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December 12, 2002
Record Shareowner Vote Prompts Cracker Barrel to Bar Sexual Orientation Discrimination
    by William Baue

Reversing more than a decade of opposition, Cracker Barrel's parent company bars sexual orientation discrimination in it Equal Employment Opportunity policy.

The infamous shareowner resolution calling on Cracker Barrel Old Country Stores' parent company CBRL Group (ticker: CBRL) to bar sexual orientation discrimination, first filed more than a decade ago, has finally achieved its objective. The resolution received 58 percent support from voting shareowners at CBRL Group's November 26 annual meeting, the highest shareowner vote ever on a social policy resolution. CBRL's board of directors voted immediately and unanimously to amend its Equal Employment Opportunity (EEO) policy to include protection against sexual orientation discrimination.

"This is a milestone," said Shelley Alpern, assistant vice president at Trillium Asset Management and co-chair for shareholder activism at the Equality Project, a group that advocates barring sexual orientation discrimination in corporate EEO policies. "Cracker Barrel, which once was the very face of anti-gay bigotry, has finally acknowledged that its lesbian and gay workers are part of the mainstream of the American workforce."

The controversy that prompted this resolution dates back to 1991, when Cracker Barrel's then vice president of human resources issued a memo without senior corporate approval.

"It is inconsistent with our concept and values, and is perceived to be inconsistent with those of our customer base, to continue to employ individuals in our operating units whose sexual preferences fail to demonstrate normal heterosexual values which have been the foundation of families in our society," the memo stated.

Cheryl Summerville was one of at least 11 employees who lost their jobs due to this policy. "This employee is being terminated due to violation of company policy," her pink slip stated. "The employee is gay."

The company later retracted this policy, but refused to bar sexual orientation discrimination. In 1992, the New York City Employees' Retirement System (NYCERS) filed a shareowner resolution asking for the addition of sexual orientation to the company's EEO policies. NYCERS, the pension fund for more than 351,000 active and retired employees of the City of New York, has over $32 billion in total assets as of June 30, 2002.

While shareowner resolutions often raise awareness of social and environmental issues, a few prompt the U.S. Securities and Exchange Commission (SEC) (SEC) to name a rule after it. Such was the case with the so-called Cracker Barrel Rule instituted by the SEC in response to the company's request to omit the resolution from its proxy under the "ordinary business" rule. The SEC not only ruled that Cracker Barrel could omit the resolution, but also it used this decision as a springboard to disallow all shareowner resolutions regarding employment issues as "ordinary business" under management's purview, not shareowners'.

It was not until 1998 that the SEC retracted the Cracker Barrel Rule in the wake of lawsuits and pressure from institutional shareowners and shareowner rights advocates. NYCERS, which had refiled the resolution in 1999, did not file in 2000 because it was engaged in a good faith discussion with the company over implementation. However, when the company chose not to add sexual orientation protection to its EEO policy, NYCERS refiled the resolution yet again in 2001. The resolution received 17.8 percent support last proxy season.

"[W]e hope to continue to push additional companies to enact other non-discriminatory policies in the future," said New York City Comptroller William C. Thompson, custodian of NYCERS.

Pressure from social investors has recently prompted numerous companies to update their EEO policies to protect against sexual orientation discrimination. Such companies include Lockheed Martin (LMT), Deere (DE), Tootsie Roll (TR), American International Group (AIG), and Home Depot (HD). Each of these victories is significant, but the Cracker Barrel's reversal is momentous. With investors becoming increasingly aware of the power of their proxy votes, the Cracker Barrel vote could be a harbinger of future shareowner victories.


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