DARTMOUTH COLLEGE ADVISORY COMMITTEE ON INVESTOR RESPONSIBILITY EXECUTIVE SUMMARY PREPARED FOR THE DARTMOUTH COMMUNITY 2009 JANUARY, 2010

Transcription

1 DARTMOUTH COLLEGE ADVISORY COMMITTEE ON INVESTOR RESPONSIBILITY EXECUTIVE SUMMARY PREPARED FOR THE DARTMOUTH COMMUNITY 2009 JANUARY, 2010

2 I. EXECUTIVE SUMMARY 1. Overview In 2009, the Dartmouth College Advisory Committee on Investor Responsibility ( ACIR ) completed its sixth full year of operation since it was convened by former President James E. Wright in The principal mission of ACIR is to review proxy resolutions relating to important social issues and to make recommendations to Dartmouth through the College s Investment Office on how it should vote specific shareholder-initiated proxy resolutions for publicly traded companies in which Dartmouth directly holds shares. In addition, ACIR is charged with making recommendations to Dartmouth regarding: the desirability of disclosing information regarding Dartmouth s investment portfolio to its constituents; the process by which Dartmouth determines its position with respect to proxy resolutions, and the practices Dartmouth employs to express its positions; the guidance, if any, that Dartmouth s investment advisors should be given to avoid selection of investment positions that could be deemed inconsistent with Dartmouth s mission; and the possibilities for education of students and other interested parties regarding the goals and constraints of Dartmouth s investment portfolio. 2. ACIR Recommendations on the Voting of Proxy Resolutions Beginning on April 1 and ending in late May, ACIR met on a weekly basis to review proxy resolutions and make recommendations on the voting of proxy resolutions. ACIR continued to employ several voting policies. ACIR continued its previous policy of recommending that the College vote in favor of all proxy resolutions requesting companies to issue reports to shareholders on their web sites detailing political contributions. And consistent with the prior practice of increasing efficiency and remaining true to its mission of advising Dartmouth on the responsible exercise of its shareholder rights, ACIR agreed to continue its policy of recommending that Dartmouth vote to abstain on all social issue proxy resolutions for companies in which Dartmouth directly held shares if ACIR was unable to review and make recommendations upon such resolutions or in circumstances where ACIR did not feel that it was adequately informed upon the issues being raised by a given resolution. In 2009, ACIR made recommendations to the Dartmouth College Investment Office on the voting of sixty-nine proxy resolutions. These proxy resolutions dealt with the following social issues subject areas: animal welfare, banking issues, bio-engineering, charitable contributions, defense contracting, disclosing prior government service, global climate change, miscellaneous environmental issues, equal employment opportunity, global labor standards, healthcare reform, human rights, linking executive compensation to social criteria, political contributions, sustainability reporting, tobacco sales and advertisement, and several resolutions that are best characterized as miscellaneous. Every single ACIR recommendation was accepted by the

3 Investment Office and voted upon accordingly. The chart below provides a summary of the recommendations made by ACIR in Issues Proxy Proxy Resolutions Recommendations Resolutions Voted Support Oppose Abstain Animal Welfare Banking Issues Bio-Engineering Charitable Contributions Disclose Prior Government Service Defense Contracting Environmental Issues: Global Climate Change Environmental Issues: Miscellaneous Equal Employment Opportunity Global Labor Standards Healthcare Reform Human Rights Linking Executive Compensation to Social Criteria Miscellaneous Social Issues Political Contributions Tobacco Total Recommendations Made Screens to Prevent College Ownership of Shares of Certain Companies with Operations in Sudan Acting on recommendations from ACIR, in November 2005 the Board of Trustees of Dartmouth College announced that it would bar College ownership of shares in six publicly traded companies with operations in Sudan because their activities amounted to direct complicity in the genocidal activities of the government of Sudan in the Darfur region. Initially, ACIR identified six companies with operations in Sudan that rose to that level of complicity. Pursuant to the Board of Trustee s direction, Dartmouth College s Investment Office created a Sudan No Hold List containing the names of those six companies and created a mechanism with which to notify its managers as to the identity of companies on the Sudan No Hold List. After the creation of the Sudan No Hold List, ACIR recognized that it bore the onus to ensure that the companies on the List continued to meet the criteria set by the Board of Trustees and to recommend new companies for inclusion on the Sudan No Hold List when necessary. Using a variety of resources, a subcommittee of ACIR meets at least annually to review the operations of

