San Francisco, CA – Shareholders concerned that Hershey Foods (NYSE: HSY) is exposing the company to unnecessary financial risk by using food ingredients derived from genetically engineered materials are taking their case to fellow shareholders at the company’s annual meeting today.
The San Francisco based As You Sow Foundation, along with New York based Domini Social Investments, the manager of the Domini Social Equity Fund (Ticker: DSEFX), are part of a shareholder group holding over $22 million of Hershey stock that filed a resolution asking the company to report on its use of genetically engineered ingredients.
“Our company is clearly exposed to unnecessary reputational and financial risks from the use of genetically engineered ingredients.” said Michael Passoff, Associate Director of the Corporate Accountability Program at As You Sow. “These ingredients were made to sell herbicides and pesticides,” added Passoff, “they provide no financial benefit to Hershey shareholders and no nutritional benefit to consumers.”
Concern over the financial risk posed by genetically engineered foods has increased in recent months after the massive recall of StarLink corn - a strain of genetically engineered corn not licensed for human consumption – that contaminated more than 300 products.
Prior to the recall, most food companies believed that genetically engineered products posed no financial risk to them. Yet the StarLink recall will cost over a billion dollars in direct costs to companies throughout the food commodity chain. Brand name damage will account for additional untold costs.
“The implications for Hershey are significant,” said Passoff, “ because it purchases large quantities of milk, corn and soy products which all contain significant levels of genetically engineered content.”
Hershey products are widely consumed by children. Because of parental concerns, baby food makers HJ Heinz Co. and Gerber have already pledged to remove genetically engineered ingredients from their products because of concern over potential allergic reactions. McDonalds, Frito Lay and Starbucks are just a few of the food companies that have responded to consumer concerns and announced they will phase out of selected genetically engineered ingredients.
The shareholders believe continued use of genetically engineered ingredients without improved testing and stricter regulation exposes shareholders to potential liability for health effects that may harm consumers of Hershey products.
“In using these products, Hershey takes on significant risks but receives no benefits,” said Adam Kanzer, General Counsel for Domini Social Investments. “Given these concerns, we believe that development of a contingency plan to deal with these highly controversial products is a necessary and prudent business step.”
The resolution calls for the company to study the issue, identify alternatives, and develop a plan for phasing out genetically engineered ingredients. The shareholders consider this basic preparation necessary in order to quickly and efficiently respond to any future contamination, or to changes in consumer demand or government regulations.
“Hershey’s brand name is its most valuable asset. By studying appropriate alternatives, Hershey can provide disclosure to consumers, avoid risk, gain competitive advantage and protect its brand name in the marketplace,” said Kanzer.
Hershey’s opposes the resolution maintaining that is that it is the Food and Drug Administration’s responsibility to make decisions about food safety. According to Passoff, “StarLink has proved that there is no effective regulatory oversight for genetically engineered food.”
There is a growing scientific concern that genetically engineered agricultural products may be harmful to humans, animals or the environment. Evidence includes a buildup of Bt toxins in soil, a National Academy of Sciences report that found gaps in regulatory coverage and acknowledgement by the US Department of Agriculture that a ‘comprehensive approach to evaluating long-term and secondary effects’ of bioengineered products is needed.”
As You Sow has contacted more than 3,000 of Hershey’s top shareholders to urge them to support the non-binding advisory resolution.
Hershey is the latest company to face a proxy vote on this issue. Nearly two dozen similar resolutions have been filed with life science companies, food companies, restaurants, and supermarkets, in what has become one of the largest shareholder movements in decades.