State Officials to Press Unocal
Stepping up the pressure on Unocal Corp., the top financial officers of California and New York will ask the company today to abandon its controversial joint venture in Myanmar or offer proof that the natural gas pipeline project’s value outweighs its risks.
California Treasurer Phil Angelides and New York State Comptroller Alan G. Hevesi will deliver that message to Unocal Chief Financial Officer Terry Dallas in a meeting this afternoon at the company’s El Segundo headquarters.
The ruling military junta in Myanmar, formerly known as Burma, has been condemned by the international community for alleged human rights violations and the continued imprisonment of pro-democracy leader and Nobel laureate Aung San Suu Kyi.
The United States, the United Nations and others have denounced conditions in the country and imposed a variety of trade sanctions, and some international firms have stopped doing business there.
Angelides, Hevesi and representatives of eight investment funds requested the meeting with Unocal in a May 15 letter delivered to the company at its annual meeting. The group, which collectively owns about 1.6% of the oil company’s common shares, includes the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, the nation’s No. 1 and No. 3 public pension funds.
CalPERS board President Sean Harrigan will appear with Angelides and Hevesi at a news conference after the Unocal meeting, along with investment officials for the AFL-CIO and Amalgamated Bank.
Angelides, California’s top investment official, is considered an outspoken and influential member of the boards of the state’s two major pension plans. He has been involved in shareholder efforts to link executive pay to performance and to prohibit state investments in U.S. corporations that relocate or establish themselves offshore to avoid taxes and weaken shareholder protections.
The Myanmar issue, he said, “has gained significant momentum” since Unocal was targeted with its first shareholder resolution on the matter in 2001.
“There is rising shareholder concern about this,” Angelides said of Unocal’s involvement in Myanmar.
“It’s deeply troubling, not just from an economic standpoint, which concerns us as shareholders, but also from what I see as management’s avoidance of responsibility and a failure to come to grips with the implications -- economic, reputational and moral -- of their continued presence in Burma.”
Unocal spokesman Barry Lane said the company has not changed its mind about Myanmar.
“We are not leaving Myanmar. We’re not divesting there,” he said.
Lane said Unocal was honoring the request for a meeting with the two officials because they represent shareholders. “We take meetings with stockholders all the time,” he said. “And we take them seriously because they’re owners of the company.”
The company’s involvement stems from its investment, through subsidiaries, of about $280 million to help develop a natural gas field off the Myanmar coast and transport the gas to Thailand through a pipeline that crosses southern Myanmar for 39 miles. Unocal has a 28.26% interest in the project, which is run by the French oil firm Total Fina Elf.
A group of Myanmar refugees filed lawsuits in the U.S. against Unocal in 1996, accusing the company of indirect liability for the alleged murder, rape and enslavement of villagers along the pipeline by the military junta’s commercial arm. Unocal, which denies responsibility for alleged actions by the military, faces potential trials in both state and federal court.
“We’re confident that we’re going to prevail,” Lane said of the suits.
The pension fund representatives fear potentially expensive liability for Unocal. Angelides said he and New York’s Hevesi would ask Unocal to withdraw from Myanmar or provide a cost-benefit analysis that proves that the project is worth the risk to the company.
“It’s not only troubling, it’s puzzling to the rest of us as to why management is hanging on to this,” said Julie Gresham, director of corporate governance for Hevesi’s office.
Hevesi and Angelides view the meeting today as a “first step” in convincing Unocal to change course in Myanmar, Angelides said.
He noted that recent corporate scandals have sparked renewed activism by shareholder groups, which increasingly are sponsoring shareholder resolutions about corporate governance, social issues and executive compensation.
“We have many tools as shareholders,” Angelides said.
