“A good portion of our dialogues and resolutions resulted in agreements with companies to improve policies and provide more transparency,” said Matthew Patsky, CEO of Trillium. “Both are helpful in assessing the environmental, social and governance risks and their financial impact on shareholders.”

Trillium’s ESG program addressed a wide range of concerns in 2011, including climate change and fossil fuel dependency, indigenous peoples’ rights, discrimination in the workplace, community-level impacts of industrial and energy production, and a free and open Internet.

Environmental Advocacy

Roughly half of Trillium’s engagements in 2011 focused on the environment or environmental health matters.

Concerned with the risks associated with the controversial practice of hydraulic fracturing, Trillium filed a shareholder proposal at energy company Anadarko Corporation (APC), which has a large interest in the Marcellus Shale.  “Following a productive dialogue, we withdrew a shareholder proposal when the company agreed to expand and improve its public reporting on hydraulic fracturing. There’s more to be done and we’ll continue to advocate at Anadarko and other companies for increased transparency and the safest practices,” said Shelley Alpern, Director of ESG Research and Shareholder Advocacy.

Dialogue with Costco (COST), the warehouse-style consumer products retailer, produced another constructive outcome. The company produced and released to Trillium and Green Century Funds a substantially improved seafood sustainability policy. “Costco will discontinue selling twelve wild species identified as ‘at great risk’ by the Marine Stewardship Council, up from seven,” said Susan Baker, Senior Research Analyst at Trillium. “The company is also partnering with reputable nongovernmental organizations to come into compliance with best practice standards for shrimp and salmon aquaculture.”

We were able to withdraw a shareholder proposal that we filed with food distribution company   Sysco Corporation (SYY) after the company agreed to participate in the Carbon Disclosure Project, the Carbon Disclosure Project Water Survey, and to fully develop its sustainability strategy to include areas such as water scarcity and sustainable agriculture. “We look forward to the ongoing dialogue with the company as we continue to meet with its senior executives in the months to come,” commented Jonas Kron, Director of ESG Research and Shareholder Advocacy.

Trillium also took steps to help ward off the construction of the proposed Pebble Mine in Bristol Bay Alaska. Proposed by the U.K.-based Anglo-American (AAM.SW), Pebble Mine, if built, will be the largest open pit mineral mine in North America. It would generate billions of tons of mining waste to be held behind a system of dams (equivalent to the Three Gorges dams in China) in a highly earthquake-prone area – and one that serves as the breeding grounds for the largest sockeye salmon run in the world. Currently the Environmental Protecting Agency (EPA) is reviewing the proposed mine to determine whether it should veto the project under its Clean Water Act authority. In April Trillium organized a group of shareholders representing $170 billion of assets under management to publicly issue a joint statement calling for the agency to protect this vitally important national resource.  “Within 48 hours of publication, EPA staffers in charge of the review requested a meeting with Trillium. At that meeting we had ample time to express our concerns and were pleased at how seriously they were taken,” Kron said.

 
Corporate Political Spending

In 2011, shareholders expressed their deep discomfort with corporate political spending more strongly than ever before. In the spring, forty-six percent (46%) of votes cast by Halliburton (HAL) shareholders supported our proposal for greater transparency and oversight at the energy services company, as did 44% of the vote at State Street (STT). And for the first time, a resolution of this type filed at mobile phone company Sprint Nextel (by the New York Employees Retirement System) received a majority vote.

These votes were a fitting cap to a proxy season that started early last August, when Trillium was part of a shareholder group that responded promptly to the revelation that a number of Minnesota-based companies had given substantial contributions, via a business front group, to a gubernatorial candidate with extreme anti-gay views. As protestors demonstrated at its stores, Target Corporation (TGT) became the focus of a nationwide boycott that received generous media attention during a slow news month. Within days of the initial revelations, Trillium filed shareholder resolutions at Target, Pentair (PNR), Best Buy (BBY) and 3M (MMM) calling for a review of existing political donations policies and tighter oversight of the reputation and other risks incurring from them.

“These ill-considered donations represented a betrayal of these companies’ commitment to valuing diversity, and illustrated the widening reach of corporations in the wake of Cititzens United,” said Alpern, referring to the 2010 Supreme Court decision that removed significant barriers to corporate political involvement. With the exception of 3M (where our resolution gained 31% of the vote), the resolutions were eventually withdrawn at all of the companies after they demonstrated that they had reviewed and improved their oversight of political contributions and the procedures in place for vetting potential recipients. A multiyear national shareholder campaign coordinated by the Center for Political Accountability has resulted in the adoption of best practices in politicaldisclosure by 85 companies, of which 50 are in the S&P 100.

 
Conflict Minerals

Trillium took part in a meeting with the Securities and Exchange Commission (SEC) to discuss proposed rules on conflict minerals mandated by the passage of the Dodd-Frank Financial Reform Act.  Conflict minerals are those whose proceeds finance fighting by armed groups in war-torn regions, particularly the Democratic Republic of the Congo (DRC). “We were gratified to see several of our recommendations included in the SEC’s recently proposed new rules,” said Susan Baker. In February, Trillium was part of an investor coalition representing nearly $200 billion assets that released a statement calling on companies to condemn the use of minerals whose trade promotes the conflict in the DRC and take immediate steps to ensure that these minerals are not used in their products.

With other socially responsible and faith-based investors, Trillium also lobbied for the passage of landmark legislation in California (SB 861) that will forbid companies that do not comply with disclosure requirements under the SEC’s conflict mineral rules from bidding on state contracts for goods and services. The legislation passed the Senate on June 1 and is currently pending in committee.   

 
Internet Privacy and Freedom of Expression

CenturyLink (CTL), the nation’s third largest telecommunications company, finally owned up to its responsibilities regarding Internet privacy and freedom of expression. Trillium’s well-supported 2009 and 2010 shareholders proposals (both received about 30% of the vote) had asked the company to report on how it would avoid violating Internet users’ privacy, after it was revealed to be in business with an online advertising company that secretly monitored Internet users’ browsing activities. In exchange for the withdrawal of our resolution this year, CenturyLink agreed to incorporate privacy and freedom of expression responsibilities into its governing documents.

Trillium’s 2011 shareholder proposals on what is called “net neutrality” at AT&T (T), Verizon (VZ) and Comcast (CMCSA) were excluded from the companies’ ballots with permission from at the Securities and Exchange Commission, on the grounds that they focused on a matter of “ordinary business.”   We were pleased, however, that the SEC’s decision was roundly criticized by U.S. Senators Al Franken (D-MN) and Ron Wyden (D-OR). In March, they wrote to SEC Chairman Shapiro to object to the decision, asserting “Whether the government will preserve and protect today’s free and open Internet is the telecommunications and free speech issue of our time.”

