Labor Groups Take Stock; Activists Push Corporations for Reforms, transparency.(BUSINESS TIMES)(COVER STORY)
Byline: Carter Dougherty, THE WASHINGTON TIMES
Organized labor has emerged as one of the most energetic shareholder activists this year, with demands that major U.S. corporations protect the integrity of their financial audits.
A smorgasbord of other activist groups - and one feisty lone shareholder - also are pushing companies to reform their voting procedures, curb executive pay and promote human rights overseas, putting a wide variety of issues on the agenda of Washington-area corporations' annual meetings this year.
But major unions, with billions invested through their pension funds, are the standout activists of the season, says Rosanna Landes Weaver, an analyst with the Investor Responsibility Research Center (IRRC), an independent Washington-based group that provides data to big institutional clients.
"Labor has tremendous assets," she says. "And labor has become more aware of their strategic value."
Their weapon is not the threat of a strike but persistent prodding through resolutions that are voted on by a company's shareholders. Unlike the usual labor-management conflicts over wages, benefits and job security, this union activism promotes exactly what corporate executives seek: rising stock values.
"Our focus through shareholder activism has always been to help create a healthy and growing company," says Jim Voye, a pension fund specialist with the International Brotherhood of Electrical Workers. "It's about fund value."
This year, what unions most want is greater accountability of auditors, a demand that has found special resonance in a year dominated by stories of fraud at Enron Corp., the once high-flying but now bankrupt energy trader based in Houston. Labor began filing its shareholder resolutions last fall - well before the Enron debacle saw the light of day, Ms. Weaver points out.
Toby Shephard Bloch, a research associate in the AFL-CIO's Office of Investment, says that labor activists have been as surprised as anyone to find themselves at the forefront of such a hot issue.
"People have been wondering what sort of crystal ball they looked into," he says.
This year, unions and other activist stockholders have taken on Bethesda's Marriott International, Riggs National Corp. of Washington, and PG&E Corp., an energy company with operations in Bethesda. AOL Time Warner Inc. and ExxonMobil Corp., both based outside the area but with extensive operations in Northern Virginia, also have come under the gun.
Nationwide, shareholders have filed at least 712 resolutions for the 2002 "proxy season" - the period in the spring and early summer when most annual meetings are held, according to the IRRC.
Using shareholder resolutions can be tough, but they are often the best way to get a company's attention, say unions and other stockholders.
Resolutions must be filed in advance, usually about six months before an annual meeting. Companies can petition the Securities and Exchange Commission to exclude them from the proxy - the ballot a shareholder uses to vote on various narrowly defined legal grounds.
Even if an activist entity convinces stockholders with more than 50 percent of the shares to support a resolution, federal regulations do not require a company's board to act. But the resolutions often bring executives to the negotiating table, and shareholders can get results before the annual meeting, with little conflict or fuss.
"Shareholder activism is ... one of several checks-and-balances that can keep companies operating in a responsible and transparent manner," the IRRC wrote in a March report.
The Connecticut Retirement Plans and Trust Funds recently reached a settlement with Nextel designed to increase the independence of the board. Emboldened by studies suggesting that a strong shareholder-rights culture helps boost returns, the $20 billion pension fund for state employees in October filed a resolution with the struggling cellular service provider. …