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Corporate Social Responsibility
News
12.11.2007 - 01:00pm ET
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Shareholder Proposal Revisits Fiduciary Duty at Agribusiness Goliath, Monsanto
(CSRwire) NAPA,CA - December 11, 2007 - Harrington Investments, Inc., (HII) a
socially responsible investment advisory firm, has announced the
introduction of a binding amendment to Monsanto Corporation's corporate
bylaws that could bar corporate indemnification of directors who fail to
adequately oversee corporate activities that cause "harm to the natural
environment, public health, or human rights."
"The idea behind this resolution is that by increasing the personal
accountability of corporate directors, our proposed bylaw amendment would
encourage these fiduciaries to better represent the shareholders of the
corporation - and to serve as better guardians of the public interest,"
said John Harrington, President and CEO of Harrington Investments.
The new vehicle for improving corporate governance will be on the proxy
for the January 16, 2008 shareholder meeting at Monsanto (MON).
"We chose Monsanto as our target for this new approach, because we view
this company as facing significant legal and reputational liabilities that
might have been prevented with better board oversight. These include
allegations of selling potentially dangerous products abroad, bribing
foreign government officials, and releasing genetically engineered
products that have not been proven safe for human consumption or the
natural environment. Such activities are bad for our company's
reputation, and could lead to substantial liabilities," said Harrington.
As recent legal actions against the company demonstrate, failure of the
management to oversee these issues can lead to significant liabilities.
In 2005, Monsanto was forced to pay a $1.5 million fine to settle
allegations that employees bribed Indonesian officials to bypass
environmental laws. In January of this year, a French court fined
Monsanto Agriculture France SAS and Monsanto's French distributor, Scotts
France, after a former chairman of Monsanto Agriculture France was found
guilty of false advertising. Then, in February of this year, it was
reported that the British Environment Agency had begun an investigation
into "one of the most contaminated sites in Wales" - a former Monsanto
dump that could cost more than $200 million to clean up according to a
reported estimate. In October of this year, Monsanto was sued by dozens
of West Virginians alleging that pollution from a now-defunct Monsanto
factory caused them to contract various types of cancer; they are seeking
$5 million each in compensatory damages and $300 million in punitive
damages. This lawsuit is particularly worrisome to investors because it
is reminiscent of a 2002 settlement in which the company agreed to pay the
preponderance of a $700 million settlement to offset damages to human
health and the natural environment in Anniston, Alabama.
The management of Monsanto, in its statement opposing the resolution, has
asserted that the amendment would increase the vulnerability of board
members to lawsuits. But according to Harrington, the board members would
still have ample protection under existing law, since the courts generally
would not hold board members personally liable where they exercise
reasonable business judgment and oversight. The bylaw amendment does not
change that, but seeks to create new indemnity rules applicable to
directors who may have failed to carefully oversee environmental, human
rights or public health matters. In egregious cases, Harrington believes
directors, as fiduciaries, and not the shareholders, should bear these
liabilities.
Harrington cited a written public statement by Hugh Grant, Monsanto's CEO,
in which Grant wrote that "an unwavering commitment to integrity in all
business operations is at the core of our corporate behavior. We must
never take this commitment for granted… Integrity means doing what is
right even when we are faced with situations not governed by any specific
law or regulation. Sometimes the right thing to do is not clear, but at
Monsanto our job is to seek and find the right answer in every business
situation."
Harrington challenged Grant's statement, "I have the impression that it is
mostly 'noise' and has little to do with the reality of Monsanto's
continuing egregious corporate conduct." Harrington added: "At least our
proposal would add a concrete mechanism to encourage directors and
officers to act as true fiduciaries in considering the interests of all
stakeholders - including shareholders - who may be impacted by Monsanto's
operations."
Monsanto steers itself into controversies in many of the areas where they
operate. Recently, Monsanto Corporation has been the focal point of
widespread protests about potential dangers to public health and the
natural environment posed by promulgation of genetically modified
organisms (GMO). Media reports have linked thousands of farmer suicides
in India to use of Monsanto products. Additionally, due to concerns that
the technology would threaten the livelihood of poor farmers worldwide,
the United Nations' Convention on Biological Diversity voted
overwhelmingly in 2006 to uphold an international moratorium on
Monsanto’s "Terminator" seeds. Monsanto's introduction of rBGH, which
is injected into cows to increase milk production, has been the subject of
much controversy.
This resolution is the latest in Harrington Investments' longstanding
ownership-advocacy relationship with Monsanto management. For instance, a
2005 resolution called for the formation of an ethics oversight committee
in response to Monsanto being fined for violating the Foreign Corrupt
Practices Act. However, Monsanto omitted the resolution from the ballot
asserting that it related to the company’s "ordinary business."
About Harrington Investments
For the past 30 years, Harrington Investments, Inc. and John Harrington
have been pioneers in socially responsible investing and shareholder
advocacy. HII manages approximately $200 million in assets for
institutional and individual investors concerned with social and
environmental, as well as financial performance.
In addition to Monsanto, Harrington has introduced several other binding
corporate bylaw amendment resolutions this year. If approved, these bylaw
proposals would result in such innovations as the creation of board level
human rights or sustainability committees.
This communication is not a proxy solicitation, and Harrington Investments
will not accept any proxies. Harrington Investments urges shareholders to
vote "FOR" the indemnification stockholder proposal on Monsanto
management's proxy.
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