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December 18, 2003
2004 Proxy Season Glimpse: HIV/AIDS Shareowner Campaign Shifts from Conflict to Collaboration
    by William Baue

The 2004 proxy season has commenced with an instance of cooperation between a company and its shareowners (Part two of a two-part article.)

While the 2003 proxy voting season has wound down sufficiently to assess significant trends (see part one of this two-part article), the 2004 proxy voting season has just begun, with deadlines for filing shareowner resolutions falling as early as November. In the brief intervening time, however, one development shows potential for collaboration between shareowners and companies instead of the adversarial relations that sometimes characterize shareowner action.

On November 6, 2003, the Interfaith Center on Corporate Responsibility (ICCR), an association of 275 faith-based institutional investors who collectively manage over $110 billion in assets, filed an HIV/AIDS resolution with Coca-Cola (ticker: KO). The resolution calls on the company to report on the impact of the AIDS pandemic on its operations in Africa. ICCR first filed a similar resolution last year with PepsiCo (PEP). PepsiCo challenged the proposal with the US Securities and Exchange Commission (SEC) as "ordinary business" that falls under management's purview.

The SEC disagreed, deeming that the issue eclipses the "ordinary business" category. ICCR considers this decision as one of the most significant developments of last proxy season. In abidance with the SEC stipulation, PepsiCo included the resolution in its proxy ballot and the resolution received 8.16 percent of the vote.

Coke took quite a different tack from its competitor. Instead of fighting the resolution, Coke met with ICCR to discuss the issues.

"The meeting with the ICCR was very positive and productive, which has been the case on any number of issues we've discussed with them over the years," said Lori George Billingsley, a Coke spokesperson. "In our dialogue with them, company management expressed that they did not believe issuing a report would be problematic, but we would have to come to some resolve with the proponents as to the type and format of the report and how it would be distributed."

A number of reporting models exist, according to Dan Rosan, the director of ICCR's public health and access to capital program. They include the Global Reporting Initiative (GRI) HIV/AIDS Resource Document.

"Coke has been very candid about the difficulties of implementing a comprehensive response to HIV/AIDS, and we have been very candid about our concerns--that level of honesty helps move the conversation beyond platitudes and into practices and policies," said Mr. Rosan. "Because of our candid conversation, and the general good-faith efforts we saw Coke taking on HIV, we asked management to recommend a vote for the resolution."

"It is an unconventional and very powerful request, so I can't confirm that it is going to come to pass, but Coke has the opportunity to show real leadership on HIV/AIDS by getting confirmation from their shareholders that taking action on HIV is a core corporate responsibility and business issue," Mr. Rosan told "I hope they seize that opportunity, because Coke's response to HIV/AIDS is not yet where it needs to be."

Coke's course of action remains to be seen.

"The ultimate decisions around the report being produced or the Board supporting the proposal would be made by the Board," Ms. Billingsley told "The Board has not met yet to discuss the issue therefore no decision has been made."

While the SEC upheld the validity of the HIV/AIDS resolution, it shot down the greenhouse gas emissions reduction resolution ICCR filed this past proxy season with Cinergy (CIN). The energy company invoked the "ordinary business" argument. None of the other companies that received this resolution or the similar climate risk mitigation resolution played the "ordinary business" card.

"One of the concerns we have for this upcoming proxy season is how the SEC is going to interpret the ordinary business rule," said Sister Pat Wolf, ICCR's executive director.

Before leaving office as SEC chair, Harvey Pitt recommended eliminating the "ordinary business" clause, or rule 14a-8(i)(7). In its recent ten-point "Call for Action," the Investor Network on Climate Risk (INCR), a consortium of state treasurers and labor pension funds representing over $1 trillion in assets, reiterated this recommendation.

Sr. Wolf also expressed concern about how the press characterizes shareowner votes.

"We still have a hard time getting the mainstream media to properly interpret shareholder votes," Sr. Wolf told "They'll say 80 percent voted against it."

In the world of shareowner advocacy, a 20 percent vote represents significant support, not the overwhelming defeat suggested by looking at the percentage voting against the measure.


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