Greening of the Boardroom : Can environmentalist directors reconcile profit with their social agenda?

Conservationist camels are sticking their noses into oil company tents.

Two months ago, after the Alaska oil spill, Exxon agreed to add an environmentalist to its board. Then last week, California State Controller Gray Davis and New York City Comptroller Harrison J. Goldin, as trustees of powerful retirement system investors, urged six other major oil companies to follow suit.

The renewed effort to make American business more responsive to the agenda of environmentalists is already raising questions. For one, who are the likely candidates? Beyond that, how well would an environmentalist fit into a boardroom where environmental preservation may square off against profits for shareholders? Would a board member who voted for profit retain credibility as an environmentalist? Would a board member who didn’t be representing shareholders responsibly?

And will environmentalist board members have enough influence to change corporate behavior, or end up as lonely voices for the wilderness?

Even if an oil company appoints a committed environmentalist as a director, says Ann Notthoff of the Natural Resources Defense Council, “I wonder whether that will really help shape policy.”

For answers, some environmentalists and executives will watch Exxon closely. The company hasn’t settled on its choice for an environmentalist board member, but general criteria have been spelled out. Exxon spokesman Bill Smith says “acumen in financial and business matters” is required but experience on a corporate board isn’t.

Those advocating the appointment of environmentalists to corporate boards maintain that shareholders will gain. Efforts to protect the environment may prove costly, but so too are accidents or day-to-day practices that spoil the oceans, forests or urban neighborhoods.

Seeking ‘Heightened Sensitivity’

California State Controller Davis and others point to the cost of cleanups, liability suits and a tarnished image among investors as the most obvious price that companies pay for not including environmental protection in their corporate planning.

“We’re looking for heightened sensitivity and more emphasis on policies which will protect shareholders in the long run,” Davis says. “It’s quite clear from the numerous tanker accidents over the past 90 days that insufficient attention has been paid to these issues.”

Some business people now agree that environmentalists can serve the interests of shareholders.

“What they’re really trying to do is to anticipate disasters,” says Jack Lohnes, of the executive search firm SpencerStuart. In 1985, Lohnes recruited William K. Reilly, then president of the Conservation Foundation and currently administrator of the U.S. Environmental Protection Agency, for the board of Northeast Utilities, which services Connecticut and western Massachusetts.

“The first and foremost responsibility of an outside director is to represent the shareholders’ interests. But in this day and age,” Lohnes says, “they are also there to consider many other constituencies, e.g., employees, customers and the environment.”

Role of Interpreter

Richard J. Mahoney, chief executive of Monsanto, the chemical and pharmaceutical manufacturer, says environmentalists can help business people think differently about issues. Mahoney was instrumental four years ago in recruiting former EPA administrator William D. Ruckelshaus to the board of Monsanto.

“He is able to translate public sentiment into advice,” Mahoney says of Ruckelshaus. This includes everything from interpreting public opinion polls to interpreting the requests of federal regulatory agencies. “He helps you think of the needs and issues of the agencies, rather than simply what we’d like all the time.”

Ruckelshaus--who considers himself to be more a mediator and negotiator than an environmental advocate--says one of his jobs on corporate boards has been to show that regulations that “may in their eyes be irrational” are based on public demand for environmental care and are not “simply an interference with their responsibilities to the shareholders.” But Ruckelshaus says the current generation of business executives is already sensitive to environmental issues in most cases.

Alice Rivlin--founding director of the Congressional Budget Office, a member of Union Carbide’s board for the past year and chairman of the governing council of the Wilderness Society--sees the main role of outside board members as asking the right questions: “What if there is an accident? Are we prepared? How do you know?”

But some environmentalists think that may not be enough. They want board members who are strong environmental advocates with considerable expertise in the field.

Commitment, Experience

“Knowledge matters,” says Carl Pope, deputy conservation director of the Sierra Club. “You’re up against the guys who have all the numbers and, say, the approval of the regional guy from EPA. Unless you happen to know where the pitfalls are, especially if you’re an outside director, you may be skeptical but how do you know?”

So which environmentalists are candidates to be tapped for the boardroom? In private discussions, environmentalists mention those with both a long commitment to the environmental movement and significant business experience.

Among those named:

Former Wisconsin Gov. Gaylord Nelson, of the Wilderness Society, is a top choice of many environmentalists. Nelson also spent 18 years in the Senate, introducing the first bills to require auto-fuel efficiency, control strip mining and ban DDT. The Wilderness Society is mostly concerned with public wilderness and wildlife refuges. While Nelson is well known in the corporate world, “he would even be moderately well respected and moderately well received by red-eyed (the most activist) environmentalists,” says Denny Wilcher, president of the Alaska Conservation Foundation.

Frank Loy is chairman of the Environmental Defense Fund, which stresses economic incentives in its solutions. Loy has presided over the rapid growth of EDF and played a key role in several successful business turnarounds. “He has a tremendous reputation in the corporate world for creating change, for the better,” says Jim Maddy, executive director of the League of Conservation Voters.

Alice Rivlin is a respected public-policy economist who was founding director of the Congressional Budget Office. She is now at the Brookings Institution. In addition to Union Carbide, she is a director of computer maker Unisys.

Jay Hair is president of the 5.8-million member National Wildlife Federation, an old-line educational organization. Despite the federation’s conservative reputation, Hair was a tenacious opponent of Anne McGill Burford, Ronald Reagan’s short-tenured head of the Environmental Protection Agency. Hair, a scientist and educator, has personal polish that could make him comfortable on a corporate board.

Michael McCloskey, chairman of the Sierra Club, has been on numerous public policy boards. He is viewed as an activist, but many environmentalists also consider him especially skillful at dealing with business folk. Said one environmentalist, “He speaks their language.”

Russell E. Train, who heads two of the big think tanks on environmental issues as chairman of World Wildlife Fund and the Conservation Foundation, advised George Bush during his presidential campaign. Train criticized the Reagan Administration for cutting the budget of the Environmental Protection Agency and has often been described in the press as “Mr. Conservation.” In the mid-’80s, he was head of an industry-environmental coalition to clean up toxic wastes, called Clean Sites Inc., and has been a member of the board of Union Carbide Corp. since 1977.

Dan Evans, former senator from Washington and the youngest governor in that state’s history, is one of the moderate Republicans who came to power after Barry Goldwater’s presidential defeat in 1964. As governor, he set aside wilderness areas, ensured public use of the state’s beaches and fought to save wild stretches of the Snake River. Many environmentalists wanted him to head either the Interior or Energy departments but he got neither post. He has just joined the boards of Washington Mutual Savings Bank, the largest independent bank in Washington state, and McCaw Cellular Communications, also headquartered in Seattle.

Other names mentioned: George Frampton, president of the Wilderness Society; John Adams, executive director of the Natural Resources Defense Council; Bruce Babbitt, former Arizona governor and presidential candidate; Mike Clark, head of the newly combined Environmental Policy Institute, Friends of the Earth and Oceanic Society; Arthur Ortenberg, formerly a conservation-minded top executive of Liz Claiborne Inc., and Henry Diamond, a Washington environmental attorney who worked with Laurance Rockefeller on his conservation projects.

Meanwhile, some names being discussed by environmentalists have emotional pull among conserverationists, but seem unlikely to be accepted for any corporate board.

One is David Brower, who has been passionately dedicated in a rocky career that has taken him from the Sierra Club, to Friends of the Earth, to his current position as founder of Earth Island Institute.

“He’s the most inspiring, firm, dedicated, dogged and convinced environmentalist in the United States,” says Wilcher of the Alaska Conservation Foundation. Wilcher concedes, however, that Brower isn’t given to brevity and compromise, and “would tie up a board for days” arguing his views.

ENVIRONMENTALISTS IN THE BOARDROOMProminent environmentalists likely to be considered in the search for oil company board membership:

Russell E. Train, chairman of World Wildlife Fund and the Conservation Foundation. Advised George Bush during his presidential campaign. Former head of Clean Sites Inc., a coalition to clean up toxic wastes. Member of the board of Union Carbide.

Jay Hair, president of the 5-million member National Wildlife Federation. Despite the federation’s conservative reputation, Hair was a visible and tenacious opponent of Anne McGill Burford, President Ronald Reagan’s controversial and short-tenured head of the Environmental Protection Agency.

Alice Rivlin, chairman of the Wilderness Society. Respected public-policy economist who was founding director of the non-partisan Congressional Budget Office. Currently senior fellow at the Brookings Institution in Washington, and a director on the boards of Union Carbide and Unisys.

Michael McCloskey, chairman of the Sierra Club. Has been on public policy boards from the Council on Economic Priorities to the Coordinating Committee of the National Petroleum Council. Viewed as an activist, yet considered skillful at dealing with business.

Gaylord Nelson, Wilderness Society counselor. Former governor of Wisconsin and former U.S. senator. Introduced the first legislation in Congress to mandate fuel efficiency in cars, control strip mining and ban DDT.

Frank Loy, former State Department official, now chairman of the Environmental Defense Fund. Has presided over the rapid growth and increasing influence of the fund. Has also been part of several successful business turnarounds.

Daniel J. Evans, former senator from Washington and the youngest governor in that state’s history. As governor, set aside large tracts of wilderness area, preserved the state’s beaches for public use and fought a dam planned to block off wild stretches of the Snake River.