Media Excerpts
Articles for media excerpting
The following excerpts from The Challenge to Power have been adapted to stand alone for free use as media articles. When reprinted, all excerpts should be attributed to John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company. Copyright 2005. www.chelseagreen.com
Pg. 20-22 (787 words)
Pg 25-26 (434 words)
Pg. 80-81 (494 words)
Pg. 87-89 (793 words)
Pg. 229-231 (836 words)
Pg 249-252 (1135 words)
Pg. 20-22 (787 words)
Corporations so dominate the political landscape that one drug company, Schering-Plough, was able to have an “unknown” senator quietly slip a provision in a military construction appropriations bill to extend the company’s monopoly patent on the anti-allergy drug Claritin, which was due to expire at the end of 2002. Sales of Claritin hit $2.7 billion in 1999. It was not revenue the company wanted to lose.
According to a 2002 report from Public Citizen’s Congress Watch, titled “The Other Drug War II,” drug companies employ 623 lobbyists in Washington, DC. Overall, drug companies spent $78.1 million on lobbying in 2001, bringing the total lobbying bill for 1997–2001 to over $403 million. According to the book, The People’s Business, there are more than one hundred thousand lawyers and lobbyists working in Washington, DC that so dominate the regulatory system that they often supply the language for proposed regulations themselves. It’s a city constantly under siege by special interests. American citizens are so removed from the bubble within the beltway that we have no real representation.
To understand the extent to which corporate money influences government, we need only look at the power of the pharmaceutical industry, or “Big Pharma” as it is known. While hundreds of drug lobbyists are former congressional staff, twenty-three are former members of Congress. It is somewhat ironic for me to note that former Congressman Vic Fazio, a lobbyist at Clark & Weinstock who represents Eli Lilly & Co., the Pharmaceutical Research and Manufacturers of America (PhRMA) and Schering-Plough, was my staff colleague in the California State Legislature. Fazio ran the Assembly Democratic Consultants (the political arm of the lower house Democrats in the California legislature) in the 1970s before he was elected to a state assembly seat, and was later elected to Congress. Unfortunately for Schering-Plough, the Claritin provision died, as did the company’s stock price. According to Congress Watch, the drug’s extension would have cost consumers an additional $7.3 billion. That would have been a handsome return on the $19.9 million Schering-Plough invested in lobbying and campaign contributions since the start of the 1996 election cycle.
Another congressional convert to the drug industry in 2004 was Representative James Greenwood (R-PA), the former chair of the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee. Greenwood abruptly cancelled hearings into whether pharmaceutical companies had concealed evidence that antidepressant drugs may have induced suicide among children and adolescents, when the Biotechnology Industry Organization offered to appoint him president of the organization, “. . . for a fourfold salary increase to $650,000.”21
The Wall Street Journal reported on November 4, 2004 that health care and drug companies contributed $26 million to Bush and the Republican Party because they believed that Democratic candidate John Kerry, unlike Bush, would allow Medicare to negotiate drug prices with the pharmaceutical companies and allow drug imports from Canada.
And since 9/11, drug companies have become quite patriotic. Eli Lilly & Co., for instance, had a special provision of its own slipped in at the eleventh hour into the 475-page Homeland Security bill in 2002, which protected Eli Lilly from being sued by the parents of autistic children who believe their child’s condition was linked to Thimerosal, a mercury-based preservative made by the company that is used as a common ingredient in childhood vaccines. No one claimed authorship of the amendment—not the Lilly lobbyist, not the White House, not the Department of Health and Human Services, and not our new Senate Majority Leader Bill Frist of Tennessee, who had originally added the Lilly amendment to a different bill. Could this amazing and mysterious provision, which no one would claim, be connected to Lilly’s $1.6 million campaign contribution to congressional politicians, of which 79 percent went to Republicans?