 
LGBT Workplace Policies

In 2010, we worked with the Equity Foundation to file a shareholder proposal at Gardner Denver (GDI), asking the manufacturer to recognize sexual orientation and gender identity expression in its nondiscrimination policy; it garnered the support of 49% of shareholder votes. “To our surprise, it was necessary to re-file the proposal in 2011; the resubmission was successful in spurring the company to adopt our policy recommendation and we subsequently withdrew the proposal,” said Jonas Kron. “In contrast, Lowes Corporation (LOW) responded very positively and quickly to our request, and now its 200,000 employees are protected by an up-to-date policy that includes gender expression.”

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About Trillium Asset Management, LLC

Boston-based Trillium Asset Management, LLC is the oldest independent investment advisor devoted exclusively to sustainable and responsible investing. We believe examining environmental, social, and governance factors as an integrated part of the investment process can lower portfolio risk and help identify the best managed companies. With close to $1 billion in assets under management, we have been managing equity and fixed income investments for high net worth individuals, foundations, endowments, religious institutions, and other non-profits since 1982. A leader in shareholder advocacy and public policy work, our goal is to deliver both impact and performance to our investors.

 2011 Shareholder Proposals

Bolded items indicate a “lead filing,” where Trillium Asset Management, LLC leads a coalition of shareholder advocates; all others are where we have co-filed in collaboration with other lead filers.  

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Expectations of the global community are growing, such that companies must have policies to promote and protect human rights within their areas of activity and sphere of influence to help promote and protect a company’s reputation as a good corporate citizen.

Corporations operating in countries with civil conflict, weak rule of law, endemic corruption, poor labor and environmental standards face serious risks to reputation and shareholder value when they are seen as responsible for, or complicit in, human rights violations.

FedEx, in its Annual Report 2010, states:  “…our company is built around a singular vision: to make it possible for people and businesses to connect and collaborate with each other, no matter where they are in the world. Our networks are critical elements of a global force we call Access, the ability to transform through connectivity. We know…that Access has the power to change millions of lives for the better. We work constantly to expand Access. Every year, we do that more responsibly and resourcefully…” (Frederick W. Smith, Letter from the Chairman, p.6)

While FedEx states: “Our goal is to comply with all local laws and to adhere to the highest standards of integrity and ethics everywhere in the world,” (Code of Business Conduct and Ethics, 7-09 p.7), our company’s Code of Business Conduct does not address major corporate responsibility issues, such as, human rights. Without a human rights policy with key performance indicators, our company faces reputation risks by operating in countries, such as China, where the rule of law is weak and human rights abuses are well documented. (U.S. State Department Advancing Freedom and Democracy Report; www.state.gov/g/drl/rls/afdr/)

We recommend FedEx base its human rights policies on the Universal Declaration of Human Rights, United Nations Declaration on the Rights of Indigenous Peoples, which recognizes the collective and individual rights of over 370 million Native peoples worldwide, International Labor Organization’s Core Labor Standards and United Nations Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights.

RESOLVED

Shareholders request management to review policies related to human rights to assess areas where FedEx needs to adopt and implement additional policies and to report findings, omitting proprietary information and prepared at reasonable expense, by December 2011.

SUPPORTING STATEMENT

We recommend the review include:

1. Risk assessment where FedEx operates to determine potential for human rights abuses in locations, such as Israel and other Middle East countries, Afghanistan, Sudan and other civil strife/war-torn areas, as well as countries where discrimination and abuse based on class, religion, ethnicity are known occurrences, such as India, the United States, Indonesia.

2. A report on current systems in place to ensure that FedEx contractors and suppliers are implementing human rights policies in their operations, including monitoring, training, addressing issues of non-compliance and assurance that trafficking-related concerns have been addressed.

3. The FedEx strategy of engagement with internal and external stakeholders.

We urge your support FOR this proposal.

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In a press release, New York State Comptroller Thomas P. DiNapoli, trustee of the $140.6 billion New York State Common Retirement Fund (Fund), which owns 7.5 million Chevron shares worth an estimated $780 million stated, “It’s time for Chevron to face reality.  The effects of this horrific, uncontrolled pollution of the Amazon rainforest are still being felt today. Investors don’t derive any benefit from this never-ending courtroom drama.

“The entire case is looming like a hammer over shareholders’ heads.  Chevron should start fresh with a new approach that embraces environmental responsibility and risk management as part of its corporate culture. More legal proceedings will only delay the inevitable.”  

For nearly 25 years, beginning in 1964, Texaco and its joint venture partner Petroecuador dumped nearly 16 billion gallons of oil waste products into the Amazon rainforest.  The two companies also spilled nearly 17 million gallons of oil from their trans-Ecuadorian pipeline operation between 1971 and 1991 —50 percent more oil than was spilled by the Exxon Valdez crash.

The statement follows just days after Trillium submitted a complaint to the Securities and Exchange Commission requesting that staff examine whether Chevron Corp. has appropriately disclosed to its shareholders the scope and magnitude of financial and operational risk from a recent adverse legal judgment in Ecuador. In its letter, Trillium states its belief that the issues raised may have “the potential to rise to the level of materiality under the securities laws.”

In a letter sent in November 2008, DiNapoli called on Chevron’s board of directors to come to an equitable settlement in order to avoid substantial penalties in an Ecuadorian court. Chevron refused to negotiate the case, and in February 2011 the Ecuadorian Provincial Court awarded plaintiffs nearly $18 billion in compensatory and punitive damages. The Ecuadorian court judgment is the second-largest of its kind, topped only by BP’s $20 billion fund established to settle claims stemming from the 2010 Gulf of Mexico oil spill. DiNapoli is co-lead plaintiff in an ongoing class action lawsuit filed against BP last year.

Shareholder Proposal Support Remains Steady

The shareholder proposal jointly filed by Trillium and the New York State Office of the Comptroller that referred to the Ecuador litigation received about 25 percent of the vote, the company announced at the meeting. The proposal, in its second year, called for the company to appoint an independent director with environmental expertise.

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Click here to read the article.
Click here to read Trillium’s press release about the request made to the SEC to review Chevron’s shareholder disclosures.

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Shelley Alpern, Trillium   (617) 292-8026, x 248
Jonas Kron, Esq., Trillium   (503) 592-0864
Sanford Lewis, Esq.   (413) 549-7333

Boston, MA, May 23, 2011 – Trillium Asset Management (“Trillium”) has requested that the Securities and Exchange Commission (SEC) undertake a staff review to examine whether Chevron Corp. has appropriately disclosed to its shareholders the scope and magnitude of financial and operational risk from a recent adverse legal judgment in Ecuador. In its letter, Trillium states its belief that the issues raised may have “the potential to rise to the level of materiality under the securities laws.”

