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Wed, 06/12/2002 - 13:00 | by Wesley Furgiuele
June 12, 2002
DOMINI SOCIAL INVESTMENTS REPORTS RECORD SHAREHOLDER VOTES FOR 2002 PROXY SEASON
Socially Responsible Firm Says Post-Enron "Crisis of Confidence" Fueled Shareholder Discontent with Corporate Social and Environmental Performance
New York, NY – Domini Social Investments, manager of the Domini Social Equity Fund (NASDAQ: DSEFX), the nation's oldest and largest socially responsible index fund, reported the results of its 2002 shareholder advocacy initiatives today, hailing a "renewed interest in corporate responsibility" among America's shareholders, and citing "unusually strong support" for some of the shareholder resolutions it filed on social and environmental issues during the 2002 proxy season.
A shareholder resolution filed by Domini with Household International (NYSE: HI), asking the company to link executive pay to demonstrable progress in eliminating predatory lending practices, received 27% of the shareholder vote. A shareholder resolution filed with Cooper Industries (NYSE: CBE) asking the company to prepare and publish a sustainability report detailing the social, environmental and economic impact of its operations received nearly 22% of the shareholder vote. (The Household International resolution was co-filed with Northstar Asset Management, represented by Responsible Wealth; the Cooper Industries resolution was co-filed with the Benedictine Sisters.) Both votes set records for Domini-sponsored shareholder resolutions. The firm has filed more than 60 resolutions on social and environmental issues over the past nine years.
"These shareholder votes are extremely high by historic standards," says Adam Kanzer, Director of Shareholder Advocacy at Domini. "You have to understand that these resolutions were opposed by corporate management, and historically such resolutions seldom receive more than five or ten percent of the vote because most investors routinely vote with company management. The 2002 proxy season marked a significant departure in this regard - a post-Enron crisis of confidence appears to have fueled shareholder discontent and strong support for a series of resolutions addressing corporate social and environmental performance. However, the pattern of votes does not look like a broad protest vote against management. We believe shareholders took a careful look at these resolutions and concluded that they raised important bottom line issues."
Domini's final shareholder resolution for the 2002 proxy season will be considered by AT&T (NYSE: T) shareholders at the company's annual meeting on July 10. The resolution challenges the fairness of the company's conversion to a cash-balance pension plan, requesting that long-term employees be offered a choice between the current plan and the previous traditional plan. Last year, this resolution received an 11.28% vote.
Domini also reported that several of its shareholder initiatives in 2002 prompted companies to enter into constructive dialogue on social and environmental issues. For example, a shareholder resolution filed with The Gap (NYSE: GPS), asking the company to prepare a public report on its efforts to ensure global compliance with its code of conduct, was withdrawn when the company agreed to work with Domini and other concerned investors to improve its public reporting by developing performance measures for its vendor standards compliance system. The Gap's code of conduct outlines the company's minimum expectations from its worldwide suppliers. The Code includes standards for maximum working hours, compliance with minimum wage and overtime laws, forced labor, child labor and worker efforts to form unions, among others. Domini is presently engaged in similar dialogues with The Walt Disney Co. (NYSE: DIS), McDonald's (NYSE: MCD), Nordstrom (NYSE: JWN), and Sears, Roebuck (NYSE: S) on international labor issues.
Domini was also a co-filer this year on resolutions calling on The Coca-Cola Company (NYSE: KO) to report on progress in meeting beverage container recycling goals, and on Pepsi Co. (NYSE: PEP) to adopt a comprehensive recycling policy. Domini has been part of a small group of investors in dialogue with both companies on recycling issues for more than two years. In response, both companies have set goals for the inclusion of recycled content in their plastic bottles.
