Supreme Court to weigh in on Child Slavery

Today (December 2nd) is International Day for the Abolition of Slavery.

Yesterday, in a cruel irony, the U.S. Supreme Court heard consolidated oral arguments in Nestlé USA, Inc v. Doe I, Docket number 19-416 and Cargill, Inc v. Doe I, a consolidated case on U.S. corporations and liabilities for alleged child slave labor violations abroad.

The basic facts of what happened are beyond dispute: six Africans were trafficked out of Mali as children, where they were forced to work long hours on Ivory Coast cocoa farms and locked at night into shacks. Attorneys for the six Africans argued that the companies should have better monitored their cocoa suppliers in West Africa and have liability. The countries of the region grow about two-thirds of the world’s cocoa, and child labor is endemic.

Looking at the docket files for the case, one finds amicus briefs from Coca-Cola, Chevron, the U.S. Chamber of Commerce, and a joint filing for three trade associations (National Confectioners Association, the World Cocoa Foundation, and the European Cocoa Association), all in support of Cargill. As well, the Washington Legal Foundation and the Cato Institute filed amicus briefs in support of the corporations.

Cargill and Nestle selected a lawyer well-known to MSNBC aficionados to represent them: Neal Katyal, a former Acting Solicitor General of the United States, and the creator of an inspiring TED Talk.  Both companies have strongly worded policies against child labor and human trafficking and the like. All of the amicus briefs stated that they abhor child slavery and the corporations actively take steps to eradicate such practices among their suppliers.

The broad outline of the companies’ argument is found in the second page of Katyal and his team’s brief:

Plaintiffs’ brief confirms that all they have alleged (and can allege) is that Nestlé USA lawfully purchased some cocoa from Côte d’Ivoire and exercised some generalized supervision. The true wrongdoers are the Malian and Ivorian traffickers, farmers, and overseers who injured Plaintiffs in West Africa.

In other words, the practices of Nestlé, Cargill and, by extension, Chevron, Coca-Cola, and all multi-national corporations with dispersed supply chains are sufficient. The terms of their contracts are clear and exclude child labor, human trafficking, and all forms of modern slavery. Occasionally, they do audits of their suppliers. Isn’t that enough? How can a company be responsible for all the actions of their suppliers?

At issue, according to the briefs, is liability under the Alien Tort Statute, a part of the Judiciary Act of 1789.  It has been enshrined in U.S. law for more than 230 years. To me, the most interesting exchange during the hearing was between Justice Elena Kagan and Katyal (pages 19-21 of the transcript):

JUSTICE KAGAN: Mr. Katyal, is child slavery, not aiding and abetting it but the offense itself, is that a violation of a specific universal and obligatory norm?

KATYAL: We’re — we’re not – yes, I think we’re not challenging that here. It’s just the aiding and abetting.

JUSTICE KAGAN: Okay. So, if that’s right, could a former child slave bring a suit against an individual slaveholder under the ATS?

KATYAL: So they — if it were – if it weren’t extraterritorial and it wasn’t a corporate action, yes.

JUSTICE KAGAN: Yeah, no problem extraterritorial, no problem aiding and abetting, just a straight suit.

KATYAL: Correct.

JUSTICE KAGAN: Okay. And could the same child — former child slave in the same circumstances bring a suit against 10 slaveholders?

KATYAL: You know, if they – if they met the — you know, the requirements under the — the law, yeah, sure. I mean, if they —

JUSTICE KAGAN: Okay. So if —

KATYAL: — if it was a plausible allegation.

JUSTICE KAGAN: — if you could bring a suit against 10 slaveholders when those 10 slaveholders form a corporation, why can’t you bring a suit against the corporation?

KATYAL: Because the corporation requires an individual form of liability under a norm, a specific norm, of — of – under international law, which doesn’t exist here. I think Sosa in Footnote —

JUSTICE KAGAN: I — I — I guess what I’m asking is, like, what sense does this make? This goes back to Justice Breyer’s question. What sense does this make? You have a suit against 10 slaveholders, 10 slaveholders decide to form a corporation specifically to remove liability from themselves, and now you’re saying you can’t sue the corporation?

Justice Kagan was pointing toward an amicus brief from the Yale Law School Center for Global Legal Challenges filed in support of the six Africans. In the brief, Oona Hathaway sets forth a compelling argument that:

Slavery, forced labor, and human trafficking constitute the worst forms of human exploitation. The law of nations has long prohibited these practices in specific, universal, and obligatory terms. Indeed, these prohibitions are among the most longstanding, deeply rooted prohibitions in international human rights law. Each of these prohibitory norms of international law extends, moreover, to natural and juridical [corporations] persons alike. (p. 33)

Citizens United v FEC decided that corporations are people, when it comes to political spending, but corporations are now arguing that they are not people when it comes to child labor, human trafficking, and modern slavery.