After nearly two decades of litigation, on February 14, 2011, the Ecuadorian Provincial Court issued its final judgment in which it found Chevron liable for just over $18 billion in compensatory and punitive damages for environmental pollution by Texaco in the 1970s and 1980s. (Chevron acquired Texaco in 2001.) The judgment, now under appeal, constitutes one of the largest court judgments for environmental damage in history, comparable in size only to BP’s promised $20 billion fund to compensate victims of the 2010 Gulf of Mexico oil spill.

Chevron has obtained a preliminary injunction from the U.S. Second District Court that purports to bar the plaintiffs and their lawyers from seeking enforcement of any judgment of the Ecuadorian court. However, the letter states, it not clear how this injunction court would protect Chevron from enforcement efforts by the plaintiffs aimed at Chevron’s assets outside the United States. Moreover, the injunction is subject to appeal.

The Trillium letter highlights the disparities between Chevron’s recent statements to shareholders those made in sworn testimony in connection with the company’s RICO suit against the plaintiffs. In its most recent annual reported, published 10 days following the judgment, the company states:

The ultimate outcome of the foregoing matters, including any financial effect on Chevron, remains uncertain. Management does not believe an estimate of a reasonably possible loss (or a range of loss) can be made in this case. …Moreover, the highly uncertain legal environment surrounding the case provides no basis for management to estimate a reasonably possible loss (or a range of loss).^[1]

However, in the RICO testimony, Chevron Deputy Comptroller Rex Mitchell stated:

Defendants’ campaign to seek seizures anywhere around the world and generate maximum publicity for such acts would cause significant, irreparable damage to Chevron. Unless it is stopped, Defendants’ announced plan to cause disruption to Chevron’s supply chain is likely to cause irreparable injury to Chevron’s business reputation and business relationships that would not be remediable by money damages.” ^[2] (emphasis added)

The Trillium letter also questions whether certain statements made to shareholders have been misleading, concerning Chevron’s opinion that the Ecuadorian courts lack jurisdiction in the case, and whether Chevron was released from liability by virtue of certain releases granted by the government of Ecuador following remedial work completed in 1998. The Trillium letter states:

Chevron is entitled to disagreements with the plaintiffs about points of contention in the lawsuit; indeed, that is why a lawsuit exists. However, some of the preceding statements, taken in aggregate, could create the misleading perception that the Ecuadorian lawsuit is fraudulent and without legal merit. The reality is that these are disputed issues on which Chevron holds a position, which is not the same as the position held by the plaintiffs or the Ecuadorian court.

In the letter’s conclusion, Trillium urged the Commission to “analyze these omissions in light of the standards governing materiality, SEC rules and guidance, and any other applicable requirements, and to take any actions the Staff deems appropriate.”

The letter was signed by Jonas Kron, Deputy Director for ESG Research and Shareholder Advocacy, and Sanford Lewis, an attorney whose practices specializes on corporate accountability. Earlier this month, Mr. Lewis released the report (co-authored with corporate responsibility consultant Simon Billenness) An Analysis of the Financial and Operational Risks to Chevron Corporation from Aguinda v. ChevronTexaco.

Related Shareholder Proposal

Trillium is a co-proponent of a related shareholder proposal filed by the New York State Office of the Comptroller that will be voted on at Wednesday’s Chevron stockholder meeting in San Ramon, CA. The proposal requests that Chevron nominate for its Board of Directors at least one independent candidate who has a high level of expertise and experience in environmental matters relevant to hydrocarbon exploration and production and who is widely recognized in the business and environmental communities as an authority in such field. Last year, the resolution received approximately 27 percent of the vote.

Related Investor Statement

In a statement expected to be released separately this week by the New York State Office of the Comptroller, a number of institutional investors in Chevron will be calling upon the company to explore a negotiated settlement with the plaintiffs.

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About Trillium Asset Management

Trillium Asset Management manages equity, balanced and fixed income portfolios for high net worth individuals, foundations, endowments, religious institutions and other non-profits. Our investment approach emphasizes quality growth at a reasonable price, with integrated ESG (environmental, social, and governance) analysis. Trillium has offices in Boston, Durham and San Francisco.

[2] Declaration of Chevron Deputy Comptroller Rex Mitchell in support of Chevron Corporation Motion for a Preliminary Injunction, Filed 2/5/11, p. 4.

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STRONG SUPPORT FROM CHEVRON SHAREHOLDERS FOR PROPOSAL TO STRENGTHEN DIRECTORS’ ENVIRONMENTAL EXPERTISE

May 26, 2010, Houston – The proponents of a stockholder proposal at Chevron Corporation seeking greater board environmental expertise hailed the 27% in support it received, according to preliminary results released by the company.

“As a businessman and investor, I know how important it is to have the right leadership in a firm,” said Rob McCord, Pennsylvania’s independently-elected State Treasurer. “The recent and tragic Gulf disaster should remind all executives and investors that trust matters — and so do contingency plans. This awareness should prompt Chevron to improve all its planning and its preparedness, and one step is to recruit directors with substantial environmental expertise,” McCord added. “Without this, shareholders face significant and unacceptable legal, regulatory, and market risk. And they will — justifiably –lack trust.”

“The high level of investors support for this resolution is indicative of rising frustration with Chevron’s environmental performance, domestically and internationally,” said Shelley Alpern, vice president at Trillium Asset Management Corporation, the lead proponent of the proposal who represented the proponents at the shareholder meeting.

“We are confident that this sends a message that management cannot ignore,” said Patrick Doherty, a spokesperson for the New York State Common Retirement Fund, which supported the proposal.

At today’s lively meeting, shareholders also expressed high level of support (25%) for a resolution questioning the company’s country selection guidelines in light of its ongoing operations in Burma.  In addition, Chevron denied admission to the annual meeting to 30 legal proxy holders, giving no reasons for not allowing then to enter.  Three legal proxy holders were arrested.  Trillium’s Shelley Alpern told board inside of meeting that “This is outrageous and reflects very poorly on our company’s respect for the laws that govern our proxy process in the United States.”

The proposal points to Chevron’s controversial operations in Ecuador, Nigeria and Kazakhstan, stating “We believe that these controversies have the potential to damage shareholder value and that the company must respond to environmental challenges in an effective, strategic and transparent manner in order to restore trust and minimize the adverse impact of its operations.” It called for Chevron to add an independent director to the board who has a “high level of expertise and experience in environmental matters relevant to hydrocarbon exploration and production and is widely recognized in the business and environmental communities as an authority in such field,” as board openings arise. Chevron’s board membership criteria make no mention of environmental expertise. Current board members’ profiles indicate no specific expertise in environmental issues relevant to the oil and gas sector.

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About the proponents

Trillium Asset Management Corporation is a Boston-based, independent investment management firm devoted exclusively to sustainable and responsible investing.

