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October 26, 2007
Corporate Operations in Burma Fuel Human Rights Abuses, Say Shareowner Activists
    by Bill Baue

Shareowner letters to Chevron and Total criticize the piping of revenues to the Burmese regime, while the Norwegian Pension Fund defends its decision not to divest from Total.


Fuel--the removal of subsidies for it in August sparked the Saffron Revolution, peaceful protests in Burma (named after the color of the protesting monks’ robes) that were met with a brutal crackdown by the military regime. And fuel extractors are the targets of shareowner activism urging withdrawal of financial support for the regime, which calls the country "Myanmar."

Socially responsible investors (SRIs) and labor unions have recently sent letters to Chevron (ticker: CVX) and Total (TOT) urging them to speak out against human rights abuses performed by a regime financed largely by revenues from these oil companies—and implicitly questioning the complicity of such a connection.

Now pressure is mounting on Norway’s Global Government Pension Fund (formerly the Petroleum Fund, seeded with revenues from the country’s vast fuel reserves) to reverse its decision not to divest from Total over human rights concerns in Burma. In November 2005, the Fund’s Advisory Council on Ethics acknowledged human rights abuses in building the Total- and Chevron-owned Yadana pipeline, but determined the Fund’s policies apply to current and potential future human rights abuses, not historical ones. The Council affirmed this position in an October 11th letter to the Finance Ministry.

In his September 28th letter to Chevron, AFL-CIO President John Sweeney cited a June 2005 Wall Street Journal op-ed where Reebok Chair and CEO Paul Fireman stated, “It's impossible to conduct business in Burma without supporting this regime.” In an October 10th response, Chevron Corporate Secretary and Chief Governance Officer Lydia Beebe cited the company’s October 2nd statement supporting a peaceful resolution that lists Chevron’s community development projects in Burma. She agreed to meet with the AFL-CIO officials, who can file a shareowner resolution if the meeting is unsatisfactory.

“Chevron and Total point to a few community projects to show they operate responsibly in Burma, but the amount spent on these pales in comparison to the hundreds of millions of dollars of revenue the pipeline provides the military regime,” said Simon Billenness, senior advisor for shareholder advocacy in the AFL-CIO’s Office of Investment. Billenness also serves on the board of the US Campaign for Burma as its treasurer.

Ms. Beebe did not respond to SocialFunds.com’s requests for commentary asking if Chevron supports the regime, and if not, how the company conducts business in Burma without supporting the regime.

“If they simply can’t do business in Burma without providing significant support to the military regime and being implicated in human rights abuses, then the question is, when are they going to pull out?” Billenness told SocialFunds.com.

Sweeney’s letter called into question Chevron’s contention that it “is a more responsible corporate actor than alternative possible corporate partners for the Burmese regime.

“I see very little difference between the Chinese oil companies operating in Burma, and Chevron and Total,” Billenness said. “ Cinooc and PetroChina already put out Corporate Social Responsibility reports, and Cinooc has a page talking about Burma in their report.”

Pulling out from Burma carries financial implications. A recent Forbes article cites a forthcoming Peterson Institute for International Economics study which is critical of economic sanctions as a tool for advancing human rights. The study notes that Chevron would have to pay $300 million to $500 million (depending on the spot price of oil) in deferred capital gains taxes to the junta--a fact the company has not disclosed to shareowners, according to Forbes.

The ongoing violence by Burma’s State Peace and Development Council, the regime that suppressed the 1990 election that went to National League of Democracy candidate Aung San Suu Kyi (the Nobel Peace Prize laureate who has been on house arrest ever since), has renewed shareowner activism on Burma that dates back to the early 1990s. In 1992, Billenness wrote a report for Franklin Research and Development (now Trillium Asset Management) called Thinking Globally that predicted business operations in Burma would surface as a major SRI issue in the wake of South Africa divestment movement. In August 1993, he helped convene the Coalition for Corporate Withdrawal from Burma that led to the filing of a number of shareowner resolutions on Burma.

According to EthVest, the database of shareowner resolutions filed by members of the Interfaith Center on Corporate Responsibility (ICCR), the resolution received 15.3 percent support at Unocal (UCL) in 1994, five times the 3 percent threshold needed for a first-year resolution. The next year, however, the SEC allowed the resolution to be omitted at Unocal (now owned by Chevron), as well as at Pepsico (PEP), Atlantic Richfield, Halliburton (HAL), and Texaco (now owned by Chevron.)

Then as now, in addition to the significant moral risks, Billenness noted four forms of financial risks associated with operations in Burma: reputational risk, sanctions risk, boycott risk, and litigation risk. A letter sent to Chevron yesterday by a coalition of social investors with $90 billion in assets (and $115 million in Chevron) notes recent Senate hearings calling on closing the loophole in US investment sanctions that grandfathers Chevron’s operations in Burma.

“Chevron’s been very economically stupid in not selling its stake in the Yadana project early on when it had the opportunity to do so,” Billenness said. “A change in sanctions policy could force Chevron to sell, quite possibly at a fire-sale price.”

When Billenness warned Unocal officials of litigation risk in a 1994 meeting, they dismissed it. Soon after that, the Center for Constitutional Rights filed an Alien Tort Claims Act case on behalf of Burmese villagers (including one whose baby died from being thrown into a fire by Burmese militia) that resulted in a multi-million dollar settlement in 2004.

Ironically, while this case clearly documented human rights abuses associated with the building of the Yadana pipeline, the Norwegian Global Government Pension Fund Advisory Council on Ethics found insufficient evidence of ongoing violence to warrant divestment from Total. The Fund’s investment policies do not cover complicity in violence supported by revenues flowing from companies to the junta, the Ethics Committee confirmed in its October 11th letter to the Ministry of Finance that notes the fund holds 20 companies with operations to Burma.

“The ethical guidelines are clearly not satisfactory, but we don’t have time to wait,” said Inger Lise Husøy of the Norwegian Burma Committee in an article on Norwatch. “Parliament can, however, overrule the Advisory Council’s decision by means of a political resolution.”

Former Norwegian Prime Minister Kjell Magne Bondevik agrees, and is urging Finance Minister Kristin Halvorsen to step in and divest.

Other Nordic investors, such as insurance companies KLP in Norway and Folksam in Sweden, as well as the Church of Sweden, are working with GES Investment Services to engage companies operating in Burma to proactively protect against the risk of exposure to human rights abuses.

 

 
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