August 26, 2005
Shareowner Resolution Asks Monsanto to Create Ethics Oversight Committee
by William Baue
The company stonewalls inquiries related to the resolution, which springs from a $1.5 million
settlement with the SEC and DOJ earlier this year regarding a bribe Monstanto paid in Indonesia.
Earlier this week, Harrington Investments Inc. (HII) filed a shareowner resolution with Monsanto (ticker:
MON) asking its
board to create an ethics oversight committee of independent directors to monitor compliance with
laws as well as the Monsanto Pledge and Code of
Business Conduct. Why make such a request?
The resolution recounts the
company's $1.5 million settlement with the US
Department of Justice (DOJ) and Securities and
Exchange Commission (SEC) in January 2005 over
violations of the Foreign Corrupt Practices Act (FCPA). In a nutshell, a senior Monsanto
manager authorized a $50,000 bribe to get a senior Indonesian Ministry of Environment official to
repeal a 2001 environmental impact assessment decree obstructing market entry for genetically
"Although the payment was made, the unfavorable decree was not
repealed," notes the SEC enforcement document without commentary
on this irony. "In addition, from 1997 to 2002, Monsanto inaccurately recorded, or failed to
record, in its books and records approximately $700,000 of illegal or questionable payments made to
various Indonesian government officials."
Such breaches of corporate ethics are
unfortunately not anomalous. On Monday of this week, the SEC charged former Bristol-Myers
Squibb (BMY) CFO
and another officer with orchestrating a fraudulent earnings management scheme to the tune of $1.5
billion. On Tuesday, the commission charged the former Kmart (KM) CEO and CFO with
financial fraud leading up to the company's declaration of bankruptcy.
illegal, and Monsanto's violation of federal law and the company's own voluntary code of conduct
prove that management cannot be trusted to protect shareholders," said John Harrington, CEO of HII,
a Napa, California-based socially responsible investment (SRI) firm. "Monsanto's management has
once again shown its disregard for its fiduciary duties and for U.S. law."
attempts to contact Monsanto for comment, SocialFunds.com spoke briefly with Monsanto Public
Affairs Director Chris Horner. The phone call abruptly ended before Mr. Horner answered any
questions and he did not respond to follow-up phone calls and email.
settlement requires Monsanto to retain an independent compliance expert. A search of SEC filings
posted on Monsanto's
website since January 6, 2005 did not disclose the retention of an independent compliance expert,
so it is unclear whether the company has fulfilled this requirement.
The SEC enforcement
document asserts that Monsanto "lacked internal controls sufficient to detect or prevent the
illicit payment schemes operated by the Indonesian affiliates."
"In fact, from 1996 to
2001 Monsanto did not conduct any internal audits of its Indonesian affiliates," the document
continues. "The absence of effective internal controls enabled the Indonesian management team to
conceal their illicit payment scheme."
It is unclear what changes Monsanto has made to its
internal controls in the wake of the settlement, if any. Monsanto's January 10 First Quarter 2005 Form 10Q, the most recent
SEC filing posted on its website addressing the bribe in Indonesia, does not mention any changes in
The Monsanto Pledge, which is "the foundation of all that we do,"
states that "integrity includes honesty, decency, consistency, and courage." The Pledge also
commits the company to several intentions, including transparency.
"We will ensure that
information is available, accessible, and understandable," the Pledge states.