As chief executive of the Pennsylvania Treasury, Treasurer Rob McCord directly invests more than $11 billion per year, and oversees Treasury’s role as the Commonwealth’s checkbook – last year alone, Treasury processed over 60 million disbursements totaling more than $70 billion.  The Pennsylvania Treasury is an independent executive office created by the Constitution of the Commonwealth of Pennsylvania.  The State Treasurer is the custodian of the funds of virtually all state agencies, with the responsibility for monitoring and safeguarding money and securities.

Amnesty International USA is a Nobel Prize-winning grassroots activist organization with over 1.8 million members worldwide. Amnesty International undertakes research and action focused on preventing and ending grave abuses of the rights to physical and mental integrity, freedom of conscience and expression, and freedom from discrimination, within the context of its work to promote all human rights. Amnesty International USA (AIUSA) is the U.S. Section of Amnesty International.

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The Investor Statement calls on companies to address the role conflict minerals play by implementing a system for determining the origins of materials, creating a non-conflict material policy and working with their suppliers to ensure adherence to it.

The DRC, which has been plagued by a civil war since 1998, continues to lose 45,000 people each month to violence and disease, even though the war officially ended in 2003. In total, more than 5.4 million people have lost their lives and millions more have been displaced.  Secretary of State Hillary Clinton has called the widespread sexual violence against women in the eastern Congo “a crime against humanity.”

The militias that are responsible for the conflict use the abundance of coltan, gold, tin and tungsten deposits (which make the DRC one of the most mineral rich countries in the world) to finance their operations.  These militias, who control most of the mines in the eastern DRC, demand bribes, unofficial taxes and other payments for the minerals. The minerals are smuggled into neighboring countries including Rwanda and Burundi, smelted and eventually used in making laptops, cell phones, medical devices, airplane engines, and other consumer goods.

Some companies are already addressing this issue, most notably Hewlett Packard, which has implemented a metals traceability project. In addition, the EICC (Electronic Industry Citizenship Coalition) and GeSI (Global E-Sustainability Initiative) have recently commissioned the nonprofit organization RESOLVE to map the supply chain of various metals including tin and tantalum, which is made from processing coltan.

For more information:

“Investor Statement Regarding Conflict Minerals from the Democratic Republic of the Congo,” January 11, 2010.

“Boundaries of Responsibility,” Investing For a Better World, October 2008.

“Investors Urge Companies to Keep Minerals from War-Torn Congo Out of Supply Chains,” Social Investment Forum press release, January 14, 2010.

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There are many people who surely throwing up their hands, saying: “Enough already. Why do we have to put up with this endless recitation of atrocities?” The best answer is probably Evans’s remarks at the end of his new book:

Most of us who lived through the Third Reich and fought in its wars are no longer with us. Within a few decades there will be no one left who remembers it at first hand. And yet its legacy is still alive in myriad ways.…The Third Reich raises in the most acute form the possibilities and consequences of the human hatred and destructiveness that exist, even if only in a small way, within all of us. It demonstrates with terrible clarity the ultimate potential consequences of racism, militarism and authoritarianism. It shows what can happen if some people are treated as less human than others. It poses in the most extreme possible form the moral dilemmas we all face at one time or another in our lives, of conformity or resistance, action or inaction in the particular situations with which we are confronted.

Evans’s history begins, “On September 1, 1939 the first of a grand total of sixty divisions of German troops crossed the Third Reich’s border with Poland.” I was 12 years old on that day and I remember looking at the headlines and recognizing that this was not good news for Jews. My father, his brother and his sister had made their way out of Eastern Europe to the United States in 1920. The rest of the family remained in a village that was alternately Hungarian, Czechoslovakian, Soviet, and is now Ukrainian. Very few Jews live there anymore. I have photographs of my grandfather, grandmother, uncle, aunt and two cousins – people I have never met. I don’t know whether they were exterminated at Auschwitz or shot on the spot.

The point Evans makes about the moral dilemmas faced by people confronted with evil actions has direct relevance to social responsibility initiatives in the business world. How does a company respond to sweat shops in China, genocide in Darfur, sexual and racial discrimination in America? European companies that kowtowed to Hitler and were complicit in his demonic programs faced a backlash after the end of the war. Companies like Bayer and Daimler-Benz were asked to compensate their slave laborers. The giant insurance companies, Generali in Italy and Allianz in Germany, and the Swiss bankers were hit by a bevy of lawsuits over assets appropriated from Jewish clients. When families filed claims to get the proceeds from life insurance policies, companies demanded proof of death. Is it possible that executives of these companies didn’t know that death certificates were not issued at Auschwitz?

The Final Solution was so large and brutal that even when the slaughter was revealed, it was discounted as being “beyond belief.” And while Jews were the primary victims, others were also persecuted: gypsies, homosexuals, the mentally retarded, Poles, Russians, Italians. The Russians fared worst; 3.3 million Red Army POWs died in German captivity.

As the war wound down, the Germans accelerated their killing machine. Up to half of the 700,000 inmates of concentration camps at the start of 1945 were dead four months later. One was the young Dutch diarist Anne Frank, who died of typhus. Another was Lou Ernst, the first wife of the surrealist painter Max Ernst, who was shipped to Auschwitz on the next to last train. And perhaps my grandparents and their children were caught in those final days of the war since the Hungarian Jews were the last to be rounded up for extinction.

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Mossville was once rich in biodiversity and natural resources. The country town was thriving when Jim Moss, a former slave, arrived in the 1790s and opened a post office. Settlers fished the swamps, raised livestock and raised families free from racial hostility.

In the 1920s and 1930s, oil and chemical companies were lured south by cheap labor and tax exemptions that endured for decades. By the 1970s, Mossville was home to the largest concentration of polyvinyl chloride (PVC) facilities anywhere in the U.S. In all, 14 industrial facilities won permits to operate in and around Mossville.

The community’s health declined as it was gradually poisoned by industrial flares, groundwater contamination, PVC emissions and other potent chemical hazards. ConocoPhillips, PPG Industries and Georgia Gulf are among the companies responsible for the most toxic and flammable substances processed and stored in Mossville.*

By 1998, Mossville residents began exhibiting recurring illnesses – cancers, rashes, and chronic respiratory and reproductive diseases — compelling the federal Agency for Toxic Substance and Disease Registry (ATSDR) to test residents’ blood.  Blood levels of dioxin were an alarming three times higher than the general population. The Environmental Protection Agency (EPA) recorded vinyl chloride emissions at 120 times greater than the ambient air standard. University of Texas researchers found that 91 percent of the residents suffered from at least one disease related to toxic chemical exposure. Despite these findings, government agencies failed to respond to the community’s need for medical services, relocation assistance, and pollution reduction.

