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August 08, 2006
Shareowner Activists See Progress at TimeWarner, and Room for Improvement
    by Bill Baue

In part one of this two-part article, activists applaud the company on its first corporate social responsibility report while continuing to push on environmental, social, and governance issues.

Ever since the early 1990s, shareowner activists have engaged TimeWarner (ticker: ">TWX) on environmental, social, and governance (ESG) issues ranging from vendor standards, recycled content in magazine paper, smoking-related issues, pay disparity, and splitting CEO/chair roles. This year saw significant progress forward on many of these fronts, according to shareowner activists affiliated with the Interfaith Center on Corporate Responsibility (ICCR), a network of 275 faith-based institutional investors with more than $110 billion in assets. At the same time, these activists see many areas where TimeWarner still has much room for improvement in its corporate social responsibility (CSR) performance.

"We commend the company for recently joining Ceres, issuing its first CSR report, and creating the position of vice president of corporate citizenship and appointing Michele Sacconaghi in that role," said Julie Tanner, corporate advocacy coordinator for Christian Brothers Investment Services. CBIS, a socially responsible investing (SRI) firm and ICCR member, has filed shareowner resolutions with TimeWarner since 2004 on pay disparity and splitting the CEO and board chair positions. "We believe these steps represent real progress at the company."

"The availability of environmental and social performance data provides a basis for our social and environmental analysis, allows us to make industry and peer group comparisons, and gives evidence of the company's commitment to disclosure," Ms. Tanner told "We also believe that the company has been more responsive in dialogues with ICCR shareholders and that our engagement has improved."

Conrad MacKerron, director of the corporate responsibility program at the As You Sow Foundation, first engaged with Time Inc. in 2003 on recycled paper content in its magazines, and expanded to address TimeWarner on smoking in movies in 2004 and vendor standards in 2005. Through these dialogues, it became clear to Mr. MacKerron that TimeWarner lacked an internal system for gathering and monitoring CSR data in a centralized fashion, so he and other shareowner activists (including Ms. Tanner) advocated for improved CSR reporting mechanisms.

In response, not only did TimeWarner issue its first CSR report in May 2006 promising to develop a vendor standards code of conduct and advancing a smoking in movies policy, but also Time Inc. issued its own sustainability report in April addressing paper usage issues.

"The sustainability reports are well-written summaries of the company's actions to date, but they lack a clear articulation of a vision or blueprint for sustainable development," Mr. MacKerron told "Furthermore, there is no mention of how these policies were developed and adopted as a result of outside pressure by stakeholders, giving the incorrect impression that the company was proactive."

In March 2005, Mr. MacKerron sent a letter to Susan Waxenberg, then-assistant general counsel and assistant secretary, to ask if the company had a vendor standards code of conduct to cover the manufacture of products licensed with such popular characters as Harry Potter and Batman. At first the company did not respond, then said they never received the letter or lost it, then let several months lapse again after receiving a faxed copy of the letter, according to Mr. MacKerron.

"In the context of a decade of controversy on vendor issues faced by Gap, Nike, Wal-Mart, and others, it was incredible that the company could not or would not provide a straight answer to a simple question," said Mr. MacKerron, who filed a vendor standards resolution in late 2005. "At that time it became clear they had no code, even though Walt Disney, their direct competitor, established a code and a system for implementing it in 1996."

"The TimeWarner CSR report says on page 39 that the company will develop a supply chain code and monitoring systems '06 and '07 and take 'a few years' more to implement," Mr. MacKerron added. "This is not an ambitious timetable and does not imply a high level commitment, especially in view of a shareholder vote of 20 percent this year on this issue."

Susan Duffy, vice president of corporate communications at TimeWarner, reports that the code of conduct is on schedule for finalization by the end of 2006, and points out that implementing a system with integrity takes time.

"A thorough internal assessment, the establishment of a compliance and monitoring system, and a remediation strategy are all elements that we believe could take several years," Ms. Duffy told "Indeed, even those companies that have been focusing more intently on these issues for a decade or more are still facing challenges and evolving their approaches."

"We are comfortable that the timeline TimeWarner has stated for this significant undertaking is reasonable and on a par with our peers," she adds.

Part two of this two-part article addresses shareowner engagement with TimeWarner over recycled content in magazine paper, depiction of smoking in films, and pay disparity, among other issues.


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