What Story Do We Tell?

For an author and former tech company executive, Seth Godin has a no frills blog that offers pithy insight. In a podcast some years back, he observed the following:

“Once you have enough for beans and rice and taking care of your family and a few other things, money is a story. You can tell yourself any story you want about money, and it’s better to tell yourself a story about money that you can happily live with.”

SGI is an organization for those who want to tell a different kind of story about their money than a simple report on the bottom line. Our members are those who want their investments to tell a story consistent with the values and passions of their lives. Our members have served those on the margins in far-flung missions or just on the other side of town. Our members have run schools to provide a quality education, inspired by faith, to those who might not otherwise be able to obtain it. Our members have built health institutions that have served the ill and injured regardless of their capacity to pay. Our members have worked tirelessly to care for and to protect creation. Would it not make sense that the savings destined for their healthcare and retirement, and those funds entrusted to them by generous donors, be used in ways that reflect what our members believe to be important?

Once upon a time, I used to urge folks to look through the last ten checks they wrote—now, I’d suggest that younger readers look through the credit card statement—what do those expenditures say about our priorities and values? The work of SGI is to tell a story with our funds. It is a story that values the poor so often invisible within the economy, especially vulnerable children and women. It is a story where the Earth, its soil and seas and air, is more valuable than the gold and oil buried underground.

A story that focuses solely on the economic return is a story too thin to heal. Indeed, we need a story rich enough to live by. Our story will not interpret the world to everyone’s satisfaction. But, finally, in our judgement, their stories can’t stand up to our stories.

Member Webinar: Shareholder Resolution Process

Today, we hosted our latest webinar for member education on the “Shareholder Resolution Process.” ICCR’s Guide to Filing Shareholder Resolutions is a great tool. We are grateful that Tim Smith of Walden Asset Management and Pat Miguel Tomaino of Zevin Asset Management were able to join us. Their input was a great contribution. Without further ado, here is the video:

 

ICCR Human Rights/Human Trafficking Strategic Review

Two weeks ago, Frank Sherman and I participated in the ICCR Program Strategy Week. The Program Directors met with their Work groups in NYC to evaluate the progress over the past year and chart out a path forward for the 2018-19 corporate engagement season. This article will summarize the human rights/human trafficking session.

Estimates indicate that 27 million victims fall prey to trafficking and slavery each year and that it is a global trade valued at $32 billion dollars. But due to the clandestine nature of these crimes and the reluctance of victims to speak out because they live in fear of physical retribution and/or deportation, trafficking and slavery are typically very difficult to uncover and prosecute. Through the Human Rights/Human Trafficking (HR/HT) Work Group, ICCR members ask the companies they hold to adopt human rights policies that formally recognize human trafficking and slavery and to train their personnel and their suppliers to safeguard against these risks throughout their supply chains. Human rights provides an umbrella for all ICCR efforts.

Investor Alliance for Human Rights (IAHR)

The day prior to our session, the Alliance met as well. It will take some time to define action that corresponds to IAHR or to the HR/HT work group as both groups are concerned with issues that overlap. The Alliance has three components: Human rights responsibilities of investors, collective action, and multi-stakeholder engagement.

The IAHR:

  • Promotes implementation of human rights due diligence by companies
  • Encourages the creation of enabling environment for responsible business conduct through awareness raising, standard setting, and regulatory development – states, multi-lateral institutions, the UN, development banks and, of course, investors
  • Encourages engaged companies to develop and strengthen activities and process to provide remedy
  • Builds partnerships with business community, NGOs, trade unions, local communities and others to leverage this work

It seems likely that the IAHR will focus, this year, on Banking and Tech sectors as it relates to salient human rights issues. Again, it will take some time to develop the necessary coordination between the efforts of IAHR and ICCR working groups.

Ethical Recruitment

Even though we no longer have a full-time staff position, ICCR will sustain efforts in this area. Significant progress has been made, but more work remains to be done.