Faced with a dying community, residents mobilized to create Mossville Environmental Action Now (M.E.A.N.), and collaborate with AEHR and Wilma Subra, a chemist who received a MacArthur “genius” grant for her environmental health advocacy. Their analysis of government data found clear matches between the specific dioxins and dioxin compounds in emissions and waste transfers, and those found in residents’ blood, attic dust, yard soil and vegetables. A comparison of EPA and ATSDR data found an astounding 77 percent of the dioxin compounds emitted by one Georgia Gulf facility, for example, matching 77 percent of the dioxins detected in blood samples in 2001.*

In 2008, Mossville residents brought their story to ConocoPhillips’ (ticker symbol: COP) annual meeting. ConocoPhillips’ Lake Charles refinery sits on the edge of Mossville and has a history of ignoring community concerns. At the meeting, CEO Jim Mulva promised them a thorough and careful investigation of their concerns. A year passed. Residents returned to the 2009 annual meeting, and again heard promises – this time Mulva’s personal assurance he’d travel to Mossville within sixty days.

In support of the community, members of the ICCR (including Trillium Asset Management Corporation) wrote to Mulva, urging him to keep his promise.

Mulva agreed to meet in Mossville in July, stipulating that only three residents could attend. The community agreed to this unreasonable condition hoping that a first meeting could plant the seeds for future dialogues. One day before the scheduled meeting, local plant manager Willie Tempton emailed M.E.A.N. saying Mulva would not attend because “significant changes in the external environment” would make it difficult if not impossible to meet the objectives of the meeting. Tempton attributed Mulva’s no-show on outside interference “from the media and the investors”.

A respectful letter from investors and vague indications of media interest either frightened off the chief executive of one of the nation’s largest companies or merely brought to the surface the arrogance that allowed it to pollute Mossville. If ConocoPhillips intends to proceed from a place of respect and integrity, Jim Mulva should have nothing to fear from media interest or concerned shareholders. The invitation is still open to visit Mossville. It would be a wiser move to accept it than to underestimate the persistence and determination of Mossville residents and their allies.

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In early June, Trillium Asset Management Social Research Analyst Susan Baker led a group of 40 investors on a fact-finding tour of Louisiana’s “Cancer Alley.” The investors, who were gathered in New Orleans for the annual meeting of the Interfaith Center for Corporate Responsibility, represented faith-based institutions and socially responsible investment firms collectively holding billions of dollars under management.

They traveled 200 miles by bus to tour the heavily industrialized and highly polluted stretch west of New Orleans.  Guided by prominent experts from local environmental justice, indigenous community, and coastal restoration groups, including the New Orleans-based Advocates for Environmental Human Rights, investors were provided with an in-depth examination of the history and current day environmental impacts of industrial corporations on Louisiana communities.  The tour’s ultimate destination was Mossville, LA (known as the “unofficial polyvinyl chloride capital”) to talk to residents who have been disproportionately burdened by the toxic hazards emitted from 14 industrial facilities owned by companies such as Conoco Phillips, PPG Industries and Georgia Gulf. The concentration of vinyl chloride in Mossville, a known carcinogen, has been measured in quantities significantly exceeding ambient air quality standards set by the EPA to protect human health. In 1999, the U.S. Agency for Toxic Substances and Disease Registry reported that residents of Mossville, had blood dioxin levels three times higher than the national comparison group. Supported by shareholder advocacy and legal actions Mossville residents have fought long and hard to make their community viable again.  At the conclusion of this extraordinary tour, Trillium, ICCR, and the Investor Environmental Health Network committed to bring our collective shareholder voice to bear on the environmental injustices compromising human life and health in Cancer Alley.

For more information, contact Susan Baker at sbaker@trilliuminvest.com

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by Shelley Alpern

Five years ago, I had the privilege of getting a firsthand look at the evidence in one of the most important lawsuits being heard anywhere in the world. The exhibits are a number of oily pits and ponds scattered throughout the state of Sucumbios, Ecuador, right in the middle of the Amazon rainforest. The contamination is allegedly the work of Texaco, the first petroleum company to break ground in Ecuador in the early 1970s. The court case is being heard in Lago Agrio, a sad-looking town whose many ramshackle buildings look far older than their age due to the ever-present rain and humidity. Poverty is everywhere. Contrasted with the lush jungle surrounding it, the whole town stands out like a very sore thumb.

The lawsuit Aguinda v. Texaco was first filed in 1993. The defendant is Chevron, which acquired Texaco in 2001. The company is charged with polluting hundreds of sites from Texaco’s operations in the 1970s and 1980s. Texaco spent $40 million in the 1990s to clean up contaminated sites per an agreement with the Ecuadorian government, and the two parties declared the site remediated in 1998. But an international team of lawyers is representing thousands of indigenous residents and settlers in a civil suit, claiming that the pollution is responsible for the region’s rising rates of cancer and other serious illnesses, and that the cleanup was sloppy, inadequate and fraudulent.

“This is an epic case,” Sean Hecht, the director of the University of California at Los Angeles’s Environmental Law Center, told the Wall Street Journal in April. “The sheer size of the money involved also explains why a company like Chevron will continue to fight this as long as possible.”

No one disputes the existence of the contaminated sites, but virtually everything else in this case is in dispute – who is responsible for creating them (Chevron blames its former partner Petroecuador), how unclean the sites are, and whether they bear the blame for the health problems in the area. The vitriol between the two sides has played out in the courts, media, and through intense lobbying of non-judicial branches of government.

Advantage Plaintiffs

Chevron has unquestionably greater resources than the defendants, but its deep pockets have thus far failed to secure it any advantage in winning this case. Indeed, Aguinda v. Texaco can only feel like a minor headache that exploded into a migraine.

• Losing bid for arbitration. In October 2008, Chevron was denied by the U.S. Court of Appeals for the Second Circuit in its motion to force Ecuador out of court and into binding arbitration. Any judgment against Chevron in Ecuador will be enforced in the United States, per the ruling of the U.S. court that decided the venue in 2002.
• Damages Estimate Increased to $27 Billion. It’s hard to believe that five years ago, when a consultant hired by the plaintiffs estimated that the cost to finish cleaning up the contaminated sites could go as high as $6 billion, the amount seemed shockingly large. The Ecuadorian court’s appointed expert now assesses damages at $27 billion and estimates that the number of cancer deaths from oil contamination to be greater than 1,400.
• Fraud charge. In September 2008, two Chevron lawyers were indicted in Ecuador for alleged fraud in the remediation effort. The indictment argues that this remediation was not conducted adequately. Chevron maintains that the indictments are politically motivated. Chevron also asserts that it cannot get a fair trial in Ecuador, a point not without merit, given Ecuadorian President Rafael Correa’s open support for the plaintiffs.

A final judgment is expected in 2009. The losing party will have the right to appeal to an intermediate court and then to Ecuador’s Supreme Court. Chevron has pledged to appeal should it lose in this round. However, its refusal to consider settling the case has only backfired in the court of public opinion.