I won’t pretend to know how this court will decide the case, but it should go without saying that aiding and abetting slavery is wrong, whether it is done by an individual or a corporation.

Thanksgiving Blessings and Prayers for Those Without

After reading this morning’s headlines (“Dow Cracks 30,000 for First Time“), I went for a run. I had heard the 1 minute press conference yesterday where President Trump referred to this milestone as a “sacred number”.

In a contrast that has defined this year, I listened to the NYT The Daily podcast: A Day at the Food Pantry during my run. A Times journalist described her visit to a food pantry in Brooklyn a few weeks ago. In pre-Covid days, this pantry served 60 people a week and is now dealing with a line of over a thousand. The journalist interviewed people in line, most of which had never visited a pantry before the pandemic hit. “This is my worst nightmare.” The journalist even shared a bit of her own past, growing up on food stamps and sharing a frozen burrito with her sister. Although painful to listen to, I highly recommend you take the 36 minutes to listen to it. 

The pandemic has exacerbated food insecurity that already existed in the U.S. The crisis has revealed the dysfunction of our food system and how structural inequalities contribute to the growing number of food insecure and hungry across the nation. Job losses from the pandemic overwhelmingly affected women, low-wage earners, and minority workers the most. As a result, one in six adults were food insecure two months into the COVID-19 recession. Feeding America reports that, among children, the projected food insecurity rates for 2020 range from 15% (North Dakota) to 32% (Louisiana and Nevada). You heard that right: one third of the children in the richest country of the world go to bed hungry!

So as I sit down to our Thanksgiving turkey tomorrow, perhaps feeling a little sorry for myself for not being surrounded by our typical family gathering, I will count my blessings and pray for those without.

Happy Thanksgiving to all of you… 

Webinar: Fossil Fuels: Engage or Divest

On Monday, November 9th, the U.S. Federal Reserve Bank recognized climate as a risk. Investors of all types can no longer afford to be on auto-pilot concerning investments in fossil fuels. This webinar explores two options: active engagement or divestment. We hear from Rob Berridge and Morgan LaManna of Ceres on how the recommendations of the CA 100+ and the Task Force on Climate-related Financial Disclosures (TCFD) can enhance engagement with companies. We hear from Fr. Peter Bisson, S.J., former provincial of the Canadian Jesuit province. Under his leadership, the province became the first province to divest from fossil fuels shortly after Laudato Si’. Again, we are very grateful for the presence of Rob, Morgan, and Fr. Peter in this webinar, for their commitment to this work, and their generosity in sharing their wisdom and experience with us. As always, we welcome your feedback via a confidential evaluation found here. Slides are available here.

Reflections on the 2020 Election

By Frank Sherman

Like many in this country, I was glued to the TV and cell phone last week waiting to hear the final outcome of the most contentious election in modern history. I volunteered for the first time at a polling location on the south side of Milwaukee to see Americans turned out in record numbers to vote in the midst of the worst pandemic in the last century.

Shortly after the race was called for Biden & Harris on Saturday, ICCR issued a statement saying “We have faced many obstacles and headwinds over the last four years… we must turn the page and get back to work.” Ceres said the election results are a “win for our health, our planet, our economy and our future.” The Catholic Climate Covenant added “the work begins anew to heal together and to work together to protect God’s creation.” I must admit, my heart rate lowered… until Monday morning when reality set in.

The cover article of The Wall Street Journal stated that the election looks like it may yield a “dream scenario for business: a moderate Democratic president whose more aggressive plans can’t pass the Senate, but who eschews the unpredictability that has often marked the Trump administration”. As COVID infections and hospitalizations hit new records this week, and unemployment and food bank lines grow ever bigger, the stark realities facing the next Administration…and us…came back into focus.

So what can we take away from this election? Analyst Bruce Mehlman states that, although President Trump lost for failing to competently manage the pandemic and for sowing excessive chaos and division, House Democrats lost because voters feared too-aggressive ‘socialist’ policies from the Left. We learned that the electorate is not monolithic….and the 72 million Trump voters are not all white nationalists. Many fear that globalization and technology threaten their jobs; their voices aren’t heard by the coastal elitist; and they fundamentally disagree with some policies offered by the Left (e.g. defunding the police, decriminalizing the border, ending fossil fuels, higher taxes).

Our nation remains closely and bitterly divided. Both parties face internal battles over future direction and leadership. Biden is viewed as a transitional leader, hired to manage COVID and bring back civility to our politics. A divided Congress will limit his options. He’s already dismissed      Healthcare For All, the Green New Deal, and a Wealth Tax from the progressive wing of his party. He will now have to rely on executive orders and his regulatory authority to even execute his more moderate agenda.

But there are reasons for hope. Biden is a legislator with a history of finding common ground with Congressional opponents. He is an institutionalist with respect for the people, processes, and      protocol that make government work. The business community recognizes the growing expectations of their stakeholders, asking for them to stand for a higher purpose and to speak out for more inclusive and equitable public policy. The global investor community is demanding corporations to address their environmental and social impacts that haven’t yet appeared on their quarterly earnings statement.

I don’t expect the GOP to suddenly take a knee, like the guards in the Wizard of Oz, to say “All hail Dorothy. The wicked witch is dead!”; no more than I expect Senator Bernie Sanders to invite Senator Mitch McConnell over for Thanksgiving dinner. But as we approach the holiday season, we all can learn from the words of that great and powerful Wizard: “A heart is not judged by how much you love; but by how much you are loved by others.”

SEC’s rule changes set back transparency and shareholder voice

Today, the SEC approved in a 3-2 party-line vote new rules that severely restrict shareholders’ access to the corporate proxy by limiting the filing of resolutions. These new rules are a consequence of lobbying by powerful industry trade associations that have sought to limit shareholder engagement with corporations on critical environmental, social, and governance issues.

The shareholder resolution process, governed by the SEC’s Rule 14a-8, has been effective for decades and has allowed smaller shareholders who had held at least $2,000 of shares for over one year to file proposals asking companies to consider non-binding proposals that may raise questions of environmental and social impacts of corporate policies and practices, or governance best practices.

Today’s new rules will significantly limit investors’ ability to submit these proposals. The new rules raise the thresholds of ownership both in terms of the number of shares and length of time they must be held. Under the new rule, new purchasers of stock must hold $25,000 in shares for at least a year, or hold $2,000 in shares for at least three years.

As well, the new rules make it much more difficult to refile a proposal that has been voted on. The prior rule required 3% support on a first-year vote, 6% on a second vote, and 10% on a third vote to keep a proposal before a company’s shareholders. Now resubmission will require 5% on a first vote, 15% on a second vote and 25% on a third vote. Emerging issues will be much more difficult to bring to the proxy.

SGI’s executive director, Frank Sherman said, “The choice to approve the new rule aims to fix something that is not broken. A half-century of evidence shows that shareholders have an important voice that companies need to hear. Pioneers like Fr. Mike Crosby have helped companies pay attention to environmental, social, and governance concerns that they were missing. To the detriment of U.S. companies, this rule restricts that important voice.”

In a press release, ICCR executive director, Josh Zinner said: “The new rule guts the existing shareholder proposal process, which has long served as a cost-effective way for shareholders to communicate their priorities and concerns to management, with little economic analysis supporting the needs for these substantial changes. The new rules appear to be based on a wholly unsupported assumption that shareholder proposals are simply a burden to companies with no benefits for companies or non-proponent investors when there is 50 years of evidence to the contrary.”

Over many decades, the shareholder proposal process has served as an efficient way for corporate management and boards to gain a better understanding of shareholder priorities and concerns, particularly those of longer-term shareholders concerned about the long-term value of the companies that they own.  Engagement by shareholders has served as a crucial “early warning system” for companies to identify emerging risks and there are hundreds of examples of companies changing their policies and practices in light of productive engagement with shareowners.

For more information:

  • ICCR’s press release can be found here.
  • Joint letter from investor groups regarding the shifting interpretation of 14a-8 No-Action Challenges can be found here.
  • Case Studies showing the impact of the new rules on shareholder engagement can be found here.
  • For more information on the history of comments submitted to the SEC regarding these rule changes visit ICCR and Shareholder Rights Group
  • See also SEC’s Proposed New Rules Threaten Shareholder Democracy
  • See as well SGI’s formal comment submission to the SEC here.

Sr. Ruth Geraets, PBVM to receive SGI’s 2020 Fr. Mike Crosby Award

Sr. Ruth Geraets, P.B.V.M.

The Board of Seventh Generation Interfaith coalition is pleased to announce that Sister Ruth Geraets of the Sisters of the Presentation of the Blessed Virgin Mary of Aberdeen, SD has been selected to receive the 2020 Fr. Mike Crosby Award. The award will be presented at the SGI member meeting on October 12. The Fr. Mike Crosby Award recognizes a person who has promoted a more just and sustainable world and exemplifies the passion and commitment of our founder, Michael Crosby, O.F.M., Cap.

“We are so happy to honor my dear friend Sister Ruth”, said SGI Board Chair Dan Tretow. “She worked closely with the SGI staff and other members in engaging several companies to operate more just and sustainably.”

