Walden to Present Chamber Resolution on Floor of AGMs

Investors have been urging companies serving on the Board of the U.S. Chamber of Commerce (“the Board”) to reevaluate their role on the Board. They point to a significant disconnect between the companies’ public commitment to corporate responsibility and sustainability and the Chamber’s aggressive lobbying and political spending against issues ranging from climate change legislation to healthcare reform.

In January, forty-four investors with $43 billion in assets wrote to nearly three dozen companies with representation on the Chamber Board. In March, a dozen investors led by Walden Asset Management began implementation of a new strategy to encourage companies to review their role on the Chamber Board – moving resolutions from the floor of annual stockholder meetings.

While shareholder resolutions submitted for company proxy statements under Securities and Exchange Commission (SEC) rules are a common occurrence, under company bylaws investors are also able to propose a resolution to be moved from the floor for action at the stockholder meeting. These resolutions can be much more direct and specific than resolutions submitted under SEC rules.

To date, floor resolutions addressing Chamber Board membership have been submitted this proxy season to 3M Company, ConocoPhillips, CVS Caremark, Eastman Kodak, JPMorgan Chase and Pfizer. More resolutions are anticipated to be filed with other companies this spring.

Additionally, shareholder resolutions on the broader topic of political spending and U.S. Chamber of Commerce involvement will appear on the proxy statements of 3M, IBM and PepsiCo for a shareholder vote in 2011. Accenture has received a similar resolution for inclusion in its proxy for the 2012 stockholders meeting. Overall, nine companies face official investor inquiries regarding their Chamber role.

After a constructive dialogue with executives at Pfizer, shareowners who sponsored a floor resolution officially withdrew the initiative. They commended Pfizer for a new policy prohibiting the use of any corporate funds for independent political expenditures in candidate elections, as well as the new appointment of their top environmental executive to the Chamber Committee on the environment where he will represent Pfizer’s positions. They felt this, plus an agreement to continue dialogue, was positive forward movement that made the resolution unnecessary.

Investors participating in floor resolutions or the challenge to companies to evaluate their participation on the Chamber Board include Walden Asset Management, PAX World Investments, The Sustainability Group of Loring Wolcott & Coolidge, Boston Common Asset Management, Clean Yield, Sisters of St. Joseph of Carondolet, Christopher Reynolds Foundation, First Affirmative Financial Network, Unitarian Universalist Association, Trillium Asset Management and Domini Social Investments.

“The strategy of moving a resolution from the floor at an annual stockholders meeting, under a company’s bylaws, is seldom used, stated Timothy Smith, Senior Vice President at Walden Asset Management. “This approach allows us to bring an official piece of business before the Board, management and investors for debate and a vote.” Such a resolution does not need to meet the SEC requirements to appear in a company’s proxy statement providing shareowners with additional flexibility.

“Use of this new strategy demonstrates that investors place a high priority on challenging corporate leaders on environmental and corporate responsibility when they are perceived to be speaking with two contradictory voices”, concluded Smith. Investors are asking companies to compare their own policies, priorities and actions to those of the Chamber, which has taken aggressive stands in opposition to environmental legislation and regulation.

Example of Floor Resolution Presented to U.S. Chamber of Commerce Board Members (JPMorgan Chase)

Whereas, many investors are concerned about our company’s role as a Board member of the U.S. Chamber of Commerce given a number of high profile as well as partisan positions by the trade association that may contradict our company’s policies and programs.

JPMorgan Chase is a key part of the decision-making process that shapes the work of the U.S. Chamber. The web site of the U.S. Chamber describes the role of Directors as follows: “Directors determine the U.S. Chamber’s policy positions on business issues and advise the U.S. Chamber on appropriate strategies to pursue. Through their participation in meetings and activities held across the nation, Directors help implement and promote U.S. Chamber policies and objectives.”

JPMorgan Chase believes, with good cause, that the U.S. Chamber is a constructive leader for business on many issues and wishes to continue its membership in the Chamber. Since our company has a Director on the Board, investors are likely to assume that our management stands firmly behind the U.S. Chamber’s lobbying, political spending, legal actions and public statements on major policy issues.

Yet we know that many companies have expressed deep concerns about the disconnect between their own policies and the positions of the U.S. Chamber, including it’s:

Strident, politically partisan positioning during recent elections.

  • Hostile opposition to climate change legislation and decision to sue the U.S. Environmental Protection Agency to limit its ability to regulate carbon emissions.
  • Defense of BP after the oil spill.
  • Pledge to dismantle healthcare reform and to help unseat members of Congress who voted for the legislation.
  • Petitions to the Department of Labor challenging investors who, in exercising their fiduciary responsibilities, consider environmental, social and governance factors in company engagements and proxy voting.
  • Announcement in November 2010 of an initiative to oppose new regulations being proposed in the implementation of the Dodd-Frank bill.

Many companies, and investors, that are committed to sustainable business practices are very concerned about these and other actions of the U.S. Chamber. However, Chamber Board members representing companies who share these concerns often do not exercise their responsibility to shape its policies and programs, nor do they challenge initiatives that they believe undercut their own business actions or explain publicly what their own positions are when the Chamber lobbies, speaks out or sues.

A number of our company’s own policies and programs on the environment, climate change and political spending stand in stark contrast to the actions of the U.S. Chamber. We believe that our company should utilize its position on the U.S. Chamber Board to advance JPMorgan Chase’s positions and help protect our reputation and competitive position. Passive acceptance by Directors of U.S. Chamber policies is neither good governance nor responsible oversight.

With an organization as visibly aggressive as the Chamber, it is vitally important for our company, as its Board member, to have a plan on how to advance our positions and turn the Chamber in another direction, if necessary.

Hence, investors plan to present the following resolution for action at the 2011 stockholders meeting. We are hopeful that this resolution will encourage our Board and senior management to reevaluate our role as a Board member of the U.S. Chamber of Commerce and to take the necessary steps to end the contradictions between our company’s policy positions and those of the U.S. Chamber.

Therefore, be it resolved: The shareholders request that the Board of Directors initiate a review of our role on the Board of the U.S. Chamber of Commerce that includes an evaluation of:

1. The consistency between the U.S. Chamber’s policies and our company’s priority environmental, social and governance (or corporate responsibility) policies and programs. As part of this process, particular focus should be on the Chamber’s new regulatory initiative to block or stall emerging regulation through lawsuits or pressure on congressional representatives and regulators.

2. Options to distinguish, as necessary, our company’s position from that of the U.S. Chamber such as:

  • Stating publicly that the Chamber’s position does not reflect our company’s views on specific issues;
  • Requesting that the Chamber state publicly that members have different and varied positions;
  • Working with other Board members to ensure varying and diverse opinions are expressed at the Forum in a democratic process.

3. Dues and additional payments made, how they are utilized, and if any restrictions should be placed upon them (e.g. limits on monies used for political spending and specific election contests).

4. The governance of the U.S. Chamber and our role as a Board member, including oversight and checks and balances, and our responsibilities with respect to Chamber programs and initiatives. This process should also address how Board members evaluate and provide feedback on the performance and compensation of the Chamber’s CEO.

5. How our company can engage more effectively with investors and other stakeholders regarding its director role in the U.S. Chamber of Commerce.

The results of this review should be made available to investors by October 1, 2011.

I don’t hold any shares in JPMorgan Chase. If I did, I’d see if I would assign the to Walden or another party attending the AGM so they could vote in favor of the resolution. Although it has no chance of passage, actions like this could bring back meaning to the AGM.

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