Lessons from a shareholder campaign supporting a community in the United States

Community campaigns differ from issue campaigns in that a community's (and a shareholder's) ultimate goal is to change the behavior of an individual company or company's operation(s) that is impacting the community.

Shareholder activity enables investors to communicate their own concerns and amplify community voices. As a result, it may enhance a community's power vis-à-vis the company, raise public awareness, and/or increase pressure on the corporation. Unlike shareholders who support them, community groups may also integrate governmental and legal tactics into their campaigns, exercising laws to challenge company actions. (In contrast, many issue campaigns aim to change laws and regulations in and of themselves.)

Many companies put the interests of their financial stakeholders above the interests of other stakeholders, such as the communities in which they operate. Shareholder activism is one way concerned shareholders can harmonize their objectives with stakeholder objectives, and leverage financial power not only in the interest of shareholder value, but also for the promotion of social values and community empowerment. The following sections recount how the Jessie Smith Noyes Foundation used its shareholder power to promote its values of environmental justice, and advance the concerns of one of its grantees, the South West Organizing Project, a Native American community justice group. (See also, a section from the Good Neighbor Project Handbook on shareholder activism.)

Essay from Jessie Smith Noyes Foundation 1997 Annual Report

by Stephen Viederman, President  

Introduction

In 1993 the Jessie Smith Noyes Foundation began an experiment, collaborating with the South West Organizing Project (SWOP), to see how shareholder activity could support their organizing efforts to make Intel more accountable to the communities in which they worked. This is the story of the experiment from the Foundation's perspective. SWOP's efforts are chronicled in their publication Voces Unidas. In addition to providing a chronology, we offer some reflections on what was accomplished. We conclude with some guidelines that are a result of discussions between SWOP and the Foundation. Our goal in telling this story is to encourage discussion of the ways that investors, especially institutional investors like foundations, may be able to assist communities in their efforts to create a more level playing field in their dealings with corporations. (1)
 

What Happened

In 1993 SWOP prepared a report, Intel Inside New Mexico (2), raising questions about Intel's expansion of their chip manufacturing facilities in New Mexico, encouraged by tax breaks and ultimately, $10 billion of Industrial Revenue Bonds from the state. Among the problems detailed in the report were excessive water usage in the manufacturing process (recall New Mexico is a desert state); excessive emissions into the air; questions about jobs for New Mexicans; and the true cost of the state's subsidies.  

SWOP tried to engage Intel to discuss their report, but to no avail. The company offered to meet alone with Jeanne Gauna, SWOP's Co-Director. This condition did not satisfy SWOP's needs as a participatory, constituency-based organization.  

Realizing that Noyes held Intel stock in a socially screened portfolio, we asked SWOP what we should do. Holding the stock and doing nothing would have been normative for foundations, Noyes included, up until that time. Divesting would have no impact. Taking an active role as a shareholder in the company would be a new role for us, but it was consistent with our goal of reducing the dissonance between the way we managed our money and our grantmaking values (3). SWOP suggested we take the latter course as a complement to their organizing strategy.  

We appeared at Intel's Annual Shareholders' Meeting in Albuquerque in May, 1994 and asked, from the floor, when Intel would respond to SWOP's report. The then-Chief Operating Officer, now Chief Executive Officer, replied that they did not deal with "vocal minorities."  

During the next few months articles appeared in the New York Times and a number of financial magazines and newsletters about our efforts. Two of our investment managers spoke with Intel officials, urging a dialog with SWOP. But there was still no response from Intel.  

As a result, and with SWOP's agreement and full participation, we filed a shareholder resolution to be voted on at Intel's 1995 Annual Meeting asking the company to revise their Environmental, Health and Safety (EHS) policy to commit themselves to sharing information with communities. Intel's EHS policy, then in effect, committed them "to sharing the knowledge that we gain with our employees, customers, the scientific community, and government." But the policy's statement that "We will be a responsible member of the communities in which we live and work" clearly did not include a commitment to share information with communities.  

The resolution got Intel's attention, and in December 1994 a high-level corporate official and the manager of the New Mexico site came to New York to meet with us. They pulled large notebooks from their briefcases, filled with data on water usage, air emissions, and the like, to make their case to us. We, however, refused to enter into that discussion. We observed that our concern was Intel's accountability and transparency to SWOP and their community constituents; it was with the community organizations that detailed discussions needed to take place.  

As a result, in January 1995, Intel initiated a series of facilitated discussions with SWOP on a range of issues. The Foundation did not participate, as agreed with SWOP, making clear the division of labor between SWOP and Noyes. These discussions, focusing on specific issues detailed in SWOP's report, continued for most of the year. They helped SWOP and Intel to learn more about each others' cultures. Some progress was made, although many issues were left unresolved. A continuing concern was Intel's culture of secrecy concerning such things as their suppliers and subcontractors. At one point, with a smile on the face of the Intel staff person, they were "unable to affirm or deny" that Taco Bell, whose trucks had been seen coming to the plant, was the supplier to their commissary.  

