" as the release of a relatively small number of more than 2,000 political prisoners, saying, "The United States is prepared to walk the path of reform with you if you keep moving in the right direction."

However, as shareowner activist Simon Billenness pointed out, "Looking carefully at the facts, some political prisoners have been released. But the bulk of them still remain in prison, including a lot of the younger activists. The government and Parliament remain hugely stacked in favor of the military and its satellite political parties. The political space is still very small."

In addition to being a member of the Committee on Socially Responsible Investing of the Unitarian Universalist Association, Billenness sits on the board of The US Campaign for Burma.

The involvement of sustainable investors in the human rights situation in Burma dates back several years, and focuses primarily on the activities of Chevron in that country. Chevron, according to Billenness, is "the US company with the largest investment in Burma. Chevron is the Burmese regime's biggest lobbying partner. "

Chevron has paid "billions of dollars" to the Burmese regime, according to Larry Dohrs, Vice President of Newground Social Investment, a Seattle-based money manager for individuals and institutions that Dohrs describes as "100% SRI." The vast majority of those payments do not benefit the Burmese people at all.

Where do Chevron's payments to Burma go? As Billenness explains it, "The payments that Chevron makes to the military regime are booked under the regime's exchange rate of six kyat to a dollar, when in reality in the marketplace it's several hundred to a dollar. What that means is that it helps the regime launder the money. The regime can channel over 95% of those payments wherever they want."

Writing in the Wall Street Journal, Sean Turnell of Burma Economic Watch explained, "Recorded at the official rate, Burma's gas earnings translate into less than 1% of budget receipts. By contrast, if the same gas earnings are recorded at the market exchange rate, their contribution would more than double total state receipts, and largely eliminate Burma's fiscal deficit."

"The motivation for this sleight of hand is probably to 'quarantine' Burma's foreign exchange earnings from the country's public accounts, thereby making them available to the regime and its cronies," Turnell continued.

"Chevron never talks about the money going to the generals," Dohrs said. "The only thing they will talk about is the small development projects they have in the direct pipeline area, which amount to a tenth of one percent of the cost of the project."

The pipeline project to which Dohrs referred is the Yadana Gas Project, described by EarthRights International as "one of the world’s most controversial natural gas development projects." A consortium of oil and gas companies, including Chevron, has operated the project since the 1990s.

"It has been marred by serious and widespread human rights abuses committed by pipeline security forces on behalf of the companies, including forced labor, land confiscation, forced relocation, rape, torture, murder," EarthRights International stated. "Many of these abuses continue today."

"We have co-filed for a number of years a resolution on country selection criteria, trying to get a picture from an investor point of view how the company decides whether or not to invest in this country or that," Dohrs said. "So far the resolution has gotten pretty substantial support, but up to this point we haven't gotten any movement from the company on the issue."

A co-filer on the country selection resolution this year is Zevin Asset Management, a Boston-based investment firm. Sonia Kowal, Zevin's Director of Socially Responsible Investing, told SocialFunds.com, "The resolution is trying to get them to outline how they decide whether to invest in a country or withdraw from a country. Their country selection processes are opaque and we'd like to know how they decide, especially when the government of the country has engaged in ongoing systemic human rights violations."

The resolution addressing country selection requests that Chevron report on its criteria for investment in and withdrawal from specific high-risk countries, including Burma.

"The current situation hasn't changed the concerns we have about how Chevron is facilitating money laundering by the regime," Billenness said. Referring to an anticipated rule from the Securities and Exchange Commission (SEC) requiring companies in extractive industries to disclose payments to governments, Billenness said, "Chevron has been fighting tooth and nail against revenue transparency, particularly on a project basis. The company has said it is contractually obligated not to disclose their payments to the regime. EarthRights International actually got a copy of the contract, and there's no provision of that kind. Then Chevron said there is a second contract, which itself is confidential."

Newground Social Investment and Zevin Asset Management are co-filers on additional resolutions addressing the corporate governance failures of Chevron. One requests that the company's board give holders of 10% of outstanding common stock the power to call a special shareowners meeting.

Another resolution directs the board to adopt a policy to ensure the separation of the positions of Chairman of the Board and Chief Executive Officer. Quoting the Chairmen's Forum, the proposal stated that an "independent chair curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of an independent board."

The resolutions addressing corporate governance also refer to Chevron's disastrous environmental record in Ecuador, where a court awarded damages totaling $18 billion to plaintiffs suing Chevron for actions including the dumping of billions of gallons of waste byproduct from oil drilling in the rainforest, and burning hundreds of millions of cubic feet of gas and waste oil into the atmosphere.

Next: Shareowner advocates take on Chevron over liability for environmental damages in Ecuador.

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