Flowering on Wall Street: activists' clout

For the past 35 years, Common Cause has lobbied Congress on everything from open- meetings laws to campaign-finance reform. But facing stiff resistance to its issues in Washington these days, the good-government group is opening a second front in its push for reform: Wall Street.

Yes, activists are using capitalism to make the world a better place. Surprisingly, they're making headway.

By forging a political coalition with shareholders at the nation's 30 largest mutual funds, Common Cause aims to pressure corporations to reveal which political campaigns they have supported. Its hope: Outraged shareholders will force more scrutiny and demand change.

It's a strategy that activists of various stripes are using. If a Republican Congress and administration prefer free markets to regulation, the thinking goes, then use marketplace dynamics to raise standards. Wall Street is listening.

"There has been ... a growing awareness of what organized money can do in terms of effecting change in corporate behavior," says Susannah Goodman, senior project director at Common Cause. "It's a great tool, and we'll see it growing. It's already growing."

For instance: Under pressure from shareholders, pharmaceutical giants Schering-Plough and Johnson & Johnson this year joined Morgan Stanley in reporting what they contribute to political action committees. At shareholder meetings this spring, another 41 companies will consider following suit.

Though marketplace activism isn't new, the shifting focus of regulation-minded groups is. Even those in tune with Washington's political majority sometimes find that they get more bang for their buck by contacting executives instead of representatives.

Consider the Mississippi-based American Family Association (AFA), a socially conservative force with 2.2 million members. Every week for the past year, the group has e-mailed its members prewritten letters, urging them to send the letters to various corporate executives. The missives often urge a firm to stop advertising on risqué TV shows.

A number of companies have pulled their ads, says special- projects director Randy Sharp. "We've been very successful" - more so than in lobbying the Federal Communications Commission. "It's been a lack of law enforcement at the FCC that's to blame, so the only alternative is grass-roots lobbying of these executives."

Not all organizations use the same tactics. The AFA doesn't use shareholder resolutions, Sharp says. Others are not only aligning their interests with shareholders', but are also buying stock in order to sponsor resolutions of their own.

Two years ago, People for the Ethical Treatment of Animals (PETA) owned stock in 10 companies with checkered track records on animals, says Bruce Friedrich, the group's director of farmed-animal campaigns. But over the past 15 months, PETA has invested another $90,000 to buy $3,000 worth of stock in 30 more companies. One rationale: if PETA as shareholder could persuade McDonald's to stop scalding chickens at supply-chain slaughterhouses, then other major meat buyers might also raise standards for their suppliers.

If proposing new regulation would trigger massive corporate opposition, "it's far more effective to work through corporations and through the private sector to effect change," Mr. Friedrich says.

Activist groups across the board insist they are not abandoning their regulatory efforts but merely augmenting them, since they believe market forces cannot achieve every important goal. The Union of Concerned Scientists, for instance, continues to press Washington for higher gas-mileage requirements in the automotive industry, even as it spends a growing share of its resources in Detroit urging carmakers to take steps on their own.

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