Frist lent pharmaceutical companies a hand again when he and more than two dozen Republican lawmakers wrote and called U.S. Trade Representative Robert Zoellick in an effort to protect lucrative drug patents. Thanks to pharmaceutical companies shelling out more than $50 million to help Republicans win control of Congress in November 2002, the industry celebrated a great victory when the United States, alone among the 144-member World Trade Organization (WTO), blocked a proposal for distributing patented medicines to less developed countries.22
Drug companies are ubiquitous in politics, and communicate their message throughout American society. Dozens of celebrities, including Lauren Bacall, Kathleen Turner, Rob Lowe, Larry King, and Montel Williams are paid large fees by companies such as Swiss drug maker Novartis AG to appear on television talk shows and morning news programs to discuss personal stories about ailments that afflict them or people near them. Often, they mention brand-name drugs without disclosing their financial ties to the drug manufacturers.23
21. “Frontlines Against Biotech in Philadelphia”, Earth First! Journal, Eostar, March-April 2005.
22. “US Flip on Patents Show Drug Makers’ Growing Clout”, Wall Street Journal, February 6, 2003, p. A4.
23. “Heartfelt Advice, Hefty Fees,” New York Times, August 11, 2002, Section 3, pp. BU1, BU14.
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Copyright 2005 John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company, www.chelseagreen.com
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Pg 25-26 (434 words)
The U.S. Food and Drug Administration (FDA) is another beltway captive agency which has consistently gone out of its way to represent industry. Not unlike the Pentagon and defense contractors, the FDA ends up favoring profits over people, partly because of the revolving door between the agency and the corporations it is supposed to be regulating. The case of Monsanto and the FDA offers a classic example of how corporations control public policy. The FDA regulation that conveniently discourages labeling of milk as not containing any recombinant bovine growth hormones (rBGH–free) was written by Michael Taylor, an attorney who worked for Monsanto both before and after his tenure as an FDA official.
Monsanto sells a genetically engineered hormone to dairy farmers who inject it into their cows to increase milk production. Trouble is, there is increasing evidence that rBGH may promote cancer in humans who drink that milk, that the cows’ lives may be shortened, and that they are more likely to develop udder infections (which require use of antibiotics, which could end up in the milk along with increased pus). When passed to consumers, the antibiotic residue in milk can affect the immune system and increase the risk of breast and colon cancer. The European Commission banned the use of rBGH.
The FDA is so in love with Monsanto, that, according to The Ecologist, the agency’s approval of rBGH was not just the handiwork of Michael Taylor, but of Margaret Miller, Deputy Director of the Office of New Animal Drugs, and Suzanne Sechen, lead reviewer of scientific data on rBGH for the FDA, who all have Monsanto ties.30 If that isn’t enough, John Gibbon, former Chair of the Congressional Office of Technology Assessment, was a ten-year Monsanto consultant; Marcia Hale, formerly an assistant to President Clinton, coordinates public affairs and corporate strategy for Monsanto in Britain; and Mickey Kantor, a longtime California Democratic party political hack and former U.S. trade representative and
U.S. secretary of commerce, is on the Monsanto board of directors.31 As former Texas Agricultural Commissioner Jim Hightower said, “They’ve eliminated the middleman. The corporations don’t have to lobby anymore. They are the government.” Hightower used to complain about Monsanto’s lobbying the secretary of agriculture. That was before former Monsanto executive Ann Venamin became the secretary of agriculture.
The connection between Monsanto and government continues a long corporate tradition. Linda Fisher, the assistant administrator for EPA’s Office of Pollution Prevention, Pesticides, and Toxic Substances in President Ronald Reagan’s second administration, developed EPA’s pesticide policy before joining Monsanto in 1995 as a lobbyist. Now she’s back at EPA as deputy director.32
