Domini Social Investments Challenges Nordstrom on Sweatshops

Nearly one in every 10 shares voting favored a shareholder resolution filed by Domini Social Investments at Nordstrom, Inc., asking the company report on its efforts to deter sweatshop-like conditions at hundreds of its contract suppliers around the world.

"We know from recent history that companies such as Nike and Reebok who failed to respond promptly to allegations of labor abuses at contract supplier factories have paid a heavy price in negative publicity and falling stock prices," Conrad MacKerron, shareholder representative for Domini Social Investments, told Nordstrom management and its assembled stockholders at the company’s annual meeting in Seattle on May 16.

Our message apparently got through to a surprising number of shareholders. The resolution received the support of 8.8 million Nordstrom shares or 9.9% of all shares voted. When 4.5% of shares that abstained are included, nearly 15% did not agree with management’s position opposing our resolution. The result was impressive given that 34.8% of the company’s common stock is held by officers or board members of the company, most of whom are presumed to have opposed the resolution.

The company settled a lawsuit last year alleging illegal labor practices by its suppliers in the U.S. territory of Saipan, which is exempt from American labor, immigration and customs laws. We believe the company could be doing a better job ensuring that its codes of conduct are enforced at supplier plants.

The company maintains it has made available information regarding vendor standards compliance mechanisms. In dialogue with Domini during the past six months, the company was willing to discuss the basic components of its audit enforcement program but not how well it is performing.

We believe that shareholders have a right to an annual report providing information about the numbers of facilities audited, the audit pass/fail rate, reasons for failure, and a discussion of progress made and problems that remain at facilities with the worst code violations. Reebok, Mattel, Liz Claiborne and a few other companies have issued detailed reports on their efforts to monitor their contract supply facilities.

The impressive first year showing of this resolution should increase pressure on company management to be more forthcoming about the success of its auditing program for vendors. We will continue our discussions with management on this important issue. Domini is also involved in similar discussions about vendor standards enforcement with McDonald’s, Gap, Walt Disney and Wal-Mart.

The composition of the Funds’ portfolios is subject to change. View the most current list of the Domini Social Equity Fund and Domini International Social Equity Fund's holdings.

The Domini Funds are not insured and are subject to market risks, such as sector concentration and style risk. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. You may lose money. This information is provided for educational purposes only, and should not be considered investment advice with respect to any of the holdings listed.

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Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by unaffiliated entities.

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