Flowering on Wall Street: activists' clout
Stymied in Washington, some groups lobby corporations to further their aims. Surprisingly, they're getting results.
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.
Still, the private sector is where social activists see an opportunity. The Investor Responsibility Research Center says shareholders are bringing 348 resolutions on social issues, about the same number as last year, to annual meetings this spring. Leading the way with 65 resolutions are environmental issues, where activists see corporate America moving in a more hopeful direction than regulatory Washington.
Over the past 18 months, for instance, institutional investors and environmentalists have argued that any role companies might have in global warming could make them a target for future lawsuits or tough regulations. Some seem to be listening. Three power companies - Cinergy Corp., American Electric Power, and TXU Energy - have analyzed their risks relative to climate change. Southern Co. and Ford Motor Co. have agreed to do the same.
"We have gotten enormous traction with business and investors, not because it's a clever tactic, but because the economic risks are inordinate," says Mindy Lubber, president of CERES, a coalition of environmental, public interest, and investor groups.
Encouraged by progress in framing climate change as a threat to companies' bottom lines, advocates are bringing some new issues before shareholders this season. Those who own stock in Exxon Mobil or ChevronTexaco, for instance, will vote on whether to call on management to report on the likely environmental impact of drilling in Alaska's Arctic National Wildlife Refuge. A leading lobby group to preserve the ban, US Public Interest Research Group (US PIRG), now dedicates half its resources on the issue toward lobbying companies instead of Congress.
Some of its methods are unorthodox, such as recruiting anthropologists to write British Petroleum President John Browne, urging him to consider the Gwich'in tribe that lives in the region. Whatever the impetus, BP said a year ago it has no plans to drill in the refuge. On another issue, US PIRG has been calling on Congress since 2001 to require stricter storage standards at chemical plants where, it says, a terrorist attack in some instances could kill 1 million or more people. Yet because Congress has declined to impose such regulations, the group over the coming year will team up with a network of investors for the first time to help nudge management.
"We've been fighting defensively ever since [President] Bush came to office, but the corporate arena allows us to be more proactive," says Athan Manuel of US PIRG's Alaskan wilderness campaign.
Not every activist group gets a welcome reception at corporate meetings, Mr. Manuel says. Those with no credentials for doing levelheaded policy analysis seldom get a hearing. What's more, some organizations that often do get a hearing say their membership is sometimes wary.
"There are many in the environmental community who do worry about our involvement with the corporate sector," says Kevin Knobloch of the Union of Concerned Scientists. "They worry about us compromising our values."
But activists agree that if they can make a solid case for a policy proposal that makes business sense, executives are often willing to listen. On this score, Friedrich says PETA persuaded McDonald's to adopt a more humane slaughtering method at a cost of $1 million per slaughter line by showing the investment would pay off economically: fewer worker-compensation claims, higher carcass quality, and a higher meat yield.
Similarly, US PIRG believes it can help oil companies tune in to American consumers who don't want oil drilling in the Alaskan refuge. "Maybe the greatest irony is that environmental groups are engaged with corporations where we could help their bottom line," Manuel says. Some 15 years ago, "no one ever would have thought US PIRG would be helping BP bolster its image as a green company. But if they earn it, we're happy to compliment them for it."