Annual Summary of Shareholder Activity 2017-2018

As we reflect on this past year of portfolio review, loan distribution, corporate engagements, and social justice grants, we can’t help but note the headlines that flash across our screens, our lives, and our world.

“Facebook isn’t too big to fail.”… “Don’t want Teacher Swat Teams! …“Fed up nuns make Wells Fargo do a paper!”…  “Well Methane Far Above Reported Level!”… “Police Find Handmade Gun & 1,600 Rounds While Investigating Delco High School Threat Suspect!”… “A Lament for Our Times!”…

Many, many times each day our lives are interrupted by these flashes of information that alert us to the most recent happening or tragedy in our global community. Generally we stop for the moment, glance at the headline, say a prayer, and continue with the designated task which for us right now is to hone in on our own corporate responsibility report and reflect on our investor stewardship, shareholder engagement, and the long term value of embracing opportunities to support justice. We are all aware of the overarching social, political, and moral crisis in our country. Our advocacy work with corporations indicates that we have entered the discourse and are promoting the common good while remaining in touch with the discord. We will continue to advocate, confront, and resist appropriately! The presence of Mark Zuckerberg (Facebook’s irresponsible business model) and Tim Sloan (Wells Fargo­­­­­­­­–unethical sales) before congress demonstrates for us that business ethics and corporate social responsibility are at risk, not only in the corporate boardrooms but also in the halls of congress. We are confronted with issues of data breaches, gun violence, immigration, bank fraud, opioid abuse, methane pollution, chemical hazards, water rights, trafficking, bonded labor, prison abuse, climate change, and a lack of social and political will all around us. We wrestle with the solutions and, in spite of all the obstacles, we are strengthened by the many, many opportunities for positive engagement and actual progress with numerous companies.

The big question is: How did our corporate responsibility office respond to the Marjorie Stoneman Douglas High School massacre? Actually we have had the topic of guns and violence on our agendas for years as we worked with corporations to stop violent video games and movies. During our Department of Defense contractors meeting on August 9, 2016, several of us—led by Judy Byron, OP, Northwest Center for Responsible Investment, decided to explore what we could do as faith-based investors to speak to corporations about gun violence. Immediately some of us (religious congregations and Catholic Health Systems) purchased stock in Sturm, Ruger & Co., Dick’s Sporting Goods, American Outdoors, and formed our own issue group on gun violence. It is necessary to own stock in a company for at least one year before one can file a resolution. That gave us until the fall of 2017 to own the shares. Last summer we sent letters to these three companies to share our perspective and concerns. We addressed gun violence as a moral, human rights, health and safety issue with specific concerns around

  • universal background checks for sales and transfer;
  • limits on semi-automatic weapons and high-capacity ammunition magazines;
  • consumer safety standards, childproof safety features, and authorized-user identification technology for all guns;
  • better preventive and therapeutic services for children and families facing violence in their homes and communities and for children with unmet mental health needs.

Our resolution with Dick’s Sporting Goods was filed on December 28, 2017,  which led to a dialogue on January 26, 2018. Coincidental or not, Walmart and Dick’s Sporting Goods adopted a voluntary corporate social responsibility measure consisting of limiting the sale of any gun only to customers over 21 years of age. Our initiative in conjunction with numerous other citizen action(s) was extremely beneficial for Dick’s Sporting Goods by enhancing their corporate reputation and commitment to human rights. This may lead to lower sales but having an enhanced corporate reputation is an additional step toward sustainability.

We have filed similar resolutions with Sturm, Ruger, & Co. and American Outdoors. The results will be known after their annual general meetings. Presently, we have sent proxy memos to large institutional shareholders such as Blackrock, Vanguard, State Street, and others to get support for our resolution. How is it possible that in a democratic society where 68% of Americans are in favor of legislation, we are limited in our political and social intervention? The basic answer lies in the irresponsible lobbying practices in Washington, DC; Pennsylvania; and other states. The National Rifle Association is committed to manipulating public opinion and tries to instill in our minds that the second amendment is under attack. We will continue to raise our collective voice to challenge this and other unjust structures as we renew our commitment to bring “mutual service to the needs of others, especially the economically poor, the marginal, and the oppressed.”