30. The Ecologist, “Getting the Government on Your Side,” Vol. 28, No. 5, Sept/Oct 1998, p. 283.
31. Ibid.
32. Vijay Prashad, Fat Cats and Running Dogs, the Enron Stage of Capitalism, 2003, p. 122.
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Copyright 2005 John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company, www.chelseagreen.com
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Pg. 80-81 (494 words)
Analysis, nearly one-third of the average American’s calories come from junk food, beer, and sugary drinks, while only 10 percent comes from fruits and vegetables. According to the Centers for Disease Control (CDC), 98 percent of high schools have vending machines and snack bars, as do 74 percent of middle schools, and 43 percent of elementary schools. Moreover, about 20 percent of the nation’s school districts offer brand name fast food and may serve fast foods on special days, such as McDonald’s Wednesdays and KFC Fridays. Yum Brands, which owns KFC, has struggled with its ads to sell fried dead birds. Michael Markowitz, a branding consultant said: “The fundamental product offering—fried chicken—has been countertrend for years. Fried chicken is not a first tier choice for people any longer.”33
Coke, which has for years cut deals with school districts for exclusive access, has one-upped its competitors. Coca-Cola Enterprises, Coke’s largest bottler, became an official sponsor of the National PTA, which gave the company’s senior vice president for public affairs and chief lobbyist a seat on the PTA board. The executive director of an advocacy group in Portland, Oregon, said: “It’s a massive conflict of interest. The National PTA has a wonderful history in protecting and advocating for the health of children, and now it is part of the Coke marketing machine, because Coke literally helps to run it.”34
Marketing to younger children is big business, and many cash-strapped school districts need any help they can get. According to James McNeal, a professor of marketing at Texas A&M and an authority on marketing to children: “Kids 4-to-12 spend on their own wants and needs about $30 billion a year. But their influence on what their parents spend is $600 billion.
That’s blue sky.”35 In July 2003, Coca-Cola pledged to stop marketing soda to children under the age of twelve, but found an alternative: market a twelve-ounce can of Swerve, made from skim milk and vitamins, with the same content as a twelve-ounce can of Coke and double the sodium. So first, the districts must wean the kids off Coke and onto Swerve—sort of like going from heroin to methadone. Besides that, this new sugary drink is perfect for Coke; since the government made deep cuts in the dairy farm program, milk is nearly as cheap a raw material as water.36
Even the $50 billion subsidized milk industry received a major boost when the Dietary Guidelines Advisory Committee, a thirteen-member panel which reports to the U.S. Department of Health and Human Services and Agriculture, recommended a 50 percent boost in milk consumption. This recommendation will be plugged into the food pyramid dietary guidelines for 2005. It will mean big profits for the dairy industry, including companies like Kraft Foods (owned by Philip Morris Tobacco), as federal nutrition programs, such as school lunch menus, are adjusted to conform to the federal guidelines.
33. “KFC Seeks a Crisp Take on Its Ads,” Wall Street Journal, August 1, 2003, p. B6.
34. “Coke Moves With Caution to Remain in Schools,” New York Times, September 3, 2003, p. C1.
35. “If You Pitch It, They Will Eat,” The New York Times, August 3, 2003, Section 3, pp. 1, 11.
36. “The (Agri)Cultural Contradictions of Obesity,” New York Times Magazine, October 12, 2003, p. 48.
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Copyright 2005 John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company, www.chelseagreen.com
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Pg. 87-89 (793 words)
In June 2001 the SEC fined Arthur Andersen, LLP $7 million for allowing Waste Management, Inc., to continue a series of “improper accounting practices” for several years, which inflated the company’s earnings. In May of the same year Arthur Andersen had agreed to pay $110 million to settle a Sunbeam accounting fraud lawsuit. In 1998 Waste Management took a $3.5 billion charge based on accounting “irregularities,” and Arthur Andersen agreed to pay $220 million to settle shareholder litigation.
Question: As auditors of Tyco since 1994, did PricewaterhouseCoopers (annual revenue: $8.1 billion) know about secret bonuses paid to Tyco executives and other irregularities? As the corporate scandals continued to hit, PricewaterhouseCoopers stayed in the headlines and paid $1 million to the SEC to settle a probe into alleged improper conduct related to its audits of SmarTalk Teleservices, a now bankrupt provider of prepaid telephone cards and wireless services.52 The same PricewaterhouseCoopers agreed to pay $50 million to settle a shareholder class action lawsuit that charged the company with signing off on allegedly misleading financial statements by defense contractor Raytheon.53 Raytheon’s top executives had earlier agreed to pay $410 million to settle similar claims. It is just the cost of doing business for both defense contractors and our cherished auditors.