David v. Goliath

Aguinda v. Texaco has taken a sustained toll on Chevron’s reputation. As played out in the media, the case might as well be named David v. Goliath. Hundreds of articles have covered the story worldwide, with long features sympathetic to the plaintiffs in venues as diverse as Vanity Fair and Outside magazine. A documentary about the case, Crude, premiered at the Sundance Film Festival earlier this year, and 60 Minutes featured a segment in May 2009. In large part due to its perceived refusal to take responsibility for Texaco’s misdeeds in Ecuador, professional corporate reputation watchers have found Chevron to be one of the most mistrusted companies in the world. In December, Chevron ranked fourth among five North American companies singled out by the research and consulting firm ECO:FACT for the year 2008. 

Chevron has fought back with its own PR offensive, and is aggressively exerting pressure on the U.S. to revoke Ecuador trade privileges. But it has an uphill political battle to fight with the change in administrations. In 2006, then-Senator Obama and colleague Senator Patrick Leahy wrote to the U.S. Trade Representative:

…seek[ing] your assurances that the U.S. Trade Representative will not allow negotiations over the

Andean Free Trade Agreement to interfere with a case involving Chevron…. While we are not prejudging the outcome of the case, we do believe the 30,000 indigenous residents of Ecuador deserve their day in court.

For what it’s worth, the lead American attorney for the plaintiffs played basketball with the president at Harvard Law School. Chevron remains undeterred. One of the company’s lobbyists told Newsweek  ”We can’t allow little countries to screw around with big companies like this.”*

Showdown in San Ramon, Part V

This April, for the fifth year, shareholders will have a chance to weigh in on Chevron’s handling of Aguinda v. Texaco by voting on a shareholder resolution sponsored by the New York City Pension Funds, Trillium Asset Management Corporation, the Pennsylvania Treasurer’s office, the New York State Comptroller and Amnesty International USA. Collectively, the proponents held 14.4 million shares of Chevron stock at the time they filed the proposal. The proposal calls upon the company to prepare a report “on the policies and procedures that guide Chevron’s assessment of host country laws and regulations with respect to their adequacy to protect human health, the environment and our company’s reputation.” In prior years, this proposal has received about 9% of the vote.

Chevron’s annual stockholder meeting in San Ramon, California, routinely draws protestors and celebrities (Bianca Jagger, Darryl Hannah) eager to draw attention to the company’s unresolved environmental and human rights issues all over the globe where it operates. Last year’s meeting drew 75 protestors in hazmat (hazardous material) garb, equipped with brooms to “clean up” Chevron’s pollution in Ecuador and its nearby refinery in Richmond, CA.   The company’s gatekeepers will look for every technical loophole possible to keep unhappy shareholders out of the meeting. Once inside the meeting, CEO Bill Reilly will ruthlessly enforce the two-minute limit for shareholders’ questions and comments – but if past is precedent, the meeting will drag on for hours anyway as the long queue at the microphones gets to have its say. Afterwards, the press will report the resolution as having been ‘resoundingly’ defeated, even though the supportive shares represent multiple billions under management by some of the country’s most prestigious institutions. And we will be left to wonder once more, how many multiples of $27 billion will it take before a critical mass of shareholders becomes concerned?

*  “Chevron Hires Lobbyists to Squeeze Ecuador in Toxic-Dumping Case.  What an Obama Win Could Mean,” Newsweek, 26 July 2008.

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“This is the kind of vote that grabs the attention of corporate management.” said Jonas Kron, Senior Social Research Analyst at Trillium Asset Management Corporation, which filed the resolution at CenturyTel. “When almost one out of three shareholders expresses this kind of concern, it’s time for the Board to re-examine how it will attend to the policy challenges, and opportunities, it faces. We hope CenturyTel will take this occasion to become a leader on privacy and freedom of speech.”

To read more please visit Open MIC.

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China has dualism down to an art, and an Olympic sport for that matter.  Dualism – the contrast between power and peace, light and dark, yin and yang – has long been recognized in eastern traditions, where the coexistence and balance of opposites is revered. These Olympic Games have embodied contradictory behavior but have been far from harmonious.  The Chinese government’s fervent desire for a fresh image has only reinforced existing stereotypes, despite an effort to achieve nothing less than perfection. The problem with perfection is that it is balanced out by imperfections, and the overarching control of an authoritarian government has created more than a few:  the arrest of human rights activists and journalists; the revocation of 2006 Olympic sprinter Joey Cheek’s visa to prevent him from attending the games (Cheek is the co-founder of Team Darfur, a coalition of Olympic athletes raising awareness about the Darfur genocide); the exploitation of the workers who built the stadium; allegations of underage gymnasts winning gold; and Lin Miaoke, the lip-syncing, adorable Chinese girl who replaced an ‘inferior’ looking 7 year-old in the Olympic ceremony limelight.

But it is not just China who is caught up in a sea of contradictions, unable to maintain a perfect façade.  The sponsorship of the “genocide Olympics” has put many a Corporate Social Responsibility policy under examination, as companies have failed to live up to idealistic mission statements.  Despite the seeming position of power corporations hold in the Beijing games (contributing a ton of money), the sponsors have dodged appeals to advocate for human rights in Sudan and Tibet.  Money still trumps values, even in the age of “enlightened” corporations who espouse social and environmental ethics.

China’s role as a leading oil extractor and arms provider in Sudan continues to enable a mass genocide of the Darfuri people.  Does this not warrant action?  At least a strong word from sponsors (whose Olympic expenditures averaged $73 million a piece)?  Not, apparently, if it falls beyond a company’s “sphere of responsibility.”  In an effort to gain traction on the issue, Trillium Asset Management Corporation (“Trillium”) wrote to Olympic sponsors last September, reiterating the reputational risks associated with sponsorship and asking sponsors to leverage their access to the Chinese government to affect positive change.  Few responded, and those that did said it was a problem for diplomats, not corporations.

That would be true in a perfect world where regional actors or the United Nations stepped in to solve problems with unlimited resources and trustworthy intentions.  In reality, the ongoing massacres of hundreds of thousands should trouble the conscience of any and all actors with potential influence. The Olympics are an outstanding testament to the human potential to balance the head and the heart.  Perhaps the next evolution in corporate potential will prove the coexistence of making money and doing good.

Resolution No. 10 Concerning Human Rights Policies

May 20, 2008

Good morning, Mr. Chairman, Board of Directors & my fellow shareholders. I am presenting this proposal on behalf of Trillium Asset Management Corporation, the Calvert Group, Amnesty International and the General Board of Pensions and Health Benefits of the United Methodist Church. [The proposal received 7.5% support from fellow shareholders.]