Finally, the Interfaith Center on Corporate Responsibility (ICCR) new investor statement will be an important tool for us as we address this issue.  http://www.iccr.org/investor-statement-gun-violence


HUMAN RIGHTS AND THE RIGHTS OF COMMUNITIES

Sr. Nora Nash (center) poses with other shareholders at the Hershey annual general meeting.

We have joined a new ICCR Alliance called the Investor Alliance for Human Rights. This group will help support coordination, communication, and action among members. We will also be able to do rapid response actions and share key human rights initiatives. We will continue to be guided by our Franciscan charism, the United States Council of Catholic Bishops, he UN Guiding Principles on Business, and Human Rights: “Protect, Respect, and Remedy.” http://www.iccr.org/our-issues/human-rights/investor-alliance-human-rights

Boeing, Chevron, Hershey, Macy’s, Northrop Grumman, Wells Fargo, and others:

Our engagement with these specific companies on human rights policies and issues is not new but it is often a struggle to get a full commitment from companies. The references in their business codes are generally helpful but spur only minimal action toward a human rights due diligence framework. We continue to require human rights benchmarks, assessments and inclusion of ethical recruitment, and a no fees policy.

We filed an ethical recruitment resolution with Hershey and in return got a serious commitment from the company. Sr. Nora and TriState Coalition members spoke at the Hershey annual general meeting on May 2 and had an excellent follow-up meeting.

Our dialogue with Macy’s raised a grave concern related to child workers in tanneries in Bangladesh. https://www.pbs.org/newshour/show/bangladeshs-leather-industry-exposes-workers-and-children-to-toxic-hazards


TRAFFICKING

This issue is covered in many dialogues related to human rights, supply chain, and worker rights.

Delta Airlines

Our dialogue on 1/8/18 related to human trafficking was encouraging and informative. We congratulated the company for the ad in their inflight magazine and the mention in the Wall Street Journal (WSJ) on 12/14/17. The company has launched a new employee engagement effort— training for all front-line employees. They will be educating all 80K Delta employees on the signs (of trafficking) to look for in airports and on airplanes. Their goal this year at launch is to hold a rally to raise education and find ways that workers can be active in combatting trafficking. The new training is excellent. Sr. Nora did a training module and it was very clear. There are up to 350 ambassadors that want to volunteer and get on board—leaders in their work group share and educate their teams. https://www.travelpulse.com/news/airlines/delta-raising-awareness-for-trafficking-victims.html

American Airlines

ICCR members, including Sr. Nora met with the company in Washington, DC, on 1/23/18 to dialogue on numerous aspects of the company’s human trafficking efforts. They were commended for their response to ECPAT Code, and their commitment to training programs for ALL staff. American Way magazine will put an ad in a quarterly issue on human trafficking. The company is very keen on getting “things right” We have many concerns with the increasing collection of biometric data which will be the subject of our next dialogue. https://www.wral.com/american-airlines-agent-saves-teens-from-suspected-human-trafficking-plot/17352102/


WATER ~ A HUMAN RIGHT

One of the hottest topics besides gun violence is the human right to water. Water is a human right recognized by the member states of the United Nations General Assembly and Human Rights Council which established the mandate to assist governments and stakeholders, including corporations, to respect, protect, and fulfill the human right to water.  The Sisters of St. Francis of Philadelphia work with numerous companies to ensure that there are policies in place that uphold the human right to water.

