March 07, 2006
SEC Forces Chevron, Dow, and CVS to Include Shareowner Resolutions on Their Proxies
by Bill Baue
Part two of this two-part article examines no-action activity thus far in the 2006 proxy season,
focusing on attempts to apply the personal grievance rule and expand a new risk assessment rule.
The withdrawal of a shareowner resolution because the company has complied with its terms
represents one kind of success in shareowner advocacy (discussed in part one of this article).
Another kind of success comes when the Securities and Exchange Commission (SEC) sides with shareowner advocates and denies a company’s
"no action" letter, or request to omit a resolution from its proxy statement.
season thus far has seen a number of such successes, according to information provided by the EthVest database of the Interfaith
Center on Corporate Responsibility (ICCR), a
coalition of 275 faith-based institutional investors that conduct shareowner advocacy. The fact
that several involve highly visible and controversial issues--such as the accountability for
environmental pollution of Chevron (ticker: CVX) in Ecuador and Dow (DOW) in Bhopal,
India--only heightens the significance of these victories.
no-action letter makes several arguments, one claiming that the resolution advances a "personal
grievance" or "special interest" based on Rule 14a-8(i)(4). To make its case,
Chevron included a copy of an email sent among resolution proponents, the nongovernmental
organization (NGO) Amazon Watch, and
lawyers representing 30,000 Ecuadorians in a lawsuit against Chevron.
are shocked that Chevron has a copy of private email communication which appears as Attachment C to the Company's
no-action letter request," writes Paul Neuheuser, attorney for the proponents, in a letter to the SEC
rebutting Chevron's arguments. He goes on to request an affidavit from the company confirming that
it did not obtain the email illegally, which he told SocialFunds.com that he has not received.
"The email was provided freely and voluntarily to us," said Charlie Stewart, Chevron's manager
for issues and litigation. "I can't comment who it was."
Chevron alleges that the email
proves the resolution proponents, socially responsible investing (SRI) firms Trillium Asset Management and Boston Common Asset Management, are collaborating with
"[E]ven if this allegation were to be true the proper answer is so
what," writes Mr. Neuheuser. "Trillium Asset Management's client . . . had no 'personal claim
or grievance against the company' and was not planning to obtain any benefit other than promotion
of the public and corporate good."
The SEC concurred, denying Chevron's request for
permission to leave the resolution off its proxy.
"In their no-action request, Chevron
tried to use that fact that we associate with Amazon Watch, and have requested information from the
plaintiffs' lawyers, as somehow proving that the shareholders are filing the proposal at the behest
of these advocates," said Shelley Alpern of Trillium Asset Management. "They basically argued that
shareholders have no independent perspective on this case and no interest in how the company is
"The SEC didn't buy that argument," Ms. Alpern told SocialFunds.com. "Had
the SEC accepted this line of thinking, it would provoked an outcry like you've never heard from
the SRI community, because it would have been a direct attack on our freedom of association."
The Chevron no-action letter also advanced an argument referencing a June 2005 SEC Staff Legal Bulletin
providing guidance that resolutions seeking "risk assessment" fall under the "ordinary business"
clause allowing companies to exclude a resolution. Mr. Neuheuser pointed out that not every
resolution that mentions the term "risk" falls under the new guidance, which specifically refers to
financial risk assessments. Dow similarly plied Chevron's line of reasoning in its no-action
letter opposing the Bhopal resolution, as did CVS (CVS) on a resolution on toxics in
"In the Bhopal and CVS no action letters, the companies attempted to
stretch the risk assessment prohibition even further than what the SEC guidance says--CVS tried to
argue that a technical
feasibility assessment was a risk assessment, and Dow tried to argue that requests that would reduce or
avoid risks were risk assessments," said Lauren Compere, chief compliance officer of Boston Common
Asset Management, which co-filed both resolutions. "In both instances, the SEC rejected those
"Unfortunately, the existing SEC guideline prohibiting resolutions that ask
for an assessment of financial risks undermines shareholder rights to the very kinds of information
that shareholders need, but at least the SEC staff didn't extend this notion further in these
instances," Ms. Compere told SocialFunds.com. "We're beginning to draw a boundary around the new
SEC guidance on risk assessment, and eventually we'll need to find a way to roll it back."
Other resolutions the SEC protected against no-action requests include three filed by SRI firm
Domini Social Investments. These include one
asking SBC Communications (SBC--now AT&T) to disclose its
political contributions, one asking Kimberly-Clark (KMB) to practice sustainable
forestry, and one asking Wendy's International (WEN) to produce a sustainability
However, the SEC has also upheld nine no-action requests thus far this proxy
season. These include four global warming resolutions at Sempra Energy (SRE), Ryland Group (RYL), Wells Fargo
and three HIV reporting resolutions at Conoco Phillips (COP), Marathon (MRO), and Pfizer (PFE). It also
includes two resolutions filed by Harrington Investments, one addressing
confidentiality of personal data at Bank of America (BAC) and one addressing bribery at
There remain 17 resolutions with no-action letters filed against them awaiting SEC
decisions, with almost a quarter of these (four) at a single company: Wal-Mart (WMT).
Part one of this
two-part article examines withdrawal of resolutions on climate change, sexual orientation
nondiscrimination, political contributions, and HIV/AIDS policies.