Resolution No. 10 calls for a report to shareowners discussing how our investment policies address or could address human rights issues, with a view toward adding appropriate policies and procedures to apply when a company in which we are invested is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.

As you know, the massacres perpetuated in Darfur by the Sudanese government – which the current Administration has labeled a genocide — were the catalyst for this proposal. Since February 2003, hundreds of thousands of civilians have been killed by both deliberate and indiscriminate attacks, and 2.5 million civilians in the region have been displaced.

Much of the revenue fueling this conflict is generated by Sudan’s oil industry. With little capital or expertise to efficiently extract its own oil, Sudan relies almost entirely on foreign companies for both. The oil industry in Sudan is dominated by four foreign companies: China National Petroleum Corporation, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec of China.

In 2007, working with organizations that have expertise on the conflict in Sudan, we and other investors began to approach companies in our portfolio with known relationships to these four oil companies. Our request to JP Morgan Chase and other prominent Wall Street firms is that you engage with these companies. Use any influence you have to encourage them to press the Sudanese government to accept the deployment of UN peacekeeping forces. It will mean something to these companies to hear you, as one of their investors and a potential or actual investment banking services provider.

Many of their responses we’ve received from companies we’ve engaged is encouraging. Morgan Stanley has written to companies of concern to express their clients’ concern about Darfur, and empowered its internal “franchise committee” to consider human rights matters when reviewing deals. Citigroup has stated its support for UN Security Council Resolution 1769 calling for the deployment of a peacekeeping force. Merrill Lynch and T. Rowe Price have agreed to review human rights organizations’ corporate profiles in their research processes, and Merrill will consider offering Sudan-free investment products.

JP Morgan Chase has taken this proposal very seriously. We are grateful for the careful attention and consideration that it has been given, and we have been assured that our dialogue with senior management will continue beyond today. Because of the urgency of the crisis in Sudan, however, it is deeply disappointing that JPMC has not taken any measure comparable to those of other firms. Your new statement on human rights is extremely vague in terms of providing guidance on how this company will respond to the situation in Sudan and others like it. In our discussions, we will encourage you to take leadership by sending a clear signal to the global community that JP Morgan Chase will not finance or profit from, directly or indirectly, business activities that violate human rights in the Sudan or elsewhere. Accordingly, we call on shareholders present here today to vote their shares in favor of this proposal, as a strong signal to management that a strong policy is warranted.

Report on How Investment Policies Address Human Rights Issues – JPMorgan Chase & Co.

HUMAN RIGHTS AND OUR INVESTMENT PORTFOLIO

WHEREAS

The issue of Human Rights increasingly impacts investors and companies alike. Company reputations are affected by both direct and indirect involvement in human rights violations. Operating in countries with clear patterns of these violations, such as Sudan and Burma, may heighten reputational and financial risk. Furthermore, companies can face similar risks when they or their suppliers are found to be using forced labor, discriminating against employees, or committing other such abuses.

Proponents believe that institutional investors, including asset management firms such as JPMorgan Chase & Co., bear fiduciary and moral responsibilities as owners of stock in companies that may be connected to human rights violations. Thus we are encouraging the Corporation to report on policies and guidelines that address these issues. This report and guidelines can address how the Corporation as a shareholder can most effectively respond to these human rights issues, including strategies for shareowner engagement with the companies and/or divestment of such stock as appropriate.

RESOLVED

Shareowners request that the Board of Directors authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues, at reasonable cost and excluding proprietary information, by October 2008.

Such a report should review the current investment policies of the Corporation with a view toward adding appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.

Supporting Statement

Proponents believe one example, clearly demonstrating the need for this report, concerns the ongoing atrocities in Sudan, and how certain types of foreign investment contribute to the conflict.

Sudan’s western region, Darfur, continues to experience human rights abuses on an unimaginable scale, including systematic and widespread murder, torture, rape, abduction, looting and forced displacement. Since February 2003, hundreds of thousands of civilians have been killed by both deliberate and indiscriminate attacks, and 2.5 million civilians in the region have been displaced.

Much of the revenue fueling this conflict is generated by Sudan’s oil industry. Rather than funding social development, the majority of the revenue is funneled into military expenditures.

With little capital or expertise to efficiently extract its own oil, Sudan relies almost entirely on foreign companies for both. The oil industry in Sudan is dominated by four foreign companies: China National Petroleum Corporation, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec of China.

Over 20 US states and 50 colleges have adopted Sudan investment policies, including engagement, screening and divestment, regarding these and other foreign companies operating in certain sectors in Sudan. A 1997 presidential executive order generally bars American companies and citizens from conducting business in Sudan. In 2007, President Bush reinforced that executive order.

Proponents believe that JPMorgan Chase & Co., as an investor, has a responsibility to address this internationally condemned conflict in the Sudan.

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The issue of human rights increasingly impacts investors and companies alike. Company reputations are affected by both direct and indirect involvement in human rights violations. Operating in countries with clear patterns of these violations, such as Sudan and Burma, may heighten reputational and financial risk. Furthermore, companies can face similar risks when they or their suppliers are found to be using forced labor or discriminating against employees, among other abuses.

Proponents believe that institutional investors, including asset management firms such as Morgan Stanley, bear fiduciary and moral responsibilities as owners of stock in companies that may be connected to human rights violations. Thus we are encouraging our company to report on policies and guidelines that address these issues. This report and guidelines can address how our company as a shareholder can most effectively respond to these human rights issues, including strategies for shareowner engagement  with the companies and/or divestment of stock as appropriate.

RESOLVED

Shareowners request that the Board of Directors authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues, at reasonable cost and excluding proprietary information, by October 2008.

Such a report should review the current investment policies of the company with a view toward adding appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.

SUPPORTING STATEMENT

Proponents believe one example, clearly demonstrating the need for this report concerns the ongoing atrocities in Sudan, and how certain types of foreign investment contribute to the conflict.

Sudan’s western region, Darfur, continues to experience human rights abuses on an unimaginable scale, including systematic and widespread murder, torture, rape, abduction, looting and forced displacement. Since February 2003, hundreds of thousands of civilians have been killed by both deliberate and indiscriminate attacks, and 2.5 million civilians in the region have been displaced.
Much of the revenue fueling this conflict is generated by Sudan’s oil industry. Rather than funding social development, the majority of these revenues are funneled into military expenditures.

With little capital or expertise to efficiently extract its own oil, Sudan relies almost entirely on foreign companies for both. The oil industry in Sudan is dominated by four foreign companies: China National Petroleum Corporation of China, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec of China.

Over 20 US states and 50 colleges have adopted Sudan investment policies, including engagement, screening and divestment, regarding these and other foreign companies operating in certain sectors in Sudan. A 1997 presidential executive order generally bars American companies and citizens from conducting business in Sudan. In 2007, President Bush reinforced that executive order.