Apache, Coca Cola, Chevron, Lockheed Martin, Northrop Grumman, and others:

The Sustainable Development Goals are key in these discussions, especially SDG #6.

https://www.un.org/sustainabledevelopment/sustainable-development-goals/…The companies listed above are key companies where this work is being done. Apache doesn’t deny the human right to water but the CEO won’t directly answer the question. Lockheed Martin and Northrop Grumman are slow works in progress. Another investor and Sr. Nora drafted a letter to Chevron’s new CEO asking him to address this issue. Coca Cola has made significant progress and recognizes the right. After many years we are proud to see this on their website. It’s worth a visit.

https://www.coca-colacompany.com/stories/our-position-the-human-right-to-water-and-sanitation


WATER – IMPACTS OF BUSINESS OPERATIONS

Archer-Daniels Midland (ADM), Campbell Soup, Monsanto, Tyson Foods:

ADM set a 15% water reduction by 2020 and has incentivized growers to practice more responsible water use and pollution management. In our recent dialogue, investors encouraged ADM to think about adopting a Human Right to Water Policy in alignment with SDG 6. Campbell Soup has made progress in water tracking and reporting which is driving greater accountability. They have adopted a new water policy. A Monsanto dialogue is scheduled for late May and ICCR’s shareholder proposal on water with Tyson received 15.83% of the vote. They have not been willing to dialogue.


CLIMATE CHANGE/ CLIMATE JUSTICE

We are continuing to do what we can to address the risks related to climate change and responsible stewardship of Earth’s resources. Indigenous communities and peoples in the global south are among the most vulnerable though they contribute the least to the global problem. Our work with organizations such as Carbon Disclosure Project, Environmental Defense Fund, Catholic Climate Covenant, Investor Environmental Health Network, and Ceres enables us to challenge companies to work toward a two degree scenario.

Apache, Chevron, Conoco Phillips, Exxon Mobil, Southern Company, Banks, and many others:

All of these companies finally recognize that climate change is a global issue and each has taken a position and some steps to address their impacts on the world community. The oil and gas industry persistently believes that fossil fuels will always be part of the energy mix and we are pressing hard for science-based targets, carbon disclosure, and Carbon Disclosure Project reporting.


HYDAULIC FRACTURING: Curbing Methane Emissions

Apache, Anadarko, Chevron, Conoco Phillips, Chesapeake:

Each year we meet with these particular companies on different aspects of hydraulic fracturing focusing mainly on water, air, community health, and human rights. This past March we met with representatives from 12 oil and gas companies as well as nongovernmental organizations. The main points of the dialogue were methane and carbon risk. There was evidence of good progress and reporting by some companies and also evidence of difficulty with the expenses for leak detection and repair which is a practice used to identify and repair components including valves, compressors, pumps, tanks, pipelines, and connectors in order to reduce greenhouse gas emissions and increase efficiency. All companies have taken some steps to be more vigilant in monitoring water, air, and chemicals. Dialogues continue to be productive.


ACCESS TO NUTRITION

Campbell Soup, Kroger, McDonald’s, Target, Yum! Brands:

Recent dialogues with Campbell Soup, Target, and Kroger demonstrated a commitment to offering healthy choices. McDonald’s and Yum have both agreed to dialogues to be held in June. McDonald’s has partnered with Alliance for a Healthier Generation to improve the nutritional profile of Happy Meals. Both companies have come under scrutiny recently for exporting high fat, high sugar processed foods to developing countries that had generally not previously been exposed to this level of unhealthy food. Studies have shown a profound negative impact on health.


ANTIBIOTICS IN MEAT

Aramark, Hormel, McDonald’s:

Aramark is developing an antibiotic policy within its Animal Welfare Policy. Despite buying Applegate Farms—an organic chicken operation—Hormel continues to struggle to expand its portfolio of organic and other meats that are free from antibiotics. McDonald’s also has found it difficult to apply antibiotic standards to beef and pork.


FOOD WASTE

Aramark, McDonald’s, Target, Yum! Brands

Aramark is a leader in reducing food waste with its membership in the Food Waste Reduction Alliance and the EPA’s Food Loss 2030 Champions coalitions. Target is developing wellness product standards and will include metrics in its next Corporate Social Responsibility report. McDonald’s and Yum have both developed programs to limit waste in their operations but do not address front-of-store (customer) waste. We’ve encouraged them to consider ways to educate the public on this topic.