In a more quiet victory, Mattel (NYSE: MAT) announced in their proxy that their executive severance pay committee would "seek to understand the impact of executive severance packages on other Mattel employees." This brief report on the methodology Mattel uses to devise executive severance packages was prepared in response to a shareholder resolution filed by Domini last year. The resolution, which was prompted by the substantial severance package awarded to departing CEO Jill Barad, was withdrawn when Mattel agreed to produce this report. In filing the resolution, Domini argued that such packages were detrimental to employee morale and therefore potentially damaging to the long-term performance of the company.
Finally, Domini reported progress in its longstanding campaign to require proxy-voting disclosure by mutual funds. Three years ago, the firm became the first mutual fund manager in the country to publicly disclose the actual proxy votes it casts for each company in its portfolios (votes published at www.domini.com). The firm has published detailed Proxy Voting Guidelines on issues ranging from corporate governance to social and environmental responsibility since 1992. Last December, Domini filed a Petition for Rulemaking with the SEC, urging adoption of a rule requiring all mutual funds to publicly disclose their proxy-voting policies and votes. Amy Domini, Founder and a Managing Principal of Domini Social Investments, also recently co-authored an editorial with California Treasurer Philip Angelides, published in the May 13 issue of Barron's, calling for mandatory proxy disclosure by mutual funds and public pension funds. The SEC recently held an Individual Investor Summit where it indicated an interest in exploring mutual fund proxy disclosure. SEC Chairman Harvey Pitt also highlighted the importance of proxy voting by investment advisers at a recent speech to the Investment Company Institute, the trade association of the mutual fund industry(1).
"The crisis in corporate governance is beginning to impact financial markets, and shareholders are registering their concerns - both with corporate management and with government regulators," says Ms. Domini. "In the aftermath of Enron/Andersen/Global Crossing/Merrill Lynch, we think greater shareholder vigilance and increased corporate disclosure are more important than ever. It's the only way to make corporations accountable - to their shareowners, employees, communities and the public."
Domini Social Investments manages more than $1.8 billion in assets for individual and institutional investors seeking to create positive change by integrating social and environmental values into their investment decisions. Its flagship fund, the Domini Social Equity Fund, was the first socially and environmentally screened index fund and is the nation's largest socially responsible index fund. The Fund includes companies with positive records in community involvement, the environment, diversity and employee relations, and excludes companies deriving significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. In addition to the Domini Social Equity Fund, the company also offers the Domini Social Bond Fund (NASDAQ: DSBFX) and an FDIC-insured money market account (in partnership with ShoreBank), both of which focus on community economic development.
Additional information on Domini's shareholder activism and proxy voting initiatives is available on the firm's web site, www.domini.com.
(1) Speech by SEC Chairman: Remarks before the Investment Company Institute, 2002 General Membership Meeting; by Chairman Harvey L. Pitt, U.S. Securities and Exchange Commission; Washington, DC, May 24, 2002.
The Domini Social Equity Fund and the Domini Social Bond Fund are subject to market risks and are not insured. You may lose money. Some of the Domini Social Bond Fund's community investments may be unrated and carry greater credit risks than the Fund's other investments. Please obtain a prospectus by calling 1-800-762-6814 or online at www.domini.com. Read it carefully before you invest or send money. DSIL Investment Services LLC (DSILD), Distributor. The Domini Social Equity Fund is not affiliated with any bank and is not insured. DSILD
and ShoreBank are not affiliated.
As of May 31, 2002, Household International, Cooper Industries,The Gap, The Walt Disney Co., McDonald's, Nordstrom, Sears, Roebuck, The Coca-Cola Company, Pepsi Co., and Mattel represented 0.41%, 0.07%, 0.23%, 0.85%, 0.71%, 0.06%, 0.33%, 0.03%, 2.23% 1.50% and 0.17%, respectively, of the Domini Social Index Portfolio (DSIP). The DSIP's holdings are subject to change.
Domini Social Investments, Domini Social Equity Fund, Domini Social Bond Fund and Domini Money Market Account are registered service marks of Domini Social Investments LLC. 06/02