Companies face significant challenges related to ethical recruitment strategies. Historically, it has been difficult to make progress on labor rights/working conditions for companies in their first tier. Now there is a new paradigm where companies need to think about their labor supply chains in every tier. There is a state of paralysis and it is hard to make progress. While there are leaders who are making progress, not enough companies are following. Most companies focus on attending conferences and webinars and think of a legal response: “What is the shape of the risk to the company?”

When the companies attempt to assess their risk, they often rely on risk-mapping platforms that all tend to give a sense of the country risks (using the State Department’s Trafficking in Persons Report and/or the Labor Department’s child and forced labor report listing countries and commodities), but not go any deeper. Further, the auditing systems need training and refinement: If you don’t ask the right questions, you won’t find forced labor. Occasionally, corporate legal counsel can suggest that the company may not want more information about recruitment as it may open the company to litigation concerning what is discovered. As well, we need to develop clear standards to separate the good from the bad recruiters. Currently, only certain sectors and commodities have been the focus of recruitment: ICT, seafood sector and palm oil sector, and coffee. This work will need to be broadened.

A critical question for work: what is the true cost of recruitment? There is the cost of recruitment, and there are charges that migrant workers pay that are not recruitment costs but the cost of corruption. More focus on this issue is needed plus an emphasis on companies sharing the cost of recruitment with suppliers as well as workers who have paid getting reimbursements. Again, progress has been made, but we must deepen and extend that progress.

Sex Trafficking

We spent some time in discussion about how we might engage companies in the airline industry, hotel industry, transportation sector, and the tech sector. We assessed some of the corporate engagements in recent years as well as identified some of our allies in this work.

Legislative Priorities

We also discussed legislative and regulatory priorities in the upcoming year concerning human trafficking. A significant priority is the re-authorization of the Trafficking Victims Protection Act (TVPA). In the U.S. House (HR 2200)
and in the U.S. Senate (S1311, S 1312, S 1862), bills may come to the floor during this year. Given the mid-term elections and other factors, these bills may not be considered, but advocates are continuing to call for this. Additionally, we want to be mindful of the appropriations process in a few areas: State Department programs to end human trafficking; State and foreign appropriations; some provisions in the Department of Labor as well as Health and Human Services; and appropriations for Homeland Security’s enforcement of the ban on forced and child labor.

In the fight against human trafficking, a critical role for faith-based investors, then, is to continue to work with “Know the Chain,” engaging corporations and boards in conversations about supply chain and due diligence. These efforts keep the issue spotlighted.

Supporting Materials

  1. Materials on the U.N. Sustainable Development Goals:
  1. Know the Chain Benchmarks – 2018 Benchmarks Company Lists (ICT, F&B, Apparel and Footwear)
  2. International Tourism Partnership’s Principles on Forced Labor launched June 12th: http://www.greenhotelier.org/our-news/industry-news/hotel-sector-unites-under-itp-to-tackle-forced-labour/
  3. “Ripe for Change: Ending Human Suffering in Supermarket Supply Chains” Oxfam’s new report, June 21, 2018
  4. One page summary of Global Forum on Responsible Recruitment In Singapore,  June 11-12, 2018

New Vatican Document on Markets and Ethics

While CEOs may have nervously read Larry Finke’s letter, they may find greater guidance in their task reading a new Vatican document, Oeconomicae et pecuniariae quaestiones (Considerations for an Ethical Discernment Regarding Some Aspects of the Present Economic-Financial System). The new document, approved by Pope Francis, running to just over 11,000 words, brings Vatican heft to financial instruments including shareholder risk, subprime mortgages, derivatives, credit default swaps, interbank loans (LIBOR), shadow banking systems (think, cryptocurrency), and offshore tax havens.

While some may consider Pope Francis an outlier, the 49 footnotes, grounded in traditional Catholic teaching, illustrate the continuity of St. John Paul II, Pope Benedict, and Pope Francis on papal teaching related to the economy. The document aims to apply those principles to the current context. The document posits:

No profit is in fact legitimate when it falls short of the objective of the integral promotion of the human person, the universal destination of goods, and the preferential option for the poor. (#10)

In other words, profit in the marketplace, in and of itself, is not enough.