With the help of the Interfaith Center on Corporate Responsibility (ICCR) and through our own outreach to other foundations, the vote on our proposal at Intel's 1995 Annual Meeting in April received support from almost 5 percent of the shareholders voting, with another 8 percent abstaining. Although the numbers seem small, they are significant as social shareholder resolutions go on the first try. They were also sufficient to allow us to refile the resolution a second time for the 1996 annual meeting. Throughout the year Noyes continued its discussions with Intel on issues of accountability and transparency to communities, and the need for a revised EHS policy. We kept in touch with SWOP at all times, and they kept us informed of the state of their discussions, which also continued during 1995. By the early fall, when resolutions had to be filed with Intel for the 1996 Annual Meeting, Intel still resisted our efforts to change their EHS policy, so we re-filed our resolution.  

In December 1995 we were pleasantly surprised to receive a draft of a revised EHS policy that included the language that we had requested. After checking with SWOP, who agreed, we withdrew our resolution for the 1996 meeting to signal our acceptance of the changes made by the Intel board. Since then we have kept in touch with Intel and they with us on a number of issues of accountability and transparency. They have been more receptive to SWOP and other communities' approaches to them, although there is still a distance to travel.  

Over the last few years we have been talking with Intel about opening a dialog with the Coalition for Environmentally Responsible Economies (CERES) leading to their becoming a signatory to the CERES Principles, which call for standardized environmental reporting. When discussions failed to reach a satisfactory conclusion we filed a resolution for a vote at Intel's 1998 annual meeting. Once again, the shareholder resolution process resulted from a failed effort to reach agreement through discussions. We received 9.9 percent support for our CERES resolution, with 6.3 percent abstentions, again indicating strong support for change by shareholders. We will continue our discussions with Intel in the hope that we will be able to avoid re-filing our resolution for the 1999 annual meeting.  

Some Reflections  

The world has not changed as a result of our combined "victory." Life is not that simple. We have been monitoring Intel's implementation of the new EHS policy in New Mexico, and have also heard from communities in Arizona and Costa Rica about issues that have arisen in those places. We keep in touch with Intel reminding them of their commitment to share with communities, while SWOP and the other communities that have been in touch with us maintain their organizing.  

The simple retelling of the chronology of events masks the work of a lot of people, without whom this effort could not have succeeded. SWOP and Noyes could not have filed the resolutions without drawing upon the long experience and skills of the Interfaith Center on Corporate Responsibility.  

They too were instrumental in organizing other institutional investors, especially from the religious community, as co-filers of the resolution, giving greater weight to our efforts. At different times a number of other foundations co-filed and participated in our discussions with Intel, especially the Education Foundation of America and the Norman Foundation. These coalitions, we believe, were essential in building the weight of our case and in getting Intel's attention. Throughout this process, Noyes' efforts contributed in a new way to a group that it had supported with grant dollars for a number of years. In this case our contribution was the use of our power as a stockholder, and time. There was a shared feeling of solidarity toward a common goal between SWOP and Noyes. A year into the process we included funds in our grant to SWOP so that they could purchase Intel stock, making them shareholders as well as stakeholders. Retrospectively we realize that we should have done that at the very beginning.  

We have communicated continuing concerns to Intel urging community dialog, and they appear receptive. Dialog now seems more possible than it did a few years ago. And Intel has made some changes in its administrative structure that are designed to help them listen more carefully to communities. In a letter to Foundation News in response to an article on the shareholder process, Intel wrote: "The experiences we have shared with the Jessie Smith Noyes Foundation illustrate the value of establishing a dialogue with the company where an investor concern exists.... We at Intel welcome constructive dialogue with our stockholders." (4)  

In New Mexico SWOP has gotten a lot of public attention as a result of their organizing efforts around the Intel expansion. A prize-winning series of articles by a local journalist demonstrated that SWOP's concerns about financial aspects of the expansion were fully justified. SWOP, not Intel or the state, was right in its analysis. Caricatured as anti-development in the press early on, SWOP has more recently been viewed as a protector of the state's rights and resources. SWOP believes that they are a stronger organization now as a result of our combined effort. "Although we knew we were right about Intel's huge tax packages and environmental impacts on the local community, the shareholder strategy lent some 'credibility' to our struggles. It can be a powerful tool which other community organizations can use to press for corporate accountability," said SWOP Co-Director Jeanne Gauna.
 
