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July 11, 2001
Labor Standards Resolutions Garner Support in 2001 Proxy Season
    by Mark Thomsen

Ten international labor and human rights proposals that came to vote this year received 10 percent or more support from shareowners.

The 2001 proxy season was a busy one for shareowners attempting to influence the social practices of their companies. Through July 10, there were 139 social policy-related shareowner resolutions that came to vote at annual meetings. Of the 28 resolutions that received 10 percent or more support from shareowners, 10 concerned international labor and human rights issues.

These figures were compiled by the Investor Responsibility Research Center (IRRC), a non-profit, independent firm that researches corporate governance, proxy voting and corporate responsibility issues. IRRC has received the voting results of 113 of the 139 resolutions, and is awaiting the tally on the remaining 26.

Shareowners, as part-owners of a company, have a right to propose changes in company policies. The proposed changes are made in the form of a resolution, which is voted on by company shareowners at the company's annual meeting. The shareowner resolution filing and voting processes are regulated by the Securities and Exchange Commission (SEC).

Last year, just 25 proposals out of 150 total received more than 10 percent support. That means almost one of every four proposals is getting more than 10 percent support so far in 2001, compared to one of every six proposals in all of 2000.

"The primary reason for the increase in "for" votes in 2001 is the surge in international labor and human rights proposals, and the significant support they are getting," said Doug Cogan, Deputy Director of Social Issues Service at IRRC.

The 10 percent figure is an important threshold. Under the SEC's shareholder proposal rule, a proposal that earns this level of support may be resubmitted, regardless of how many times it has appeared on the company's proxy statement in the past.

Fifty shareholder resolutions were filed this proxy season asking companies to implement workplace standards set by the International Labor Organization or to review and report on labor standards for their global operations. Another 13 proposals focused on human rights issues, mainly in China and Burma.

These 63 labor and human rights proposals slightly outnumber the 61 environmental proposals that were filed this proxy season. Readers should note that many of these filed resolutions were later omitted by the SEC or withdrawn by the filers themselves.

The other resolutions that received support of 10 percent or more of the votes cast are as follows: equal employment/non-discrimination, five proposals; environment, four proposals; tie executive compensation to social issues, four proposals; implement MacBride principles in Northern Ireland, two proposals; and drug pricing, political contributions and board diversity, one proposal each.

During the proxy season ten years ago, 203 social issue shareowner proposals came to vote. At that time, a dominant focus of shareholder activists was pushing companies to sever ties to the apartheid regime in South Africa. Of the 203 proposals, 81 focused on South Africa, and 61 of these received support of 10 percent or more. Only 17 of the remaining 122 proposals, or less than one out of six, received at least 10 percent support.

The proposal that received the highest percentage of support so far this year was a resolution at Unocal calling for the implementation of International Labor Organization (ILO) standards. Approximately 23 percent of Unocal's non-abstaining shareowners voted in favor of the proposal.

The other nine companies where international labor and human rights proposals received 10 percent support or more were McDermott International, Ball, Colgate-Palmolive, Johnson Controls, Alcoa, Halliburton, Black and Decker, Caterpillar, and Xcel Energy.

Cogan believes that this year's results indicate a trend of increasing support for decent and equitable working standards.

"As more institutions develop proxy voting guidelines in support of these issues, like the California Public Employees' Retirement System did last year, the votes are likely to go still higher," said Cogan. "But it is critical that church groups, labor unions and socially responsible investment firms maintain an active effort to solicit support from such large institutions if they hope to have their campaign continue to grow."


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