Another paragraph reflects the concerns that we raise in our resolutions regardinging executive compensation with the pharmaceutical companies:

In addition, such logic has often pushed managements to establish economic policies aimed not at increasing the economic health of the companies that they serve, but at the mere profits of the shareholders, damaging therefore the legitimate interests of those who are bearing all of the work and service benefiting the same company, as well as the consumers and the various local communities (stakeholders). This is often incentivized by substantial remuneration in proportion to immediate results of management, but not likewise counterbalanced by equivalent penalization, in the case of failure of the objectives, though assuring greater profits to managers and shareholders in a short period, and thus ending up with forcing excessive risk, leaving the companies weak and impoverished of those economic energies that would have assured them adequate expectations for the future. (#23)

Not only does it speak to management and shareholders, the document offers some challenges to consumers as well:

It becomes therefore quite evident how important a critical and responsible exercise of consumption and savings actually is. Shopping, for example, a daily engagement with which we procure the necessities of
living, is also a form of a choice that we exercise among the various products that the market offers. It is a
choice through which we often opt, in an unconscious way, for goods, whose production possibly takes place through supply chains in which the violation of the most elementary human rights is normal or, thanks to the work of the companies, whose ethics in fact do not know any interest other than that of profit of their shareholders at any cost.

It is necessary to train ourselves to make the choice for those goods on whose shoulders lies a journey
worthy from the ethical point of view, because also through the gesture, apparently banal, of consumption, we actually express an ethics and are called to take a stand in front of what is good or bad for the actual human person. Someone spoke of the proposal to “vote with your wallet”. This is in reference to voting daily in the markets in favor of whatever helps the concrete well-being of all of us, and rejecting whatever harms it. (#33)

For those of us who engage in socially responsible investing, the document concludes with some significant encouragement:

In front of the massiveness and pervasiveness of today’s economic-financial systems, we could be tempted to abandon ourselves to cynicism, and to think that with our poor forces we can do very little. In
reality, every one of us can do so much, especially if one does not remain alone.

Numerous associations emerging from civil society represent in this sense a reservoir of consciousness, and social responsibility, of which we cannot do without. Today as never before we are all called, as sentinels, to watch over genuine life and to make ourselves catalysts of a new social behavior, shaping our actions to the search for the common good, and establishing it on the sound principles of solidarity and subsidiarity. (#34)

The most evocative phrase for me from the document is here, that “we are called, as sentinels.” Frank Sherman, when describing our work in corporate social responsibility, likes to say that we are “canaries in the coal mine.” While more and more people are taking up the work of fighting human trafficking, we would be nowhere were it not for the work of so many dedicated religious sisters who have kept a laser-like focus on the issue. Time and again, faith-based socially responsible investors take up a concern, “as sentinels,” long before others take notice. For 45 years, SGI has been a pioneer in socially responsible investing, and we can draw strength from this document that our work is critical for achieving a more just and sustainable economy.

The full text of the document can be found here in a PDF or on the Vatican website here.

Helpful commentary on the new document can be found here:

Less helpful but interesting commentary:

A Math Challenge for Tech’s Gender Gap

Even if companies pledge to making women the majority of new hires, redressing the gender imbalance at companies like Facebook, Apple, and Google could take more than a decade, according to Jennifer Saba in an article at Reuters Breakingviews. In the age of #MeToo, Silicon Valley firms face new scrutiny about male dominance in their labor force. Reuters also provides a handy calculator to project when a company could achieve gender parity.

Key quotes:

  • “[A]t 200 companies surveyed, women made up 36 percent of entry level positions in the technology sector but just 27 percent of middle-management positions. The figures were worse for positions at vice-president level or above.”
  • “Say Google, Facebook and Apple committed to 51 percent of new staff being women – pretty close to the overall makeup of the labor market.
  • “Based on the rate their workforces expanded last year, and assuming one in five existing workers quit and are replaced annually, it would take Apple 15 years to reach parity. Google would do it in 14, and Facebook in a faster-but-still-slow seven years.
  • “Small steps make a big difference. Set a truly bold goal of six in 10 new hires being women, keeping all else constant, and all three companies would achieve parity within six years.”