CONTRACT SUPPLIERS/VENDOR STANDARDS/ETHICAL RECRUITMENT

Boeing, Darden, Ford, Hershey, General Motors, Kroger, Sears, Target, and Walmart:

Each of the above companies are at different levels of progress. All companies are meeting the requirements of the California Supply Transparency Act. Some are using the Global Compact Principles and/or the Sustainable Development Goals to address the issues of responsible sourcing of goods. We are working diligently to implement the “No Fees Campaign” and “Ethical Recruiting.” An in-person meeting with Kroger at their HQ on 11/9/17 covered various facets of their work on supply chain human rights. The company has developed a payment and data system using Oracle software called Supplier Hub. This will enable them to track second tier suppliers as well. Although disclosure of audit results is still weak, we’re encouraged by their use of the Sustainability Consortium’s mapping tool.


ACCESS TO CAPITAL

We continue to meet with several of these financial institutions for a variety of purposes and issues. Risk culture, ethics, human rights, gun violence, loans to oil and gas companies, and loans to prisons have been front-line discussions. The Financial Choice Act passed last June repealed many of the regulations related to the Dodd-Frank regulatory framework. Essentially, Wall Street is freed from many protections and we have lost the power of the Consumer Financial Protection Bureau.

Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, and Wells Fargo:

Bank of America and Citi responded positively to the gun violence issue. Bank of America has strengthened its environmental and social risk policies. J.P. Morgan Chase (JPMC) is a major stockholder of private prisons and, according to the SEC filings, there are significant financial ties between the bank and private prisons. During our dialogue of 4/13/18, the bank’s representatives could not answer Sr. Nora’s question: Why does JPMC collect fees, interest on credit, bonds, and loans as well as invest clients’ money in shares of CCA or the GEO group (private prisons)? Why is JPMC increasing its bottom line when the commodity with which one is dealing is a human being, a captive human life, an immigrant, a refugee? We will be continuing this line of discussion and due diligence in our next dialogue.

We have kept you updated on the Wells Fargo happenings and will continue to do so. Our presence at the AGM (Annual General Meeting) and at the Stakeholder Council meeting in Des Moines, IA, was effective and well received. A separate report will follow.


TOBACCO

Comcast, Disney, Time Warner:

Comcast (NBC Universal) has not engaged with us on smoking images. ICCR sent a letter on 10/2/17 making the case against tobacco and requesting a dialogue, but received no response. Disney is in the process of buying Fox’s movie business and we asked if they will hold all past and future Fox movies to the Disney standard. Disney said they must wait until the deal is finalized before speaking with us. https://www.nytimes.com/2018/04/25/business/media/smoking-movies-disney-fox.html?rref=collection/sectioncollection/business&action=click&contentCollection=business&region=rank&module=package&version=highlights&contentPlacement=2&pgtype=sectionfront

Altria, Phillip Morris:

Our resolution with Altria will be presented at the Annual Meeting later in May. We are asking the company to take steps to preserve the health of its tobacco-using customers by making information available to them on the nicotine levels for each of their cigarette brands, and to begin reducing nicotine levels in brands to a less addictive level. A 1/12/18 dialogue with Altria focused on the FDA’s proposal to lower nicotine levels in all cigarettes.

Philip Morris has produced a new cigarette-like device that heats tobacco but does not burn it. They believe the lack of combustion makes this a much safer product. They established the Foundation for a Smoke-free World, but the health community remains skeptical. After our dialogue on 1/9/18 we remain skeptical also.


ACCESS TO HEALTH CARE

Domestic Health: AbbVie, Amgen, Bristol-Myers Squibb (BMS), Johnson & Johnson (J&J), Merck, and Pfizer:

We continue to struggle to move the needle on drug pricing transparency with pharma companies. Shareholder resolutions requesting transparency have been omitted previously. This year proposals will go to a vote at AbbVie, Amgen, and BMS asking that executive pay be connected to drug pricing performance. Dialogues with J&J and Pfizer did not produce meaningful information on pricing.

Domestic Health – Insurance: Aetna, Anthem, UnitedHealth:

Our initial dialogue with Aetna—scheduled for January 2018—was postponed by the company due to the pending merger with CVS. We are attempting to schedule a dialogue with UnitedHealth for July. A major issue is the consolidation of health players from mergers of insurance companies, retail pharmacies, pharmaceutical companies, and medical groups. The most alarming is the merger of insurance companies with pharmacy benefit managers.

Global Health: Bristol-Myers Squibb, Johnson & Johnson, Merck, and Pfizer:

Working with Access Accelerated, BMS has made significant progress on expanding access to affordable healthcare in low-income countries. A recent dialogue with J&J revealed many new initiatives on access in midtier countries. Dialogues have been held with all four companies. Their global access programs give anecdotal information because the programs are tailored to specific areas. Various indexes do not take into account the specific circumstances of each country such as level of government cooperation.

Rite Aid, Walgreens, Boots Alliance:

Rite Aid’s merger with Walgreens failed with Walgreens buying about half of the stores. Rite Aid has announced that grocery chain Albertsons will buy them out but will keep the Rite Aid stores open. We sent a letter to Albertsons suggesting they remove tobacco from the Rite Aid stores when the merger is complete. We will file a resolution with Walgreens on the U.N. Sustainable Development Goals in July.


OPIOID CRISIS

AmerisourceBergen, Pfizer:

As members of the Investors for Opioid Accountability, we have led the shareholder engagement with AmerisourceBergen, one of the big three distributors. Our shareholder resolution—asking for a board report on actions it has taken to address the opioid crisis—received 41.22% of the vote. Pfizer subsidiary Hospira manufactures overdose treatment drug Naloxone. Prices have risen dramatically during this epidemic.


LOBBYING DISCLOSURE & VIRTUAL-ONLY AGM

Comcast, ConocoPhillips, United Parcel Service, Walgreens, Duke Energy:

We cofiled a shareholder resolution with UPS on Lobbying Disclosure requesting greater transparency of money spent through trade associations and other third party grassroots organizations. Tom will present the resolution at the company AGM on 5/10/18. Comcast’s decision to hold virtual-only AGMs prompted our filing but the SEC sided with the company on that proposal.  However, ConocoPhillips changed their policy to return to a hybrid meeting – allowing both in-person and virtual presence. Duke Energy spent $44,482,000 from 2010-2016 on federal lobbying. These figures do not include lobbying expenditures to influence legislation in states where Duke Energy also lobbies but disclosure is uneven or absent. The company is a member of the Business Roundtable and Edison Electric Institute and the American Legislative Exchange Council. We had a dialogue with the company on 11/13/17 and filed the resolution on 11/17/17. Duke filed a no action with the Securities and Exchange Commission (SEC). We withdrew the resolution because it would not have passed SEC.


CHEMICAL FOOTPRINT & PRODUCT SAFETY

Hasbro

On 3/23/18 we sent a letter (with signatories from 18 other investors) to the company with a request that it participate in the Chemical Footprint Project. This survey seeks to assess the extent to which companies proactively manage chemicals to capture new market opportunities and avoid the financial and social risks of hazardous chemicals. Hasbro responded very quickly and a productive dialogue was held on 4/12/18.

Dollar Tree

The company has not made any progress in either transparency or producing a progress report on the elimination of chemicals in their products. We will check for a dialogue during the summer.

Dollar General

On 7/8/17 Sr. Nora wrote a letter to Dollar General asking for a response and dialogue on product safety noting that the Toxic Substances Control Act does not currently ensure that consumer products have been tested or evaluated on the chemical issues of growing concern to consumers. Scientists have associated chemical impacts with some of the health issues such as the health risks which include cancer, neurological damage, reproductive and immune system damage, or impaired child development. Dollar General responded to our letter but we still filed a resolution with New York State. We held a dialogue on 1/31/18 and withdrew the resolution conditionally. Another meeting will be scheduled.


CONCLUSION:

We appreciate your taking time to read our report and we look forward to your comments.

– Nora Nash, OSF, and Tom McCaney