wfn.org | Church pension fund uses clout to effect change

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TITLE:Church pension fund uses clout to effect change

April 22, 2002 News media contact: Tim Tanton7(615)742-54707Nashville, Tenn.
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NOTE: A photograph of Vidette Bullock Mixon is available.

A UMNS Feature
By Tim Tanton*

Human rights violations. Environmental issues. Money laundering. Predatory
lending.

Those heavyweight problems are in the portfolio of a United Methodist agency
that some might view as an unlikely advocate on social issues: the General
Board of Pension and Health Benefits, based in Evanston, Ill.

In fact, the board wields considerable clout as the largest pension fund
operated by any denomination. With more than $11 billion in its investment
portfolio, it is a powerful behind-the-scenes force in nudging some of the
biggest U.S. companies to change the way they do business.

The spring months are busy for Vidette Bullock Mixon and other staff members
who deal with issues of corporate accountability. From March through May,
they attend or keep tabs on some of the thousands of annual shareholder
meetings held across the corporate world. Stockholders vote on resolutions
and enact other business affecting their companies at the gatherings.

The board uses its rights as a shareholder to raise issues of concern with
companies, says Bullock Mixon, director of corporate relations and social
concerns. "Overall, it appears that companies are being responsive, at least
to the general board as an institutional investor, and we're pleased that we
can continue to be used as a change agent."

The board's Committee on Social Responsibility, using the United Methodist
Book of Discipline, General Conference resolutions and other guidelines,
annually evaluates social issues and determines which ones to pursue with
its invested companies.

"We file approximately 25 shareholder resolutions annually on a variety of
social issues," Bullock Mixon says. More than half will be withdrawn before
the annual meetings roll around, as companies respond to the board's
concerns.

That's fine with the board, which prefers dialogue to filing resolutions,
Bullock Mixon says. With a filing, the representative of the resolution only
has a few minutes during the annual stockholders' meeting in which to make a
presentation, which is followed by the company's response and the vote.
However, if a company's management is willing to enter into dialogue, the
board could get 90 minutes to two hours in a private meeting or conference
call. That's a better way to get information, share concerns and achieve a
meeting of the minds on complex social issues, Bullock Mixon says.

Ensuring inclusiveness 

Of 24 resolutions that the board has filed this year, it already has
withdrawn 11 because of subsequent conversations with the companies
involved, Bullock Mixon says. About half of the resolutions will remain on
the ballot or possibly come to a vote. Occasionally, a company will use its
right to challenge a resolution by asking the Securities and Exchange
Commission for permission to omit it.

The board is invested in about 2,500 companies in the United States and
elsewhere, and it casts its shareholder votes with each one, says Laurie
Michalowski, coordinator of socially responsible investing. "We also do a
very careful review of the composition of the boards for all of our
companies. It's a very high priority for us." The agency checks on whether
each company board is inclusive in terms of gender, racial and cultural
background, and whether it has a good mix of directors from outside the
corporation.

Bullock Mixon has a staff of three other full-time employees and an intern.
They increase their impact by partnering with other institutional investors,
encouraging them to co-sponsor resolutions and, in turn, serving the same
role for resolutions filed by others. That kind of partnership, coordinated
through the Interfaith Center on Corporate Responsibility (ICCR) in New
York, spares agency staff from attending every annual meeting where a
resolution of interest is considered.

The board has been the primary filer in dealing with key companies such as
Wal-Mart, Disney and Nike on topics such as sweatshop conditions in supplier
factories and other vendor standards, according to the Rev. David Schilling,
a United Methodist and director of global corporate accountability programs
for the interfaith center. The board has taken the lead in working with
those companies, building consensus with other ICCR members around issues
and organizing meetings with management, he says. 

"The board has been good at commending companies when they've made changes
and continuing to press (them) to make improvements," he says, "and I think
that's been a very important contribution to the shareholder work."

Relationships with Wal-Mart, Disney and Nike began with the filing of
shareholder resolutions asking the businesses to develop comprehensive codes
of conduct, encompassing labor and human rights standards, fair wages,
monitoring and reporting back to stockholders. 

"Wal-Mart has not been eager to do public reporting, but because of the
dialogue that has been led by the board, in February the company released
its first report ... on supplier standards and its compliance programs,"
Schilling says. "... The board's work with Wal-Mart has helped make this a
reality."