4 companies on the Sudan No Hold List and to also review the operations of other publicly held companies with operations in Sudan. The subcommittee then forwards its recommendations for revisions to the Sudan No Hold List to ACIR for approval. If ACIR accepts the subcommittee s recommendations, ACIR forwards them to the Investment Office for action. Pursuant to this process, ACIR forwarded additional recommendations to the College s Investment Office on February 2, These recommendations requested that several companies be added and several companies be removed from the No Hold List. The Investment Office accepted ACIR s February recommendations. As of this date, the following thirteen companies are on the Sudan No Hold List: AREF Investment Group, AviChina Industry and Technology Company, China National Petroleum Company, Kejuruteraan Samudra Timor Berhad, Kencana Petroleum Berhad, Lundin Petroleum AB, Muhibbah Engineering Berhad, Oil & Natural Gas Company Limited, PetroChina, Petronas (Petrolium Nasional Berhad), Ranhill Berhad, and Sinopec Group (China Petrochemical Corporation). ACIR will continue to monitor the situation in the Darfur region of Sudan and of publicly traded companies with operations in Sudan s oil sector or that supply military equipment to the Sudan government. Absent any significant improvement in the human rights situation in Sudan, ACIR anticipates that the College will continue to maintain the Sudan No Hold List. The warrant for the arrest of Sudanese President Hassan al-bashir, issued by the International Criminal Court on March 4, 2009, suggests that changes in Sudan are, if anything, moving in the wrong direction. 4. Russell Athletic Labor Controversy In March 2009, the College s General Counsel requested ACIR s assistance in assessing a controversy surrounding the labor practices of a company licensed by the College to use its trademarks and logos. Specifically, Russell Athletic had been accused of interfering with workers rights of association at one or more plants in Honduras in violation of the Code of Conduct of the Fair Labor Association, to which the College is an affiliate. Russell Athletic was then licensed by the College to create certain sports uniforms and to manufacture and sell various products emblazoned with the College s trademarks and logos. Numerous colleges and universities across North America had terminated their license agreements with Russell Athletic as a result of these allegations, and the College sought ACIR s guidance on whether it too should terminate Russell Athletic s license agreements. At the General Counsel s request, ACIR investigated the allegations and prepared a recommendation for action. ACIR determined that the Fair Labor Association was taking diligent steps to enforce its Code of Conduct at Russell Athletic facilities and to assist Russell Athletic in adopting various recommendations issued by the Fair Labor Association to Russell Athletic. ACIR also concluded that the most productive and beneficial course of action for

5 Russell Athletic s employees would be for the College to maintain its licensing agreement with the company. Therefore, ACIR recommended that the College maintain its licensing agreement with Russell Athletic as long as the company remained a Participating Company in the Fair Labor Association. Dartmouth College accepted and approved ACIR s recommendation. 5. Access to Information about Dartmouth s Holdings and to ACIR s Meetings ACIR continues to make available to the Dartmouth community a listing of Dartmouth s direct holdings of publicly traded equities. This listing is updated on a quarterly basis and is available for review during normal business hours at Dartmouth s Investment Office, which is located at 7 Lebanon Street, Hanover, New Hampshire. In addition, members of the Dartmouth community are welcome to attend ACIR s regular weekly meetings in the spring. 6. Membership 2008 There were fifteen voting members of ACIR for during All ACIR members were appointed by President James E. Wright. In 2009, ACIR members came from the College s faculty, administration, and undergraduate and graduate schools. In 2009, John M. Carey, Chair and Professor of Government, John Wentworth Professor in the Social Sciences, served as Chair of ACIR for the second year. Other ACIR members included: Marina Agapakis, Dartmouth College 09; Eric V. Edmonds, Professor of Economics; Shane B. Galie, Investment Analyst, Office of Investments, Dartmouth College; Richard Howarth, Professor of Environmental Studies; Heather Huff, Investment Analyst, Office of Investments, Dartmouth College; Joshua R. Keith, Tuck School of Business 09; Micaela N. Klein, Dartmouth College 10; Daniel R. Lynch, MacLean Professor, Thayer School of Engineering; Kathleen E. Moriarty, Dartmouth College 09; Kevin D. O Leary, Associate General Counsel, Dartmouth College; Eric Ramsey, Associate Director of Collis Center & Student Activities, Dartmouth College; Paul A. Schned, Dartmouth College 03, Tuck School of Business 09; and Lora G. Wise, Executive Assistant to Executive Vice President for Finance and Administration. Allegra B. Lubrano served as ACIR s Executive Administrator for the sixth year. 7. Executive Summary Conclusion Shareholders continue to file proxy resolutions at publicly traded companies in record numbers. Individual shareholders, foundations, unions, religious organizations, social investment funds, pensions and special interest groups filed nearly 400 such social issue proxy resolutions at public companies in

