April 01, 2011
SEC Allows Proposal for Genocide-Free Investing on JPMorgan Proxy Ballot
by Robert Kropp
SocialFunds.com speaks with Eric Cohen of Investors Against Genocide about its strategy to expand
upon engagement with mutual funds to seek a fundamental change on the issue in the financial
On March 8th, the Securities and Exchange Commission (SEC) informed JPMorgan Chase that the
financial institution's effort to prevent a shareowner proposal filed by Investors Against Genocide had been turned
down. The SEC wrote, "We are unable to concur in your view that JPMorgan Chase may exclude the
JPMorgan Chase had sought to exclude the resolution on the grounds that
it "is materially false and misleading."
The proposal represents something of a departure
for Investors Against Genocide, which until this year had focused its engagement exclusively on
mutual funds companies. Recounting some of the significant successes that the organization has had
with mutual funds, Eric Cohen, co-founder and Chairperson of Investors Against Genocide, told
SocialFunds.com, "There was a time when we felt that we were tilting at windmills, but we had the
very substantial win with TIAA-CREF. Then, based on our engagement, American Funds decided to sell
every share they had in PetroChina. We know that big companies can get it and can decide to do the
right thing. So why not JPMorgan?"
Early last year, Teachers Insurance and Annuity Association - College Retirement
Equities Fund (TIAA-CREF) announced that it had divested its holdings in four of the five major
Asian state-owned oil companies with significant operations in Sudan, including PetroChina.
Described by the US government as the first genocide of the 21st century, the government of
Sudan’s actions in the Darfur region has led to the killing of hundreds of thousands, as well as
long-term displacement into camps of another three million people. According to Investors Against
Genocide, "The government of Sudan has continued to pursue genocide in Darfur for over six years,
using as much as 70% of its oil revenue to provide arms and funding for the genocide, rather than
economic development for the poor people of Sudan."
The shareowner proposal filed at
JPMorgan Chase read, "Shareholders request that the Board institute transparent procedures to
prevent holding investments in companies that, in management's judgment, substantially contribute
to genocide or crimes against humanity, the most egregious violations of human rights. Management
should encourage JPMorgan funds with separate boards to institute similar procedures."
proposal further states, "PetroChina, through its closely related parent, China National Petroleum
Company, is internationally recognized as the worst offender helping fund the Government of Sudan's
genocide in Darfur."
Cohen said, "With mutual funds, we were submitting shareholder
proposals asking the Board of Trustees for the fund, who had responsibility for decisions about the
policies of the fund, to have a policy to avoid connections to genocide. But with JPMorgan Chase,
we knew the rules were a little different. They might have owned $1.3 billion in PetroChina, five
percent of outstanding H shares, but some of them were in funds, and the funds have boards of
directors. The corporation has a board of directors, and they do wealth management and take broker
According to Cohen, the second sentence of the resolution was added to
specifically address the complex structure of a corporation such as JPMorgan Chase.
proposal at JPMorgan Chase is not the first time that Investors Against Genocide has sought to
expand upon its mission of "seeking a fundamental change in the financial industry," as Cohen
described it. After its successful engagements with TIAA-CREF and American funds provided investors
with significant alternatives to investing with mutual funds with holdings in PetroChina, the
organization published a white paper which
provided recommendations for financial advisors to ensure that their investment decisions reflect
the preference of their clients to avoid investments that support genocide.
According to a
2010 study by KRC Research, 88% of respondents want their mutual funds to be genocide-free, and 84%
said they would "withdraw their investments from American companies that do business with companies
that directly or indirectly support genocide."
When the white paper was published last
December, Susan Morgan, a co-founder and Director of Communications of Investors Against Genocide,
told SocialFunds.com, "Our work has moved from a first phase of engagement with companies, now that
there are alternatives to investing in funds that support genocide. Now it's important for us to
get the word out on companies that have taken the right steps, and inform consumers as to how to
invest with them. The paper focuses on financial advisors because they're in the position to help
inform their customers."
Cohen observed of JPMorgan Chase, "The company does quite a lot
of advising that results in the purchase of PetroChina. They should take more seriously the
problems with companies tied to genocide."
He continued, "JPMorgan's website has a section
on corporate responsibility, and states that it has always sought to be a good corporate citizen.
It's a great statement, and if they thought about how investment in PetroChina is connected to the
genocide in Darfur, Sudan, they would put the facts together and realize they have to make an
effort to make money for their clients while avoiding such connections."
"This is a
company that has signed onto many responsible investment initiatives, including the UN Principles for Responsible Investment (PRI)," he
added. "Divestment fits with the kind of thing they espouse, but up till now they've stopped short
of drawing the line on investing in genocide. We're hopeful that they can change."
Describing the organization's engagement with "fairly high-ranking executives" at JPMorgan
Chase, Cohen said, "We've had some discussions with JPMorgan Chase, and we're pleased that they
took it seriously, heard us out, and engaged on it. We've told them that we'd be more than happy to
withdraw the proposal. We'd rather praise them than argue with them at the annual meeting."
The institution's Annual General Meeting (AGM) is scheduled to be held in Columbus, Ohio, on
"We know from our mutual fund experience that it's hard to get the attention of
shareholders," Cohen said. "So many are institutional investors who are going to vote with
management from the get-go. But we believe that when investors see that there is an issue about
investing in genocide, it won't be hard for them to figure out how to vote."
shareowner proposal on the issue to public corporations has an advantage, in that unlike mutual
funds, corporations hold shareowner meetings on an annual basis. According to Cohen, "We’ll now
have an annual opportunity to raise awareness of the problem."
Citing the example of
Franklin Templeton, which, he said, currently owns $1.7 billion in PetroChina, Cohen said,
"Franklin Templeton has not engaged with us whatsoever. One day they will have a shareholder
meeting and our proposals will come to a vote. But Franklin Templeton is owned by BEN, which as a
public corporation holds a shareholder meeting every year."