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May 08, 2003
Shareowners Press Avon to Walk the Walk
    by William Baue

Shareowners vote overwhelmingly for board independence at Avon while questions about potential carcinogens in its products linger.

Three shareowner resolutions were voted on at the Avon (ticker: AVP) Annual General Meeting (AGM) last week. The two corporate governance resolutions received exceedingly high levels of support, and a first-year social resolution on product safety received ample support to be re-filed next year.

The International Brotherhood of Electrical Workers Pension Fund resolution requesting that Avon expense stock options, or assign a fair monetary value to them, received an unprecedented 56 percent of the vote. Even more astonishing were the results for the resolution calling for annual board elections, a measure corporate governance advocates consider to be a key to creating board independence. This proposal received a staggering 80.5 percent support from voting shareowners.

Avon CEO Andrea Jung stated that this vote represented a "groundswell" of shareowner support, and promised that the board's Governance Committee would consider the proposal with the utmost seriousness.

"This vote ranks as one of the top ten votes ever in U.S. corporate history, where the resolution was opposed by the Board," said Tim Smith, senior vice president of Walden Asset Management, the socially responsible investment (SRI) firm that filed the resolution.

Walden has filed the same resolution at several other companies, including McDonald's (MCD) and Gillette (G). Walden decided to file the resolution at Avon not only because of the need for the company to address this specific issue, but also to provide additional support for other shareowner action being conducted there.

"We felt there were other issues being raised by shareholders and breast cancer activists that Avon was not being responsive to," Mr. Smith told

In the absence of meaningful dialogue, these shareowners and stakeholders filed a resolution asking Avon to study the feasibility of removing parabens, a chemical preservative that may increase breast cancer risk, from 82 Avon products. Parabens mimic the behavior of steroidal estrogens, which were recently added to the federal list of known carcinogens in the 10th Report on Carcinogens published in December 2002 by the U.S. Department of Health and Human Services. Steroidal estrogens not only block the normal function of natural estrogens, but they also increase the risk of breast cancer.

"Avon's image as a leader in the fight against breast cancer is one of its biggest assets," said Adam Kanzer, general counsel and director of shareholder advocacy for Domini Social Investments, which co-filed the resolution with Breast Cancer Action, a San Francisco-based advocacy organization. Walden and Trillium Asset Management also supported this resolution.

"The fact that chemicals found in Avon's products may increase the risk of breast cancer undermines Avon's efforts on behalf of women's health," added Barbara Brenner, executive director of Breast Cancer Action.

This resolution received 6.18 percent support from voting shareowners, surpassing the Securities and Exchange Commission's 3 percent threshold for re-filing resolutions after their first year. Shareowners and stakeholders also expressed concern over Avon products containing dibutyl phalate (DBT), a chemical linked to reproductive disorders that the European Union has banned from cosmetics.

The integrity of the Avon Foundation's Breast Cancer Crusade and its famous Breast Cancer Walk has also been called into question.

"We are very concerned about the lack of transparency in the company's transactions around the walk," Ms. Brenner told

Last summer, Breast Cancer Action compared Avon's claim that it raised $190 million for breast cancer since 1992 with its claim to have distributed $147.8 million for breast cancer research, education, and screening programs. Avon could not account for the difference of approximately $42 million.

Avon did not respond to's requests for commentary.

"Avon has a lot of goodwill in the SRI community, and the time to talk to its critics is right now, before it's eroded by unanswered critiques," said Shelley Alpern, Trillium's director of social research and advocacy. "The social investment community may be too impressed by philanthropy, and we need to take a closer look at how responsibly philanthropy is being conducted."


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