Taking Stock of Their Beliefs : Trends: Turning their shares into swords, social investors are trying to direct companies’ policies on issues from the environment to diversity.
Call it the investors’ equivalent of sleeping with the enemy.
With only $1,500 worth of stock, the Marin Institute for the Prevention of Alcohol and Other Drug Problems led an effort this spring to prod the world’s largest beer maker to evaluate the effect of its advertising on underage drinkers.
Although the proxy resolution, co-sponsored by two Roman Catholic religious orders, got only 6.3% of shares voted, discussion of the issue took up nearly half of the two-hour annual meeting of Anheuser-Busch Companies Inc. at a golf and tennis resort in Williamsburg, Va.
“We consider it a huge victory that we got over 12 million shares,” said Diana Conti, executive director of the San Rafael-based institute. She noted that the result was sufficient to put the resolution on the proxy statement again next year. “This is a way for the little voices to be heard.”
The movement known as social investing--concerned shareholders trying to affect company policies beyond those involving just the bottom line--has been around for nearly a quarter of a century. Its greatest success came in the late 1980s when more than 150 American companies, after years of stockholder badgering, divested themselves of business in white-run South Africa.
With the collapse of apartheid, the focus has changed.
“We work on about 15 issues from baby formula and the environment, tobacco, alcohol, community reinvestment, board diversity and equal opportunity to working conditions in American factories in Mexico and foreign military sales,” said Timothy H. Smith, executive director of the Interfaith Center on Corporate Responsibility (ICCR).
ICCR, representing 275 Christian and Jewish institutional investors with a total of $45 billion in shares, has been a leader of what some have called the Moral Minority. It is a movement that may be taking on greater importance with the federal government in an increasingly deregulatory mood. This year, the New York-based center, which owns no shares itself, has helped coordinate campaigns involving 180 resolutions affecting 133 corporations.
In general, social investors are regular shareholders, with pension and insurance funds to worry about just like other organizations. They have targeted companies in which they already own a considerable stake, looking to alter a few policies they consider objectionable by managements they otherwise support.
But in a few cases, activists have bought into companies they actively dislike for the sole purpose of trying to alter corporate behavior. Current rules permit shareholders to propose resolutions on proxy statements if they own $1,000 worth of stock.
Earlier this year, the Jessie Noyes Foundation, a New York-based group that supports grass-roots organizing, was about to sell all its stock in Intel Corp. because of its concern over the environmental impact of a planned pentium chip factory at Rio Rancho, N.M.
But at the last minute, Stephen Viederman, foundation president, told his investment manager to hold onto 100 shares so the foundation could sponsor a resolution that would require Intel to inform the community of the environmental impact of its factory.
Like the Anheuser-Busch resolution, the Intel one lost, but it did receive sufficient votes for sponsors to bring it up again--and to put pressure on the company.
“I’ve had three meetings with Intel on this so far,” Viederman said. “We want them to tell the community what they are doing about the water and air situation.”
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Father Michael Crosby, a Franciscan priest from the Province of St. Joseph of the Capuchin Order, chairs ICCR’s tobacco campaign and was a pioneer in the use of minimum shares for maximum social impact.
Crosby said that when on a trip to Latin America in 1980, he was appalled by the predominance of smokers and by the aggressive marketing campaigns of U.S. tobacco companies. He asked the treasurer of his Milwaukee-based order to buy 10 shares each of Philip Morris and R.J. Reynolds (since merged with Nabisco).
Armed with his tiny stake, Crosby repeatedly filed resolutions that were ultimately instrumental in persuading the companies to put health warning labels on cigarettes sold throughout the world.
“It isn’t widespread,” he said of the technique. “It only happens when people are very committed to a specific issue and they feel this is the only way to deal with it. It buys you a pulpit at the annual meeting.”
The Marin Institute turned to the tactic when it discovered to its chagrin that the Beryl Buck Trust, which funds the institute, owned nearly $30 million in alcohol and tobacco stocks in its $570-million portfolio.
James Mosher, the institute’s former executive director and now senior research fellow, said he went to Wells Fargo Bank, which is in charge of the trust’s investments, and urged officials to get rid of the stock.
“I didn’t want to be accused of benefiting from the very industries involved in creating the problem of alcohol and tobacco addiction,” Mosher said.
But the trustees balked. So the institute board, with the advice of ICCR, voted to buy $1,500 worth of Anheuser-Busch and Philip Morris with the intention of questioning their marketing practices. By the time the institute had filed its Anheuser-Busch resolution--and asked the trust to support it--the portfolio managers had sold off their Anheuser-Busch stock.
“We succeeded in getting [the trustees] to divest, though they won’t admit it,” Mosher said.
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Francine Katz, Anheuser-Busch vice president for consumer awareness and education, said the company opposed the proxy resolution because it believes its money is better spent on programs it has run for over a decade to discourage underage and other irresponsible drinking.
She said that studies have shown advertising does not cause underage drinking and that the company, which sells 44% of the beer consumed in this country, has discontinued using the cartoon character Bud Man to market its products.
But Mosher said a television ad shown at the annual meeting unintentionally supported the dissidents’ position that the company’s advertising targeted young people.
“One showed cartoon ants marching by with a big bottle of Budweiser, which they drag into an anthill. You hear them uncork the bottle and then ‘glug, glug, glug. Have a good time with Bud.’ My 10-year-old daughter thinks these commercials are great.”
Mosher said the institute would back the same resolution next year and was exploring the use of direct mail to reach out to all Anheuser-Busch shareholders.
“We’re hoping to combine the bearing witness approach of ICCR with political organizing,” he said.
The institute is also planning a similar resolution at another company in which it owns $1,500 shares: Canandaigua, manufacturer of a wine cooler called Cisco. The institute believes this beverage, which goes down like soda pop but has a relatively high alcohol content, is particularly dangerous for teen-agers.
Some social investment experts worry that such resolutions may be getting out of hand, which could encourage efforts to make it more difficult to file them.
Heidi Soumerai, vice president of United States Trust Co. in Boston, which invests half of its $3 billion in assets in so-called socially responsible funds, noted that the Securities and Exchange Commission is considering proposals that could raise eligibility to $25,000 in stock and allow no more than three resolutions per proxy statement.
But as long as they can, the gadflies will keep at it.
“It’s therapeutic to do this,” said Dr. Gregory Connolly, “having a sister who just had a lung tumor removed.” Connolly, a Massachusetts doctor and ICCR campaigner, bought $1,000 worth of stock in six U.S. tobacco companies eight years ago.
“You get to take a good five minutes at the annual meeting and confront management and they don’t like it. These people just don’t realize the personal suffering they cause.”