6 2009. Of the resolutions filed, nearly half came to votes at annual meetings. In addition, negotiations between resolution proponents and recipient company management resulted in the withdrawal of scores of resolutions. Issues relating to socially responsible investment continue from college campuses to Fortune 500 board rooms. Despite the continuing challenging economic environment, ACIR believes that the notion of the shareholder as a responsible investor will continue to gain traction. ACIR accomplished much in 2009, both with regard to the 69 recommendations it made on the voting of proxy resolutions, its continuing review of the activities of companies operating in Sudan and its review and recommendation relating to the College s license agreement with Russell Athletic. ACIR will be joined by several new members in 2010, and it looks forward to continuing its work in the coming year.

7 APPENDIX I INDEX TO ACIR RECOMMENDATIONS ON 2009PROXY RESOLUTIONS BY COMPANY KEY: F = Recommended a vote in favor of resolution O = Recommended a vote to oppose resolution A = Recommended a vote to abstain on resolution W= Withdrawn by proponent P = Vote pending at time of report Company Subject Area Rec. Support Altria Group Healthcare Reform A 3.9% Altria Group Human Rights F 25.0% Altria Group Tobacco (demographics) A 3.6% Altria Group Tobacco (youth smoking) O 4.2% Altria Group Political Contributions F 28.9% AT&T Corp. Political Contributions F 31.8% Avon Products Miscellaneous (Nanomaterials) F 9.7% Bank of America Banking Issues A 33.4% Bank of America Disclose Prior Government Service O 7.8% Bank of America Healthcare Reform A 7.5% Caterpillar Inc. Political Contributions F W Chevron Corp. Environment (host country laws) F 8.7% Chevron Corp. Global Climate Change F W Chevron Corp. Human Rights (report on criteria) F 26.7% Chevron Corp. Human Rights (verifiable policy) F 29.1% Cisco Systems Human Rights (board committee) A P Cisco Systems Human Rights (censorship) A P Citigroup Inc. Political Contributions F 30.0% Coca-Cola Co. Enterprises Healthcare Reform A 4.5% ConocoPhillips Environment (oil sands) F 30.3% ConocoPhillips Global Climate Change F 27.4% ConocoPhillips Healthcare Reform A 7.1% ConocoPhillips Political Contributions F 27.5% CVS Caremark Corp. Political Contributions F 39.5% E.I. Du Pont De Nemours & Co. Healthcare Reform A W Exxon Mobil Corp. Equal Employment Opportunity (perks) F 7.9% Exxon Mobil Corp. Equal Employment Opportunity (sex. orient.) F 39.3% Exxon Mobil Corp. Global Climate Change (quant. goals) F 29.0% Exxon Mobil Corp. Global Climate Change (renewable energy) F 27.3% Exxon Mobil Corp. Global Climate Change (task force/report) A 10.0% Exxon Mobil Corp. Healthcare Reform A W Exxon Mobil Corp. Link Executive Pay F 11.6% General Dynamics Military/Defense Contracting F 3.2% General Mills Inc. Political Contributions F W Home Depot, Inc. Equal Employment Opportunity F 22.3% Home Depot, Inc. Global Climate Change F 23.7% Honeywell International Healthcare Reform A 11.0% Intel Corporation Environment (Right to Water) A 5.9% J.P. Morgan Chase & Co. Banking Issues F 8.4% J.P. Morgan Chase & Co. Disclose Prior Government Service O 4.2% J.P. Morgan Chase & Co. Global Climate Change O 3.0% KB Home Healthcare Reform A 4.6%