While it seems that the SEC is going to bar a PricewaterhouseCoopers partner from auditing in the future, the Manhattan district attorney’s office announced that it will not bring criminal charges against PricewaterhouseCoopers for helping Tyco alter its books.54 PricewaterhouseCoopers defended its audits of Tyco, advising it not to restate its financial results back to 1998, which was overruled by the SEC.55 This all happened about the same time that the SEC chairman, William H. Donaldson, announced that thirty-six year insider and PricewaterhouseCoopers partner Donald Nicolaisen was being named chief accountant at the SEC.56 He will work closely with the agency’s Public Company Accounting Oversight Board to police the accounting industry. Apparently the SEC doesn’t consider this a conflict, since about one-half of the SEC’s chief accountants come from big accounting firms.
According to the Wall Street Journal, four large accounting firms dominate the landscape, creating their own oligopolistic empire. Besides PricewaterhouseCoopers, the other three (and their annual revenues) are: Deloitte & Touche ($5.9 billion), Ernst & Young ($4.5 billion) and KPMG ($3.2 billion).57 The Big Four audit 99 percent of public company annual sales, even though 86 percent of the Fortune 1000 companies prefer to have more audit firms available.58 After the Big Five accounting firms became the Big Four with the implosion of Arthur Andersen, the SEC appointed a new Public Company Accounting Oversight Board to guard against conflicts and other auditing problems. The SEC chairman forgot to tell other commissioners that his appointee as oversight board Chair, William Webster, ran the audit committee for a publicly traded company whose executive was possibly involved in irregularities. Following Webster’s resignation, the new board located its Washington, DC office in the same offices vacated by Arthur Andersen, and promptly voted themselves yearly salaries of $452,000 apiece ($560,000 for the new chair). Kayla Gillan—a member of the new board and formerly general counsel to CALPERS (where she was only paid $148,000)—said the high salaries (the president of the United States makes $400,000, and the chief justice of the Supreme Court receives $198,000) were justified because the board was not a federal agency but supported by fees from public companies and accounting firms.59 She added further that personally, the move to DC was a trauma to her family and that at forty-four years old, her career was at risk.60
Gillan and her colleagues may well earn those big bucks, as members of the Big Four continue to stumble along with conflicts that are endemic to large oligopolistic enterprises. For example, KPMG LLP paid referral fees to its auditing customer, First Union Corp. (now Wachovia Corp.) for sending customers its way who needed tax shelters. KPMG, in some cases, made $400,000 or more per transaction.61 How’s that for a cozy symbiotic relationship? No problem with auditor independence here.
KPMG has refused to turn over tax documents to the Justice Department for its investigation of allegations that the firm pedaled abusive tax shelters—unlike PricewaterhouseCoopers and Ernst & Young, which paid off the government in fines.
The Enron, Tyco, WorldCom, Arthur Andersen, Global Crossings, and KPMG scandals are one more reason CALPERS and CALSTRS have pledged to vote against renewing the services of any auditor that has served a company for more than five years, or any auditor also performing consulting services for a company.
The SEC has issued guidelines that now require corporate audit committees to review and approve each and every time an auditing firm performs tax or consulting work, to limit conflicts of interest.
52. “SEC Opts for Quick Settlement in Corporate Fraud,” San Francisco Chronicle, May 27, 2003, p. B3.
53. “PriceWaterhouseCoopers to Pay $50 Million to Settle Lawsuit”, Wall Street Journal, May 26, 2004, p. A2.
54. “Tyco Auditor Settles Charges by SEC,” San Francisco Chronicle, August 14, 2003, p. B8.
