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May 02, 2007
Yes and No: Newmont Recommends Voting For One Resolution, Petitions SEC to Omit Another
    by Bill Baue

The actions span the gamut of corporate responses to shareowner resolutions on environmental, social, and governance issues, from wholehearted support to forceful opposition.


When Michael Pryce-Jones, social research analyst at proxy advisory firm PROXY Governance, read the proxy ballot from Newmont Mining, he was surprised to see the board recommend voting for a human rights shareowner resolution filed by Christian Brother Investment Services (CBIS). Standard operating procedure for companies is to recommend voting against shareowner resolutions on environmental, social, and governance (ESG) issues.

It is exceedingly rare for companies to recommend in favor--in part because shareowners typically withdraw resolutions when behind-the-scenes dialogue leads companies to implement the policies or practices advocated by shareowners. This is the first social resolution supported by a US mining company.

"You can begin to speculate on whether Newmont wanted to put this to shareholders to see what they thought, or wanted to be seen to be actively engaging shareholders and stakeholders on this issue, or whether it helps them address the New York City Employees Retirement System [NYCERS] proposal, which addresses similar issues," said Mr. Pryce-Jones.

The company not only recommended voting against the NYCERS resolution, which addresses environmental and human rights impacts of waste disposal from its Indonesian mines into Buyat Bay, but also had petitioned the SEC for permission to exclude it from its proxy statement. The SEC did not buy the argument that the issue amounted to ordinary business and had already been substantially implemented, and required its inclusion on the proxy. The juxtaposition of a yes recommendation alongside an attempt to suppress a resolution illustrates opposite ends of the spectrum on how companies respond to shareowner resolutions.

PROXY Governance recommended voting for the CBIS resolution asking the company to review its implementation of free, prior, informed consent (FPIC)--as well as assessing the risks of community opposition resulting from less-than-robust FPIC. Specifically, it requests a report by a committee of independent board members reviewing the company's global policies and practices addressing "existing and potential opposition from local communities," particularly in Peru, Indonesia, Ghana, and on the Western Shoshone reservation in Nevada--and "steps taken to reduce such opposition."

Institutional Shareholder Services (ISS), the oldest and most influential proxy advisory firm, also recommended voting for this resolution, which ended up receiving 91.6 percent support from voting shareowners at the Newmont annual meeting last week. However, both firms recommended against the NYCERS resolution, noting that the controversial issue has the potential to impact shareowner value but that the company is managing the problem and providing sufficient disclosure on its website and filings. The resolution received 5.63 percent support.

"A benefit when management supports a resolution in the proxy is that all shareholders are made aware of the issue and the concerns of the proponent," said Julie Tanner, corporate advocacy coordinator at CBIS. Co-filers include fellow members of the Interfaith Center on Corporate Responsibility (ICCR), a coaltion of 275 faith-based institutional investors with over $110 billion in assets. "Additionally, it is helpful that the company outlines, albeit briefly, how and when it will implement the resolution, and the proponent can then hold the company to that very public commitment."

The board's Environmental, Health, and Safety Committee, which includes at least three independent directors, will oversee the review and report, according to the board recommendation in the proxy ballot. Stakeholders expressed cautious optimism about the prospects for the report, while also continuing to press the company.

"Newmont should call on experts who are completely independent of the company and won't just say what it wants to hear," said Keith Slack, senior policy advisor for Oxfam America. "It should also seek input from affected communities themselves."

According to Steve Gottesfeld, Newmont's vice president of communications and public affairs, the committee determines the use of independent experts or community consultation, not the company.

"The value and strength of the committee comes from the fact that it is comprised of directors who are independent," Mr. Gottesfeld told SocialFunds.com. "It is the committee that will determine what resources are needed up to and including the retention of outside experts as well as consultations with our host communities."

"Newmont already enlists third-parties to evaluate our sustainability practices and provide assurance on our reporting," he added. "Provided that we all continue to engage in good faith and with good will, we see little risk in the inclusion of these perspectives [in the report.]"

While this yes recommendation is significant, it does not necessarily foretell a trend.

"The place to look for trends isn't in the technical form companies' responses take--but I do see a trend in companies facing more pressure to have substantive policies or practices on human rights," Mr. Pryce-Jones of PROXY Governance told SocialFunds.com. " Last year, we saw a increase in support for human rights resolutions, for example at Boeing, Halliburton, and Chevron--they all got about a quarter of the vote for."

Proxy advisory firms are increasingly supporting such resolutions. For example, both ISS and PROXY Governance recommended for the resolution asking Chevron to adopt a global human rights policy--and they both do so again this year.

On the other end of the spectrum, companies continue attempts to block human rights resolutions. For example, Yahoo lobbied to block a resolution filed by Harrington Investments calling for the creation of a Board Committee on Human Rights. The company currently faces an Alien Tort Claims Act suit filed by the wife of a Chinese citizen who published writings on the Internet critical of the communist government and was jailed for 10 years after Yahoo revealed his identity to Chinese authorities. The SEC denied the company's request for permission to omit the resolution from its proxy ballot.

"This is the first time a binding by-law amendment to create a corporate Board Committee on Human Rights has made it on a shareholder ballot," said John Harrington, President and CEO of Harrington Investments. While most resolutions are precatory (or advisory), this resolution represents a relatively new development in seeking to require companies to implement measures sought by shareowners. "The internationally recognized moral issue of human rights will now become an important fiduciary issue for corporate directors."

Unsurprisingly, Yahoo's board did not recommend voting for this resolution, nor did it recommend voting for a similar human rights resolution on Internet censorship filed by NYCERS.


Disclosure: Bill Baue co-hosts Corporate Watchdog Radio with Sanford Lewis, who serves as the attorney for Harrington Investments on the Yahoo resolution.

 

 
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