October 24, 2001
Social Investors Press Unocal to Cut Ties to Burma
by Mark Thomsen
Social investors have become part of a sophisticated, multi-pronged campaign to keep the Burma
issue in front Unocal senior management. (part two of a two-part article)
related how a student campaign is working to push universities and colleges to divest from Unocal (ticker: UCL) because of the
company's business ties with Burma's (Myanmar's) ruling military regime. Social investors have
also been stepping up their activities to pressure the oil company. In the past they focused
mostly on shareowner resolutions and dialogue, but now they are beginning to make their presence
known at stock analyst meetings.
"Investors are realizing the risk of doing
business with [Burma's military junta] simply outweighs the benefits," said Heidi Quante of the
Unocal Corporate Accountability Campaign. The Campaign, which is a project of Global Exchange, is
working with shareowners to get Unocal to withdraw from Burma. Global Exchange is a San
Francisco-based human rights organization that promotes environmental, political, and social
justice around the world.
Shareowner support for resolving the Burma issue was evident at
Unocal's annual meeting this year. One shareowner resolution submitted by the AFL-CIO, which asked
the company to implement International Labor Organization standards in its worldwide operations,
received over 23 percent support from voting shareowners. According to the Investor Responsibility
Research Center, that resolution is the third-highest vote-getter this proxy season.
Another resolution requested that executive compensation at Unocal be tied in part to the
social performance of the company. The resolution, filed by a member of the Interfaith Center on
Corporate Responsibility (ICCR), included unfavorable mention of the company's Burma operations.
That resolution also received significant support, garnering almost 16 percent of shareowner votes.
Concerned investors are not stopping there, however. In July, the AFL-CIO sent a report
on Unocal to company investors and analysts. The report details how Unocal is lagging behind its
peers in terms of financial performance, how income from the company's Yadana gas pipeline project
in Burma remains uncertain, and how the political and legal risks of Unocal's Burma investments
pose a danger to shareowners.
The legal risks have already appeared in the form of
International, a human rights and environmental group, is assisting 12 Burmese in suing Unocal
for its complicity in human rights violations inflicted by Burma's military. The violations
include forced labor, rape, and murder.
A federal court has found that Unocal knew Burma's
regime used forced labor on the Yadana pipeline "as early as its initial deliberations as to
becoming a co-venturer with the military." The court also found that once involved, Unocal
benefited from forced labor.
Despite these facts, the federal court concluded that Unocal
could not be held liable. A subsequent appeal is pending. However, a case filed in Unocal's home
state of California has survived a movement for dismissal and may proceed to trial next summer.
The same 12 plaintiffs are suing for assault, battering, false imprisonment, and unjust enrichment.
According to the AFL-CIO report, "Given that Unocal expects at least a value of $1 billion
from the Yadana project, the company may be liable at a minimum for that amount in this case."
This litigation risk should be a concern to all shareowners, not just social investors.
"Unocal's involvement in Burma is a virtual 'poison pill,'" said Simon Billenness, Senior
Analyst at Boston-based Trillium Asset Management. "Being linked to a rogue regime is depressing
the stock price and preventing respectable major oil companies from purchasing Unocal."
behalf of Trillium's clients, Mr. Billenness has been questioning Unocal senior management at
analysts meetings about business operations in Burma. At a meeting in Boston a few months ago, he
discussed the AFL-CIO report and handed out copies to other analysts.
The Unocal Corporate
Accountability Campaign is pushing the Burma issue even further at analyst meetings. It is taking
the extraordinary step of organizing protests outside the analysts' meeting places. Even though
Unocal has stopped posting its analyst meeting schedule on its website, the Campaign has continued
to organize the protests.
Meanwhile, human rights abuses by Burma's military continue
today. According to EarthRights International, light infantry battalions responsible for
patrolling areas around the pipeline still force villagers to carry supplies for them.
The government officially does not allow such forced labor. The soldiers, however, have taken
to asking the heads of villages to provide porters, and members of the village are forced to work
for the battalions on a rotating basis. Those who try to refuse are told they must pay money.
Some villagers have reported being beaten and others have had land confiscated for short periods.
Mr. Billenness said he hopes Unocal's CEO, Chuck Williamson, will see that it is in
Unocal's long-term interest to clear up the company's tainted reputation.
Bijur took over Texaco in 1996, Texaco had a dreadful reputation. He reached out to concerned
investors and stakeholders, took Texaco out of Burma, effectively handled the company's diversity
problems, and left the company with a clean plate," said Mr. Billenness. "I am hoping that Chuck
Williamson will do the same for Unocal."