55. Ibid.
56. “Price-Waterhouse Partner Named to Key SEC Post”, New York Times, August 15, 2003, p. C5.
57. “Keeping the Accountants from Flying High”, Wall Street Journal, May 6, 2003, p. C1.
58. “We Need More Than The ‘Big Four’,” Wall Street Journal, January 25, 2005, p. B2.
59. “Oversight Board’s Bad Start,” San Francisco Chronicle, January 28, 2003, p. B1.
60. Ibid.
61. “Did Ties That Bind Also Blind KPMG?” Wall Street Journal, June 18, 2003, pp. C1, C5.________________________
Copyright 2005 John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company, www.chelseagreen.com
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Pg. 229-231 (836 words)
Corporate management has a long record of ignoring shareholders. At Intel, Hewlett-Packard, Apple Computer and IBM, shareholders have voted against management in favor of expensing stock options. In 2004, 68 percent of Gillette shares supported a resolution asking the company to repeal its classified (staggered) board elections in favor of annual elections. In 2003 the vote was 64 percent in favor and in 2002, it was 56 percent in favor. Gillette continues to ignore the majority of its owners.
The good news: A recent study found that firms with the strongest shareholder rights significantly outperform companies with weaker shareholder rights. A 2001 study of 1,500 firms conducted by researchers at Harvard University and the University of Pennsylvania’s Wharton School found a significant positive relationship between greater shareholder rights, including annual election of directors as measured by a governance index, and both firm valuation and performance from 1990 to 1999.
In addition, a recent report found that there is a positive correlation between corporate social performance and corporate financial performance. Every year the Social Investment Forum (SIF) and Co-op America sponsor the Moskowitz Prize, based upon outstanding research in the field of socially responsible investing. In December 2004, the award went to Marc Orlitzky, Frank Schmidt and Sara Rynes for their research paper entitled: Corporate Social and Financial Performance: A Meta-Analysis. The paper examined over fifty academic reports, concluding that “there was a positive association between corporate social performance and financial performance across industries and across study contexts.” The authors reported that the link “varies (from highly positive to modestly positive) because of contingencies, such as reputation effects, market measures of financial performance, or corporate social performance disclosures.” The study also found that corporate social performance was a better predictor of financial performance using accounting measures than market-based ones.
The better news: While most of the approved resolutions are considered corporate governance and supported by large institutional investors, most of those votes were also aided by SRI mutual fund and SRI portfolio managers. Under pressure from Calvert Group and other SRI managers, Dell Computer agreed to set goals and measure progress in the recycling of its computers and pledged to do what it could to stop exporting computer work to developing countries. Occasionally, companies will see the handwriting on the wall and respond. For example, in a confrontation at the annual shareholder meeting of Safeway, the company announced that it would name three new independent directors and begin expensing options in 2005.12
Larger votes for social and environmental resolutions began appearing in 2002. A campaign by Responsible Wealth, a group of wealthy donors and shareholders supported by Shareholder Action Network (SAN), and three lawsuits against Household International, led 27 percent of the shareholders to vote for a resolution linking executive pay to measures to prevent predatory lending. The resolution was introduced by NorthStar Asset Management and Domini Social Investments.
At ExxonMobil, 29 percent of shareholders voted in 2003 to adopt a policy prohibiting discrimination on the basis of sexual orientation (the vote was 24 percent in 2002), and more than 20% of shareholders supported two resolutions: one requiring the company to report on how it would increase investments in renewable energy and another on how it would respond to the risks of global warming. While ExxonMobil has pledged $10 million per year for ten years to Stanford University for climate research, it also funds numerous Washington, DC-based groups that question the human role in global warming and argue that proposed government policies to limit carbon dioxide emissions are excessive. ExxonMobil largely supports such groups as the Competitive Enterprise Institute, Frontiers of Freedom, The George C. Marshall Institute, the American Council of Capital Formation, Center for Policy Research, and the American Legislative Exchange Council (ALEC).
