Shareholders press environmental issues.

• Author: Cogan, Douglas G.
• Position: Meeting the Environmental Challenge

A 10-point environmental code known as the Valdez Principles has once again captured the limelight at many of this year's annual meetings.

The environmental took center stage at many of this year's annual meetings with shareholders. Global warming, ozone depletion, and the plight of the rain forests were among the issues raised in a raft of more than 50 environment-related shareholder proposals. Yet a 10-point environmental code known as the Valdez Principles once again captured the limelight.

Shareholder proponents -- in the third year of proxy campaign -- filed 44 Valdez resolutions in 1992, 30 of which came to votes. Nineteen of the proposals asked companies to sign the Valdez Principles, and 11 others requested shareholder reports on management's reactions to the principles. Of the remaining Valdez resolutions, 10 were withdrawn following constructive dialogue between management and the proponents and four were excluded on technical grounds by the Securities and Exchange Commission.

The Valdez Principles were drafted nearly three years ago by a coalition of environmental groups, social investment advisers, unions, church groups, and trustees of two public pension funds. Collectively, member organizations of the Coalition for Environmentally Responsible Economies, or CERES, control $180 billion in investment assets. Signatories of the Valdez Principles pledge, among other things, to reduce pollution, conserve energy, report to "stake holders" on environmental matters and commit the attention of their managers and directors to these issues.

All of the environmental proposals on the ballot were opposed by management and a majority of shareholders this proxy season -- although nearly all garnered sufficient votes to be eligible for resubmission in 1993. Under the proxy rules set by the SEC, first-year shareholder initiatives must receive support from at least 3% of the shares voted; second-year resubmissions must obtain at least 6% support; and third-year resubmissions at least 10%. As this article went to press, all of the votes on the Valdez Principles have been tabulated at the involved companies.

Resolutions asking companies to sign the Valdez Principles received support from an average of 8% of the shares voted, ranging from 4.1% at Wheelabrator to 12.2% at Occidental Petroleum. Resolutions asking management to prepare reports on their reactions to the Principles fared much better, with average support of 12.3%. Votes in favor of the reporting resolutions ranged from 6.2% at Oregon Steel to 22.2% at Burlington Resources. The outcome at Burlington Resources marks the first time that a "social" proxy issue other than a South Africa-related proposal has crossed the 20% support level.

Thirty-seven private companies and three small publicy traded firsm have signed the Valdez Principles. But major corporations have declined to endorse the code. Those targeted with shareholder resolutions listed their reasons in their 1992 proxy statements. Exxon, whose ill-fated oil tanker gave rise to the name of the Valdez Principles, remarked that they "do not recognize the need to balance environmental protection with the importance of adequate energy resources and a stable, healthy economy. The Principles stress environmental values to the virtual exclusion of all other consierations, such as relative cost as well as benefit."

Critics of CERES

Other companies were critical of CERES, the Boston-Based coalition that drafted the Principles. Atlantic Richfield charged in its proxy statement that "CERES, as distinct from its members, has no financial or ownership interest in ARCO but would nonetheless seek comprehensive oversight of ARCO's [Environmental, Health, and Safety] matters. This is wholly unacceptable." Similarly, Champion International maintained that "The establishment and enforcement of environmental policy should not be ceded to a private, self-appointed organization like...