Inside the tech industry, efforts like #CauseAScene raise the issue of “inclusion and diversity as the latest marketing buzz words” rather than occasioning substantive change. The sorts of efforts that Saba points to in her article could well occasion real change in Big Tech. Concern about the gender gap in the workforce complements SGI’s work in Racial Justice Investing. Making workforce composition more transparent will help industry leaders, investors, and stakeholders take meaningful steps toward an authentically inclusive and diverse workforce.

Member statement at Kohl’s AGM

Yesterday, Frank Sherman, Chris Cox, and Tim Dewane attended the annual shareholder meeting at Kohl’s. For Kohl’s, the shareholder meeting was the closing of a significant chapter in the company’s history and the beginning of a new chapter. Having begun his career with the company in 1982, Kohl’s CEO Kevin Mansell retired, a post he has held since 2008. With the retirement, Michelle Gass is the company’s new CEO.

Tim Dewane

ICCR and SGI have a long history of engagement with Kohl’s. At the shareholder meeting, Tim Dewane, the JPIC director for the School Sisters of Notre Dame of the Central Pacific Province offered a statement:

Good morning Mr. Chairman and Kohl’s Board members. My name is Tim Dewane, I am the JPIC Director for the School Sisters of Notre Dame of the Central Pacific Province. The School Sisters of Notre Dame CPP are a long time shareholder of Kohl’s and a member of Seventh Generation Interfaith, an ICCR-affiliated coalition of faith-based institutional investors that has engaged in positive dialogue with Kohl’s for nearly 20 years. Our members first sat down with Kevin Mansell and Rick Schepp in 2000 to provide input into the language of Kohl’s Terms of Engagement, a set of standards on worker rights and working conditions for its suppliers throughout the world. Since 2000, faith-based shareholders have met with the company annually and have seen improvements its supplier’s performance on workplace human rights as well as significant improvement in its’ environmental sustainability of your operations through a variety of programs that are described in its 2017 CSR report.

We welcome Michelle Gass as Kohl’s new Chief Executive Officer, the first woman to occupy this important position at the company. We look forward to working with you and your staff. As you build on the legacy of Kevin Mansell we encourage you to expand and deepen the integration of Kohl’s commitment to corporate social responsibility throughout the company’s business strategy and messaging to customers, investors and to society. In the current environment, stakeholders and rating agencies, who have incorporated social and environmental criteria into their valuation of companies, are expecting more transparency of Kohl’s and other companies. Kohl’s has a good story to tell, one that we are working on to improve with every meeting we have with you.

We encourage you to apply ‘human rights due diligence,’ based on the UN Guiding Principles on Business and Human Rights, the new global norm, to identify potential risks to people and communities, especially where your business partners operate in high risk countries where rule of law is weak. In addition, we encourage Kohl’s to join a number of companies in aligning its CSR strategies to the realization of the UN Sustainable Development Goals adopted in 2015 to eradicate poverty, gender inequity, child and forced labor, adverse impacts of climate change, among others, by 2030.

Larry Fink, Chair and CEO of Blackrock, stated in his Letter to CEOs entitled, A Sense of Purpose, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Pope Francis has echoed the understanding of many our own Kohl’s customers when he said that purchasing is not simply an economic act, but also a moral one. We are called to love and care for our neighbors as our selves and in today’s world our neighbor includes not only the folks in this room, or those here in Menominee Falls, but all those whose lives touch ours – including the garment workers in Bangladesh and elsewhere.

We look forward to working with you to build on Kohl’s solid commitment to quality and community – with profits we can all live with. Thank you!

A PDF version of Tim’s statement can be found here.

Update: NYT reports on investors’ letter to Disney

In February, we posted news of SGI and its members joining other investors in a letter to Disney to restrict smoking in products from newly acquired Fox film and television assets. Yesterday, The New York Times carried news of our letter in an article entitled “There’s No Smoking in Disney Films. What About When It Owns Fox?

More about the engagement with Disney on tobacco can be found here: