Votes on Employment Practices Urged

Hoping to enlist shareholder activists in the war on apparel industry sweatshops, Labor Secretary Robert Reich urged Monday that investors be given the right to vote on companies’ employment practices.

Reich’s remarks could heat up a battle between Walt Disney Co. and an Oakland investment firm that has decried alleged sweatshop conditions at factories producing Disney products.

Although Reich declined to comment directly on the dispute, he said that Burbank-based Disney “has not been among the leaders in fighting sweatshops here and abroad.”

The Oakland investment firm, Progressive Asset Management, has called for a shareholder vote on a pair of proposals at Disney’s annual meeting in February. The more controversial of the two measures, if approved, would require Disney to issue a public report on the workplace conditions at its suppliers’ Third World and U.S. factories.

Disney spokesman John Dreyer disputed the criticism. He said Disney has “a very strong code of behavior that we expect from suppliers” and that the company monitors the practices of its manufacturers. When violations have been uncovered, he said, Disney has warned manufacturers or canceled their contracts.

Dreyer acknowledged, though, that Disney is seeking to block the shareholder vote. In the company’s defense, he cited a longtime Securities and Exchange Commission policy of allowing companies to bar shareholder votes on “ordinary business matters” normally reserved for management.

The SEC’s position, however, is now coming under pressure. Congress recently asked the SEC to conduct a review of its shareholder proxy policies.

Reich’s argument for allowing the proxy votes is that they are issues of national significance and not ordinary business. But, Reich added, “there’s a legitimate argument to be made that if a company is substantially involved in an important issue facing the country that transcends that individual company, then shareholders ought to be permitted to vote on that company’s role.”

SEC officials declined to comment.