According to the Investor Responsibility Research Center (IRRC), more than 1,053 shareholder resolutions were introduced in 2003, up from 802 in 2002. SocialFunds.com reported there have been 760 corporate governance resolutions filed in 2003 (about half by labor unions), up from 529 in 2002. Over 40 percent dealt with executive compensation, which is not surprising, considering that the highest-paid CEOs over a three-year period received $219 million (Steve Jobs at Apple), $87 million (John Chambers at Cisco), and $51 million (John Blystone, now retired, of SPX Corp.).13 In March 2003 the AFL-CIO resolution at Tyco to limit executive severance packages received almost 51 percent of the shareholder vote.
One of the most significant civil rights victories of the 2003 shareholder season was Wal-Mart’s agreement to prohibit discrimination based on sexual orientation in its company policy. Unlike ExxonMobil, which is the only one among the top seventy-one companies in the Fortune 500 to not have a gay and lesbian workers’ rights policy, Wal-Mart worked with the Pride Foundation and other organizations to adopt a non-discrimination policy. Ironically, Wal-Mart is currently being sued in a class action suit for discriminating against 1.6 million female employees. There are 318 Fortune 500 companies that have similar gay rights policies, and 197 that offer benefits to same-sex partners.14
12. “Constructive Dialogue Marks Proxy Season”, Investment News, David Hoffman, June 28, 2004.
13. “U.S. CEO Pay Averages $12 Million Annually,” Bloomberg News, August 18, 2003, www.bloomberg.com.
14. “Victory for Gay Rights,” San Francisco Chronicle, July 3, 2003, pp. B1, B5.
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Copyright 2005 John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company, www.chelseagreen.com
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Pg 249-252 (1135 words)
HII has filed over a dozen shareholder proposals requesting that food and food-related companies report on, label, or phase out the use of genetically engineered ingredients. We have also targeted the Scotts Company for special concern because of the company’s development and distribution of genetically modified seeds to grow a species of grass that could have a substantial long-term negative impact on the environment. Now Scotts has purchased Smith & Hawken to capture the “environmentalist” side of its business. Scotts, by the way, is the major distributor for Monsanto’s Roundup herbicide.
Representing our clients, HII has urged the state and federal regulatory agencies to require pre-release safety tests for consumer and animal food products that are genetically modified. We are concerned about the long-term public safety issue, but also, as a fiduciary, we are afraid that our investment in food companies may be endangered due to large liability claims against companies that sell products containing genetically engineered ingredients. We are especially mindful of the potential dangers of such foods being sold to the public when there are no accompanying consumer benefits: taste is not improved, nutrition is not enhanced, and prices are not reduced. What’s more, food corporations have been adamantly opposed to labeling products so consumers know whether bio-engineering was involved.
According to Austin Sullivan, General Mills senior vice president for corporate relations: “Manufacturers, who currently receive no benefit or marketing advantage from bioengineered ingredients, do not want to present their products in a way that is negative to consumers. With no manufacturing or consumer benefit to offer and only downside risk of adverse consumer behavior, mandatory labeling would lead manufacturers to ask their suppliers for non-bioengineered ingredients only. The net result of this would be to eliminate choice and retard the development of a potentially beneficial technology.”35
Genetic modification of seeds and plants, which are able to resist Monsanto’s Roundup Ready spraying, appeals to farmers. Many have been sold on this product, and now U.S. farmers, unlike their European and many third world counterparts, are producing soy, corn and cotton crops, the majority of which are genetically modified. Many food companies in Europe abandoned foods with genetically-modified organisms (GMO), as well as Gerber Products Co., and Frito Lay in the United States, among others.
