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October 09, 2002
SRI Community Reaps Success in Washington
    by William Baue

Recent proposals from the SRI community enacted as public policy are creating momentum toward more potential legislation and regulations that support SRI goals.

The SRI community has long advocated for progressive public policy regulations and legislation regarding corporate governance and social and environmental issues. Recently, the SRI community has been particularly active in this advocacy. Just last week, for example, members of the SRI community made presentations to the Senate Committee on Environment and Public Works (EPW) proposing that the Securities and Exchange Commission (SEC) strengthen environmental disclosure regulations.

"We were there to promote a public policy recognition of the need for disclosure of environmental liability, especially as it relates to climate change," said panelist Lily Donge, a social research analyst with the Calvert Group. Other panelists included Martin Whittaker of Innovest Strategic Value Advisors and Damon Silvers of the AFL-CIO. Innovest is a research firm that rates corporate environmental and social performance and the AFL-CIO is a national labor organization.

The SRI community's advocacy for public policy changes has met with some success lately. Last month, the SEC proposed regulations that would require mutual funds to disclose their proxy votes and policies. SEC Chair Harvey Pitt also proposed eliminating the "ordinary business" rule that companies often invoke to keep shareowner resolutions off their proxies. Letters and rulemaking petitions to the SEC written by SRI community members as well as institutional investors and environmental groups contributed to the development of these SEC proposals.

Social Investment Forum (SIF) President Tim Smith co-authored one of the letters and commented to on the history of the SRI community's public policy advocacy.

Governance and Public Policy Articles"Throughout the last 30 years, the SRI community has been involved both in advocacy directly with companies and in trying to impact public policy, which would affect companies," said Mr. Smith. "The SRI community has always had a multiple-pronged approach. You change companies' behavior both directly and by changing the rules of the road."

Domini Social Investments Principal Steve Lydenberg suggested several ways the SRI community could extend the momentum of present successes into the future.

"In the aftermath of Enron and related scandals, the SRI world has an important immediate opportunity to put forward at least three agendas," Mr. Lydenberg told "First, a formulation of the responsibilities of stock ownership. Second, a program for required disclosure by corporations of social and environmental data, building on the work of the Global Reporting Initiative. And third, a redefinition of the corporation, drawing on the stakeholder model of the corporation. The SRI world's long experience in evaluating social and environmental issues puts it in a strong position to influence these debates."

Mr. Lydenberg elaborated on his first and third proposals. Regarding the responsibilities of stock ownership, he calls for the democratization of corporate governance mechanisms. For example, he suggests there should be greater shareowner participation in proxy voting. Regarding a redefined corporation, he discredits the notion of enhancing stockowner value at any cost. Mr. Lydenberg favors a model that seeks to enhance value for all stakeholders, including employees, customers, communities, and the environment.

Mr. Smith also projected the SRI community's future in public policy advocacy. He distinguished between initiatives that SRI members are working on currently and regulation and legislation changes that SRI community members would like to see. The former category includes such issues as abolishing sweat shops and recycling computers. For the latter category, Mr. Smith suggested the U.S. emulate the British regarding the law that requires pension funds to report on the degree to which they consider ethical, social, and environmental issues in investment decisions.

"Such legislation is on our wish list," said Mr. Smith. "Nobody here has proposed it as a piece of legislation, but the British law acts as a prompt for us to promote similarly ambitious initiatives."


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