8 Lear Corporation Global Labor Standards F 13.9% Lockheed Martin Military/Defense Contracting F 7.1% Lowe s Companies Healthcare Reform A 4.4% McDonald s Corp. Animal Welfare F 5.9% Microsoft Corp. Charitable Giving A P Microsoft Corp. Healthcare Reform A P Norfolk Southern Corp. Political Contributions F 33.9% Northrop Grumman Military/Defense Contracting F 4.9% Occidental Petroleum Human Rights F 7.5% PepsiCo Inc. Charitable Contributions O 5.0% PepsiCo Inc. Environment (Recycling) F 8.7% PespiCo Inc. Bioengineering O 8.4% Pulte Homes Link Executive Pay A 8.8% Sprint Nextel Political Contributions F 38.4% The Allstate Corp. Political Contributions F 31.2% The Coca-Cola Company Human Rights O 3.8% The Goldman Sachs Group Healthcare Reform A W The Goldman Sachs Group Miscellaneous (bylaws econ. Security) O 4.2% The Goldman Sachs Group Political Contributions F 28.9% The Hartford Fin. Ser. Group Political Contributions F W The Walt Disney Company Political Contributions F 28.3% United Technologies Defense Contracting F 4.8% Valero Political Contributions F 39.1% Wal-Mart Stores, Inc. Equal Employment Opportunity F 12.8% Wal-Mart Stores, Inc. Political Contributions F 11.7% Wells Fargo & Co. Political Contributions F 27.2% Wyeth Inc. Political Contributions F W

9 APPENDIX II INDEX TO ACIR RECOMMENDATIONS ON 2009 PROXY RESOLUTIONS BY SUBJECT AREA KEY: F = Recommended a vote in favor of resolution O = Recommended a vote to oppose resolution A = Recommended a vote to abstain on resolution W= Withdrawn by proponent P = Vote pending at time of report Animal Welfare McDonald s Corporation F 5.9% Banking Issues Bank of America A 33.4% J.P. Morgan Chase & Co. F 8.4% Bioengineering PepsiCo Inc. O 8.4% Charitable Contributions Microsoft Corp. A P PepsiCo Inc. O 5.0% Defense Contracting General Dynamics F 3.2% Lockheed Martin F 7.1% Northrop Grumman F 4.9% United Technologies F 4.8% Disclose Prior Government Service Bank of America O 7.8% J.P. Morgan Chase & Co. O 4.2% Environment: Miscellaneous Chevron Corp. (host country laws) F 8.7% ConocoPhillips (oil sands) F 30.3% Intel Corporation (right to water) A 5.9%

10 PepsiCo Inc. (recycling) F 8.7% Equal Employment Opportunity Exxon Mobil Corporation (sexual orientation) F 39.3% Exxon Mobil Corp. (perks) F 7.9% Home Depot, Inc. F 22.3% Wal-Mart Stores, Inc. F 12.8% Global Climate Change Chevron Corporation F W ConocoPhillips F 27.4% Exxon Mobil Corporation (task force/report) A 10.0% Exxon Mobil Corporation (quant. goals) F 29.0% Exxon Mobil Corporation (renewable energy) F 27.3% Home Depot, Inc. F 23.7% J.P. Morgan Chase & Co. O 3.0% Global Labor Standards Lear Corporation F 13.9% Healthcare Reform Altria Group A 3.9% Bank of America A 7.5% Coca-Cola Company Enterprises A 4.5% ConocoPhillips A 7.1% E.I. Du Pont de Nemours A W Exxon Mobil Corp. A W Honeywell International A 11.3% KB Home A 4.6% Lowe s Companies A 4.4% Microsoft Corporation A P The Goldman Sachs Group A W Human Rights Altria Group F 25.0% Chevron Corporation (report on criteria) F 26.7% Chevron Corporation (verifiable policy) F 29.1% Cisco Systems A P Cisco Systems A P Occidental Petroleum F 7.5% The Coca-Cola Company O 3.8% Link Executive Pay Exxon Mobil Corp. F 11.6% Pulte Homes A 8.8%

11 Miscellaneous Avon Products (nanomateriuals) F 9.7% The Goldman Sachs Group (bylaws econ. Security) O W Political Contributions Altria Group F 28.9% AT&T Corp. F 31.8% Caterpillar Inc. F W Citigroup Inc. F 30.0% ConocoPhillips F 27.5% CVS Caremark Corp. F 39.5% General Mills Inc. F W Norfolk Southern Corp. F 33.9% Sprint Nextel F 38.4% The Allstate Corp. F 31.2% The Goldman Sachs Group F 28.9% The Hartford Fin. Ser. Group F W The Walt Disney Company F 28.3% Valero F 39.1% Wells Fargo & Co. F 27.2% Wal-Mart Stores, Inc. F 11.7% Wyeth Inc. F W Tobacco Altria Group (demographics) A 3.6% Altria Group (youth smoking) O 4.2%