Labor Standards

SHAREHOLDERADVOCACY:

Investing in Social Justice

General Assembly 2005

Sponsored by UUSC and UUA’s Committee on Socially Responsible Investing (CSRI)

Presented by Jim Gunning (UUSC & CSRI) & Stephanie Leighton (CSRI), Portfolio Manager and Director of Equity Research of Trillium Asset Management

UUSC: UU voice for human rights

Vision statementThe UU Service Committee envisions a world free from oppression and injustice, where all can realize their full human rights.

Mission statementThe UU Service Committee advances human rights and social justice around the world, partnering with those who confront unjust power structures, and mobilizing to challenge oppressive policies.

COMMITTEE ON SOCIALLY RESPONSIBLE INVESTING

Founded by the UUA Trustees in 2001:

• Joan Cudhea, Chair• Tim Blackwood• Jerry Gabert, UUA Treasurer• Jim Gunning• Larry Ladd, UUA Financial Advisor• Stephanie Leighton• Susan Leslie, Staff Liaison• Eva Marx, Board Trustee• Rev. Sydney Morris, UUMA• Rev. James Sherblom, Investment Committee

THREE PARTS OF SRI

To achieve a “triple bottom line” – social, environmental, as well as financial returns:

• Screening investments

• Community investing

• Shareholder activism

SCREENING INVESTMENTS

Positive and negative screens

Selection criteria:

► Financial

► Social

► Environmental

POSITIVE SCREENS

Characteristics of companies and industries to favor:

• Good employment practices

• Sound environmental policies

• Good community relations

• Safe products

• Diverse boards

NEGATIVE SCREENS

Characteristics of companies and industries to avoid:

• Weapons and military contractors

• Tobacco products

• Gambling

• Nuclear energy

• Alcoholic beverages

COMMUNITY INVESTING

• Modest portion of portfolio (3-5%)

• Low or no financial return

Examples:

► Community banks

► Affordable housing

► Micro-lenders

► Others

SHAREHOLDER ENGAGEMENT

Use share ownership to press for corporate accountability on:

• Social and environmental issues

• Corporate governance/accountability issues

SHAREHOLDER ENGAGEMENT

Methods:

• Proxy voting

• Engagement with executives

• Shareholder resolutions

• Divestment (as a last resort)

HISTORY OF SHAREHOLDER

CAMPAIGNS1970s 1980s 1990s

South Africa South Africa Human rights

Environment Environmental reporting

Global warming

Global codes of conduct

Equal employment Equal employment Sweatshop labor

Tobacco Unsafe products

Nuclear power MacBride principlesSexual orientation

non-discrimination

CURRENT ISSUES: SOCIAL

• Global human rights policies

• Contract supplier standards

• HIV/AIDS reporting

• Sexual orientation non-discrimination

• Water rights

• Enabling access to capital

CURRENT ISSUES:ENVIRONMENTAL

• Global warming & climate change reporting

• Emissions reduction & energy efficiency reporting

• Renewable energy sources

• Indigenous rights policy

• Recycling

• Pesticides and other toxic chemicals

• GMOs

CURRENT ISSUES:GOVERNANCE

• Board diversity and independence

• CEO compensation

• Pay disparity

• Political contribution disclosure

• Separate CEO and Chair

EMERGING ISSUES

• Sustainability reporting

• Environmental justice

• Gender identity non-discrimination

• Alternatives to toxics

• Animal testing

• Israeli-Palestinian conflict

HOW CAN I GET INVOLVED?

• Vote your proxies

• Identify your issues – in coalition with others

• Choose companies to approach

• Engage company executives – letters or meetings

• File resolutions for annual meetings

• Have patience and persistence

PROXY VOTING

• Company annual meeting materials

• Unmarked proxy ballots are voted by management

• Institutional investors hold many shares

• Investment managers (and mutual funds) must now disclose how they vote

ENGAGEMENT OF EXECUTIVES

• Stress ownership status – it’s OUR company

• Raise awareness about issues

• Propose meaningful actions

• Consider “going public” on issue

• Agree on target dates

WHO FILES RESOLUTIONS?

• Religious organizations -- including the UUA, UUSC & some UU churches

• Socially responsible investment firms

• Labor unions

• Public pension funds

• Other non-profits (NGOs)

• Individuals

HOW TO CHOOSE ISSUES

• Work in coalition with others

• Major resource is ICCR (Interfaith Center on Corporate Responsibility)

► Includes both faith-based and secular organizations

► Both UUA and UUSC are members

UUA: based on stated UU values

UUSC: mission-related issues

WHAT DOES SUCCESS LOOK LIKE?