Suggested Guidelines for Community-Investor Relations  

As a result of this effort over the last few years we — SWOP and Noyes — believe that shareholder activity can, in certain circumstances, be an effective tool for community organizing. Based upon our experience SWOP and Noyes have drafted the following guidelines that we think might apply to collaborations between institutional investors and community organizations.  

Definition:  

Shareholder activity is an effort on the part of owners of companies — shareholders — to change the policies and/or the behavior of companies through a variety of means, including meetings with corporate officials, letter writing, proxy voting, co-filing of shareholder resolutions initiated by others, and/or initiating a shareholder resolution. Initiation of a shareholder resolution is usually the end of an unsuccessful effort to obtain satisfaction from the corporation on the issues raised through meetings and letter writing.  

Assumptions:  

Shareholder activity can be an effective part of a community strategy toward corporate accountability, transparency and responsibility.  

Principles:  

1. Shareholder activities, particularly shareholder resolutions, are not a stand-alone strategy. The shareholder activities must be part of a broader community organizing strategy.  

2. Communities must speak for themselves. No one but the community can speak for it.  

3. Communities must determine their own organizing strategies, detailing the nature of the problems and the demands they wish to make of corporations. It should be recognized that while letter writing and meetings with corporate officials are always appropriate, some issues, in the present legal climate, may not lend themselves to shareholder resolutions. The U.S. Securities and Exchange Commission has ruled consistently in the last few years that certain issues are "ordinary business" and, therefore, inappropriate for the shareholder resolution process.  

4. Communities should seek to become shareholders as well as stakeholders in the targeted companies in an effort to somewhat level the playing field in discussions.  

5. Alliances should be developed with other shareholders, including religious institutions, foundations and other groups that share concerns for social, economic and environmental justice  

6. Control of the shareholder activity must remain in the hands of the community. A division of labor for the shareholder process should be made clear between the community and the other groups involved before the process begins. Communication among all groups is essential, with the lead always residing in the hands of the community.  

7. The role of the community is to insure that the corporation is accountable on the detailed issues of concern to the community.  

8. The role of other shareholders is to make sure that the corporation is accountable to the community, in effect insuring that the corporation comes to the table with the community. Other shareholders should also organize the shareholder community to support the activities that are being directed by the community.  

9. Shareholder activities should always be designed in ways that contribute to strengthening the community and its organizations.
 

The focus of this essay has been on shareholder advocacy and community organizing. It is clear that shareholder advocacy can also be used effectively to advance other efforts by individuals and institutional investors to change corporate behavior on a variety of social and environmental issues. The challenge to Apartheid in South Africa through boycotts, political action, divestment and shareholder activity is well known, and underlines the importance of a variety of strategies to achieve a goal. (5) The religious community, through the Interfaith Center on Corporate Responsibility, has for more than a quarter of a century advanced environmental, human rights, diversity and other concerns successfully by raising their voices as shareholders. Pension funds, through the work of the Council of Institutional Investors, have focused their wealth on advocacy to improve corporate governance with good results. (6)  

There is no panacea for helping corporations become more responsive to the needs of communities and people of conscience. Shareholder activity can, however, be an effective tool along with other tools.  

We welcome comments and reactions.  

Stephen Viederman

May 28, 1998
 

Follow these links to see how shareholder activism has worked in the context of issue campaigns and community campaigns abroad.  

Back to Shareholder Activism Index

To Shareholder Activism and Community Campaigns Abroad

To Shareholder Dialogue: The Goal of Shareholder Resolutions
 

(1) Jeanne Gauna, Co-Director of SWOP, and Louis Head were consulted throughout the process described here. Jeanne also reviewed this essay. The guidelines at the end of the essay are a joint effort between Jeanne and me. This essay focuses on what the Foundation did, and does not attempt to describe SWOP’s other organizing activities, which were considerable and necessary.

(2) Intel Inside New Mexico: A Case Study of Environmental and Economic Justice, Albuquerque, New Mexico, SouthWest Organizing Project, 1995. See also Sacred Waters: Life Blood of Mother Earth: Four Case Studies of High-Tech Water Resource Exploitation and

Corporate Welfare in the Southwest. Albuquerque, New Mexico: Southwest Network for Environmental and Economic Justice, 1997.

(3) For further information about the Foundation’s mission-related investing, see the Fiduciary Activities section of this report at www.noyes.org

(4) Letter from Gordon Casey, Intel’s Director of Investor Relations, Foundation News, March/April 1997, page 7, responding to Stephen Viederman, Adding Value to Your Grants, Foundation News, January/February 1997.

(5) See Robert K. Massie, Loosening the Bonds: The United States and South Africa in the Apartheid Years, New York, Doubleday, 1998

(6) See for example, David Moberg, "Union Pension Power: Labor is mobilizing its investment power to pressure corporate America," The Nation, June 1, 1998, 16-20