“Ruth’s dedication to those most vulnerable guides her shareholder advocacy”, added Frank Sherman, SGI Executive Director. “At the same time, her cheerful and gracious attitude creates common ground with corporate management. This is why Sister Ruth has been so effective in her work with companies. Father Mike would be very pleased with this well-deserved recognition.”

Sister Ruth entered the Presentation Convent in August 1961. She earned a Bachelor Degree in Elementary Education and Mathematics at Northern State University and went on to obtain a Masters of Arts Degree in Pastoral Studies from the University of St. Thomas, St. Paul, MN. For 21 years, Sister Ruth taught in Catholic Schools in MN and SD. Her ministry then led her to McDowell County, WV, where she worked with Catholic Community Services serving with those made poor as coal companies were leaving the area. Her compassionate heart led her back to South Dakota where she directed shelters for abused and neglected women and children on the Cheyenne River Reservation. She was Coordinator of Formation and Director of Novices 1999-2011. In January 2008, she was appointed Congregational Treasurer, a position she still holds today.

Sister Ruth became involved with SGI in 2008, serving on the Board for the past 6 years. Her Presentation Congregation has a particular interest in Care of the Earth and the Rights of Women and Children.

Please join us in congratulating Sister Ruth.

Chevron Investors Call for Climate Disclosure

This is the first of a series on the 2020 shareholder meetings

Chevron Corp.’s busy annual shareholder meeting this year featured seven shareholder proposals, on topics ranging from lobbying, climate, and human rights. Cindy Bohlen of Riverwater Investments and Mary Minette of Mercy Investment Services co-filed the human rights proposal led by Sister Nora Nash, OSF, asking the company to provide a report on Chevron’s effectiveness to prevent, mitigate, and remedy human rights impacts of its operations. We were pleased to have received a vote of 17% for a first-year proposal. Other proposals were presented to the company during the AGM by notable figures: Alec Baldwin, Roger Waters, and Jody Williams, which focused on governance issues, and pointed to Chevron’s 50-year involvement (through its acquisition of Texaco) in toxic pollution in Ecuador. 

Another resolution focusing on climate lobbying garnered a 53%, majority vote. The proposal asked the Company for a report explaining how it ensures its lobbying activities are aligned with the Paris climate accord and the goal of limiting global warming. This majority vote agrees with the investor push for companies to be more transparent about their lobbying activities, especially through their membership in trade associations. 

Recent news highlights why this resolution, and this vote, are critical for the Company. Amid the Black Lives Matter protests, news reports tie Chevron to a public affairs firm urging journalists to examine how green groups were claiming solidarity with black protesters while backing policies which would “hurt” minority communities. Naomi Oreskes, a Harvard University history professor and the co-author of “Merchants of Doubt” said that it is “remarkable that the Company tried to leverage national unrest about systemic racism and police violence to promote an expansion of oil and gas drilling.” While Chevron has denied the claims of being a part of this campaign, it raises the question of Chevron’s public statements supporting the Paris Agreement, while its lobbying activities send the opposite message. 

Additionally, the District of Columbia filed a lawsuit against Chevron and other oil and gas companies  for “systematically and intentionally misleading” consumers about the role their products play in causing climate change.” This lawsuit is of another way, of many, of which stakeholders are trying to hold the company accountable for its actions. 
SGI members are calling on Chevron and other corporations to respect human rights. As a member of the Business Roundtable, Chevron signed on to the new statement of purpose for corporations to serve all stakeholders. It’s time for Chevron to live up to their rhetoric!

SGI Statement of Solidarity

Milwaukee, WI, June 1, 2020: Members of Seventh Generation Interfaith Coalition for Responsible Investment are traumatized and outraged by recent incidents of police brutality in our neighborhoods and cities that manifests individual and institutional racism. We mourn the recent police killings of George Floyd and Breonna Taylor and the murder of Ahmaud Arbery, and stand in solidarity with the victims of systemic racial injustice in the United States. While recent events disclose injustice in law enforcement and our criminal justice system, we recognize that institutional racism exists as well in our corporations, our economy and throughout our society.

We lament that years of protests, demonstrations, and marches have failed to bring an end to the suffering, the dehumanization, the oppression, and the loss of so many precious lives. So many people of color who historically have been disenfranchised continue to experience economic inequities, sadness and pain; a pattern seen as well in the path of the COVID-19 pandemic, disproportionately affecting people of color in the number of cases and fatalities.

We recognize our obligation to work as institutional investors, as citizens, and, most importantly, as people of faith to address and change unjust and immoral cultural patterns and social systems. We commit ourselves to listening to the stories of those subjected to institutionalized racism to more authentically accompany them. Through the lens of faith, we will reform our investment practices and challenge companies to increase diversity and address their negative impacts on people of color. We recommit to building a more just and sustainable world for our brothers and sisters who are most vulnerable.