Proponents believe that our company, as an investor, has a responsibility to address this internationally condemned conflict in the Sudan.

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The issue of Human Rights increasingly impacts investors and companies alike. Company reputations are affected by both direct and indirect involvement in human rights violations. Operating in countries with clear patterns of these violations, such as Sudan and Burma, may heighten reputational and financial risk. Furthermore, companies can face similar risks when they or their suppliers are found to be using forced labor or discriminating against employees, among other abuses.

Proponents believe that institutional investors, including asset management firms such as Merrill Lynch & Co., bear fiduciary and moral responsibilities as owners of stock in companies that may be connected to human rights violations. Thus we are encouraging our company to report on policies and guidelines that address these issues. This report and guidelines can address how our company as a shareholder can most effectively respond to these human rights issues, including strategies for shareowner engagement with the companies and/or divestment of stock as appropriate.

RESOLVED

Shareowners request that the Board of Directors authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues, at reasonable cost and excluding proprietary information, by October 2008.

Such a report should review the current investment policies of the company with a view toward adding appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.

SUPPORTING STATEMENT

Proponents believe one example, clearly demonstrating the need for this report concerns the ongoing atrocities in Sudan, and how certain types of foreign investment contribute to the conflict.

Sudan’s western region, Darfur, continues to experience human rights abuses on an unimaginable scale, including systematic and widespread murder, torture, rape, abduction, looting and forced displacement. Since February 2003, hundreds of thousands of civilians have been killed by both deliberate and indiscriminate attacks, and 2.5 million civilians in the region have been displaced.
Much of the revenue fueling this conflict is generated by Sudan’s oil industry. Rather than funding social development, the majority of these revenues are funneled into military expenditures.

With little capital or expertise to efficiently extract its own oil, Sudan relies almost entirely on foreign companies for both. The oil industry in Sudan is dominated by four foreign companies: China National Petroleum Corporation of China, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec of China.

Over 20 US states and 50 colleges have adopted Sudan investment policies, including engagement, screening and divestment, regarding these and other foreign companies operating in certain sectors in Sudan. A 1997 presidential executive order generally bars American companies and citizens from conducting business in Sudan. In 2007, President Bush reinforced that executive order.

Proponents believe that our company, as an investor, has a responsibility to address this internationally condemned conflict in the Sudan.

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The issue of Human Rights increasingly impacts investors and companies alike. Company reputations are affected by both direct and indirect involvement in human rights violations. Operating in countries with clear patterns of these violations, such as Sudan and Burma, may heighten reputational and financial risk. Furthermore, companies can face similar risks when they or their suppliers are found to be using forced labor, discriminating against employees, or committing other such abuses.

Proponents believe that institutional investors, including asset management firms such as JPMorgan Chase & Co., bear fiduciary and moral responsibilities as owners of stock in companies that may be connected to human rights violations. Thus we are encouraging the Corporation to report on policies and guidelines that address these issues. This report and guidelines can address how the Corporation as a shareholder can most effectively respond to these human rights issues, including strategies for shareowner engagement with the companies and/or divestment of such stock as appropriate.

RESOLVED

Shareowners request that the Board of Directors authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues, at reasonable cost and excluding proprietary information, by October 2008.

Such a report should review the current investment policies of the Corporation with a view toward adding appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.

SUPPORTING STATEMENT

Proponents believe one example, clearly demonstrating the need for this report, concerns the ongoing atrocities in Sudan, and how certain types of foreign investment contribute to the conflict.

Sudan’s western region, Darfur, continues to experience human rights abuses on an unimaginable scale, including systematic and widespread murder, torture, rape, abduction, looting and forced displacement. Since February 2003, hundreds of thousands of civilians have been killed by both deliberate and indiscriminate attacks, and 2.5 million civilians in the region have been displaced.

Much of the revenue fueling this conflict is generated by Sudan’s oil industry. Rather than funding social development, the majority of the revenue is funneled into military expenditures.

With little capital or expertise to efficiently extract its own oil, Sudan relies almost entirely on foreign companies for both. The oil industry in Sudan is dominated by four foreign companies: China National Petroleum Corporation, Petronas of Malaysia, Oil and Natural Gas Corporation of India, and Sinopec of China.

Over 20 US states and 50 colleges have adopted Sudan investment policies, including engagement, screening and divestment, regarding these and other foreign companies operating in certain sectors in Sudan. A 1997 presidential executive order generally bars American companies and citizens from conducting business in Sudan. In 2007, President Bush reinforced that executive order.

Proponents believe that JPMorgan Chase & Co., as an investor, has a responsibility to address this internationally condemned conflict in the Sudan.

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We believe the ability of corporations to continue to provide goods/services in our interdependent world depends on their acceptability to the societies where they do business. Good corporate citizenship goes beyond the traditional functions of creating jobs and paying taxes, to include corporate practices designed to protect human rights, worker rights, land and the environment.

According to Dow Jones Sustainability Group, sustainability includes:”Encouraging long lasting social well being in communities where they operate, interacting with different stakeholders (e.g. clients, suppliers, employees, government, local communities and non-governmental organizations) and responding to their specific and evolving needs thereby securing a long term ‘license to operate,’ superior customer and employee loyalty and ultimately superior financial returns.” (www.sustainability-index.com; March 2000)

Footwear and apparel companies accept their responsibility for working conditions and wages throughout their supply chain. The food service industry must accept its responsibility for sustainability throughout its supply chain, including the agricultural workers who pick the many products that are part of the food sold. Just as these workers through their labor, contribute to the sustainability of the company, so must YUM Brands accept its responsibility for the working conditions, wages and benefits of these workers. These workers then contribute to the sustainability of their home communities from which they come and where their families live.

Concerned investors evaluate companies on their financial, environmental and social performance — the triple bottom line. Some companies have published sustainability reports and are taking a long-term approach to creating shareholder value through embracing opportunities and managing risks derived from economic, environmental and social developments. We believe sustainability reporting should be included in our company’s annual report.

We believe corporate sustainability includes a commitment to pay a sustainable living wage to employees as a means to empowering sustainable economies. Workers need to have the purchasing power to meet their basic needs. We believe paying sustainable wages contributes to community development and employee loyalty to the company.

The sustainability of corporations, we believe, is connected to the economic sustainability of their workers and the communities where corporations operate and sell products. Effective corporate policies can benefit both communities and corporations.

Resolved: Shareholders request the Board of Directors to prepare at reasonable expense a sustainability report. A summary of the report should be provided to shareholders by October 2005.

Supporting Statement

We believe the report should include:1. Yum Brand’s operating definition of sustainability.2. A review of current Yum Brand policies and practices related to social, environmental and economic sustainability throughout the supply chain. 3. A summary of long-term plans to integrate sustainability objectives throughout company operations.

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