• Company agrees to meaningful discussions

• Company agrees to adopt our requests

• In both cases, we would agree to withdraw resolution

• If the resolution remains on the annual meeting agenda, we present the issue and discussion follows

• Voting occurs, results are reported

NEXT STEPS OF PROCESS

• Depending on vote size, further meetings with company executives

• Re-filing resolution in subsequent years

• SEC allows resubmission if resolution gets at least 3% of vote (6% after second year, 10% after third year)

2004 RESULTS: LABOR STANDARDS

• 17 proposals voted on -- average support 12.2%

• Disney vote was 29% (China operations)

• Delphi vote was 23% (low wages in Mexico)

• 99 Cents Only (19%) and Visteon (17%)

• Successful withdrawals at ExxonMobil (UUSC co-filed), Big Lots, Jones Apparel

Note: statistics provided by IRRC – Investor Research Responsibility Center (www.irrc.org).

2004 RESULTS: EQUAL EMPLOYMENT

OPPORTUNITY • Four proposals voted on -- ranged from 11 - 16%

• 24 sexual orientation non-discrimination proposals

► 21 withdrawn when companies agreed to adopt

► 3 were voted on – ranged from 27 - 62%

• ExxonMobil was 29% (UUA co-filed); ALLTEL was 27% (UUSC co-filed) and in 2005 agreed to adoptNote: statistics provided by IRRC – Investor Research Responsibility Center (www.irrc.org).

RECENT UUA SHAREHOLDER ACTIVISM

• Primary filer at Home Depot and Conoco Phillips: Both adopted policies of non-discrimination based on sexual orientation

• Co-filer at HJ Heinz: Agreed to global code of conduct but is resistant to independent auditors of overseas operations

• Co-filer at Chevron and Glaxo SmithKline on HIV/AIDS: Participated in meetings with executives – Chevron adopted a global workplace policy for employees and their families

RECENT UUA SHAREHOLDER ACTIVISM

• Co-filer at ExxonMobil on sexual orientation non-discrimination -- company may be relenting on this issue

• Leveraged efforts of NYC Retirement System and others by recruiting local UUs to attend annual meetings and present resolutions

UUA CAMPAIGN FOR EQUALITY

• Wrote most companies in our portfolio – about 200 letters

• Asked what they were doing with respect to 10 Equality Principles

► Principles include non-discrimination on the basis of sexual orientation, gender identity/expression, domestic partner benefits

• Next steps – call company executives to verify responses and/or explain issues

• Ask for adoption of Principles, or face a resolution in coming year

RECENT UUSC SHAREHOLDER ACTIVISM

• Unocal agreed to settle lawsuit on Burma (Myanmar) for subjecting people to slave labor and other crimes

• ExxonMobil agreed to engagement on shaping a global labor standards policy

• ALLTEL adopted policy of non-discrimination based on sexual orientation, after several years of resolutions

• Wal-Mart asked to report on “sustainability”

RECENT UUSC SHAREHOLDER

ACTIVISM• Unocal (now merged with Chevron) adopted a

global code of conduct • Merck and PepsiCo asked to address the

HIV/AIDS pandemic• Merck agreed to publish an annual report on their corporate

responsibility efforts including HIV/AIDS• PepsiCo agreed to formulate a global workplace policy for its

employees and their families

• TJX agreed to a strong vendor standards program, but remains resistant to increased public reporting

HOW CAN MY CHURCH GET INVOLVED?

• Local churches may invest based on SRI

► UUA’s General Investment Fund, which has screens for social and environmental issues

► Investment firms that specialize in SR investing

► SR mutual funds

• Vote proxies based on SR guidance

• Join coalitions such as ICCR

• Write letters to local companies on social issues

INFORMATIONAL RESOURCES

• Interfaith Center on Corporate Responsibility (UUA and UUSC are members) www.iccr.org

• Social Investment Forum (UUA is a member) www.socialinvest.org

• Shareholder Action Network www.san.org

Information on proxy voting:

• UUA www.uua.org/finance/sri/investing/proxy.html

• As You Sow Foundation www.asyousow.org

• Rockefeller Foundation www.rockpa.org

QUESTIONS & ANSWERS

THANK YOU FOR ATTENDING

For more information, please visit our websites:

UUA - www.uua.org/finance/sri

UUSC - www.uusc.org/info/shareholder.html

Subscribe to SRI-News:

www.uua.org/mailman/listinfo/sri-news