The Interfaith Center on Corporate Responsibility has 275 religious
institutional members, at least 100 of which are actively involved in filing
shareholder resolutions and engaging in dialogue with companies, Schilling
says. "In this past year, there were 144 resolutions filed with 99 companies
by religious investors through ICCR." Those businesses don't include
additional companies such as Nike, which ICCR members may spend a lot of
time working with outside the shareholder resolution process.

Influencing the leaders

The board often files its resolutions with the largest companies in an
industry, such as Wal-Mart among retailers, Nike among footwear
manufacturers and McDonald's among restaurant companies. "If you can
influence the larger key players, then oftentimes others in the respective
industry will tend to model the best practices of some of the larger
corporations," Bullock Mixon says.

As a major institutional investor, the board often has large stakes in those
companies. "If the general board has a million shares in Wal-Mart, that
gives us additional influence and enables the company to sit down and talk
to us as a large stakeholder and a long-term investor in their company,"
Bullock Mixon says.

The board's investments are screened to ensure that church dollars do not
support companies that derive more than 10 percent of their revenues from
alcohol, tobacco, pornography, gambling and armaments. The agency also
invests more than $700 million in affordable housing and says its program is
the largest operated by a denomination.

Historically, shareholder resolutions on social issues rarely get high
percentages of votes.
"Shareholder resolutions are advisory at best," Bullock Mixon says. "Even if
a resolution should get in excess of 50 percent, it's not mandatory that a
company would have to take the action called for."

However, even a double-digit percentage vote is a sign that a resolution
reflects something that shareholders are concerned about, and companies take
notice of that, she says. Other groups, such as employees or college
students, could also be focusing attention on the same concern, and the
combination of those forces - and concern for its own reputation - could
push a company to respond.

Effecting change can be a long-term process. The board filed its first
shareholder resolution on U.S. companies doing business in Mexico in 1992.
Today, labor conditions in border factories, or "maquiladoras," continue to
be a concern, as evidenced by the March trip that a group of board members
made to Tijuana.

The pension board's resolutions address diverse concerns. This year's crop
focuses on:
7	Environmental issues, such as the use of chlorine compounds in
bleaching paper, genetically modified foods, global warming, energy
sourcing, the use of polyvinyl chlorides and indigenous peoples' water
rights.
7	Diversity and equality, such as diversifying boards of directors,
addressing glass-ceiling issues and supporting equal employment opportunity
reporting.
7	Finance, specifically detecting money laundering.
7	Global accountability and corporate governance, such as human rights
issues in Myanmar (formerly known as Burma) and global labor standards for
suppliers.
7	International health, calling for drug-pricing restraint and
addressing HIV/AIDS - particularly in Africa - malaria and tuberculosis.
7	Militarism, addressing arms sales and "weaponization in space"
contracts.

For the last two years, predatory lending has been a focus for the board's
resolutions, Bullock Mixon says. That has meant targeting companies that
provide credit to people with low incomes or poor credit histories.

A new issue for this year has been money laundering, and the board is
working with banks and other financial institutions to address that concern.
The agency has had conversations with the managements of Fleet Boston,
Merrill Lynch and Citigroup about adopting more robust systems for
scrutinizing financial transactions and detecting possible money laundering,
Bullock Mixon says. As a result of that progress, the board has withdrawn
resolutions that it filed this year with the three companies.

On another front, the board is working with food companies, such as grocery
chains, encouraging them to address concerns about genetically modified
food. It has called on retailers such as Albertson's to make consumers aware
that a private-label product contains genetically modified food, and it has
obtained a commitment from Whole Foods, an organic store chain, to make
information available in its stores about genetically engineered products
and to consider re-labeling several private-label items.

The public perception of what constitutes a responsible company is changing,
according to Schilling. It's no longer enough for a company to be viewed as
responsible if it maximizes shareholder value, creates jobs and pays taxes.
Now, people perceive that a responsible company also must contribute to the
betterment of society, he says. "There's a huge shift that's taken place
over the last five and 10 years, and we're beginning to see the results of
that."
# # #
*Tanton is news editor for United Methodist News Service.

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United Methodist News Service
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