In 1999, HII began addressing our concerns over food safety to food companies held in our clients’ portfolios. After corresponding with company representatives in 1999, we filed resolutions with General Mills and Sara Lee to phase out the purchase of bio-engineered ingredients. General Mills indicated that Monsanto was working on several genetic modifications of food products that will help consumers lower “bad” cholesterol and increase their intake of healthy omega-3 fatty acids.36 In August 2000, Sara Lee informed us that it was still assessing its suppliers, GMO ingredients, and the feasibility of removing those ingredients, indicating that it was an overwhelming and complicated issue since Sara Lee had over 100 operating companies and over a dozen in meat processing alone. The process of evaluating whether or not to be committed to a GMO-free policy similar to McDonald’s policy regarding potatoes was complicated even further by Sara Lee’s decentralized management process.
While dialogue and discussion between HII and several food companies continued, our resolutions were opposed by management, and typically received 4 to 9 percent of the shareholder vote. Arguments were made, questions were asked and answered, issues were discussed, but little was resolved. Most of the resolutions remained on the ballot for two or three years. In the case of both General Mills and Sara Lee, after unsuccessfully attempting to convince management of our concerns of liability and our clients’ financial exposure, HII divested its stock positions.
In several instances, HII asked a food company to label GMO ingredients, based upon consumer choice and polls that show upwards of 90 percent of consumers favoring GMO labeling. In the case of Procter & Gamble (PG), HII’s labeling resolution received over 10 percent of the shareholder vote in 2002 but did not exceed 10 percent in 2003, its fourth consecutive year on the PG shareholder ballot. It could not be reintroduced in 2004.
When the issue of voluntary labeling was addressed by Whole Foods Market, management was already in the process of complying and our co-filed resolution was withdrawn. Several opponents of GMO ingredients have told HII that they are disappointed at Whole Foods’ lack of follow through to implement its labeling plan, and another resolution is being considered. When HII approached Hain Celestial Group to request a report on the feasibility of phasing out GMO ingredients from its products, management initially resisted. It was only after the resolution won over 23 percent of the shareholder vote in its second year, that a compromise was reached and the resolution was withdrawn.
Requiring all genetically engineered foods sold in the United States to be labeled, as will be required of all U.S. food imports into the European Economic Community (EEC), would have severe repercussions on marketing and sales in this country. In discussions with food company representatives, they were unanimous in their opinion that based on surveys, American consumers would reject genetically modified foods or food with genetically modified ingredients. This is the primary reason Monsanto is putting pressure on U.S. trade representatives to force the EEC to back off its labeling requirement. Monsanto opposes full disclosure of GMO ingredients because, as Frank Dixon, one of the authors of the Innovest study entitled “Monsanto & Genetic Engineering: Risks for Investors” told me: “Labeling of GMO products in the United States would be the end of genetic engineering.”
The Coalition for Environmentally Responsible Economies (CERES) and Joan Bavaria, of Trillium Asset Management, work with other SRI institutional investors to convince corporate management to endorse an environmental code of conduct. About seventy companies have signed the Principles and participate in CERES’ conferences and educational programs, as well as providing annual CERES reports on the companies’ compliance with the principles. CERES is building stakeholder teams, matching its members with endorsing companies to provide ongoing dialogue and feedback on corporate sustainability disclosure and performance. The organization is also reaching out to pension funds and other institutional investors to build the Investor Network on Climate Risk (INCR), following the 2003 Investor Summit on Climate Risk at the United Nations. INCR will work to educate corporate management on the long term financial risks of global warming.
Since 1997, HII has been corresponding with corporate management and introducing shareholder resolutions with over a dozen of our portfolio companies to convince them that it is in their best long-term interests to voluntarily endorse the CERES Principles and participate as CERES members, including filing annual reports on compliance with a code of environmental conduct. We have been marginally successful at entering into dialogue and bringing them to the CERES table.
35. “Mandatory Labeling Seen as Killing Off AG Biotech Industry,” Food Chemical News, no. 20, vol. 44, July 1, 2002, p. 1.
36. “Gene-altered Foods Failing to Whet Sales, Firms Find,” Chicago Tribune, June 28, 2002.
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Copyright 2005 John C. Harrington, from The Challenge to Power: Money, Investing and Democracy. Reprinted by permission of Chelsea Green Publishing Company,chelseagreen.com
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