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Weak Commitment to Human Rights Factors into Boston Common's Decision to Divest of Cisco Systems

Manipulative Vote Tallying Further Isolates Cisco

Weak Commitment to Human Rights Factors into Boston Common's Decision to Divest of Cisco Systems

Manipulative Vote Tallying Further Isolates Cisco

Published 01-11-11

Submitted by Boston Common Asset Management

Boston Common Asset Management, LLC has divested of its holdings in Cisco Systems, Inc. stock (NYSE: CSCO) due in part to the company's weak human rights risk management and poor response to investor concerns. Cisco's deceptive announcement of vote results on proxy items at the 2010 annual shareholder meeting has raised further alarm about the company's commitment to transparency.

Since 2005 Boston Common has led a growing coalition of investors, representing over 20 million Cisco shares, in asking Cisco management to ensure its products and services do not stifle human rights. Cisco has testified before federal law makers twice since 2006 over questions on its human rights record, including its marketing of equipment to the Chinese Ministry of Public Security.

"Boston Common's decision to divest comes after years of campaigning Cisco for greater transparency and accountability on key human rights and business development concerns," stated Dawn Wolfe, associate director of environmental, social, and governance research at Boston Common Asset Management. "Freedom of expression, privacy, and personal security are all critical elements in maximizing network traffic. Politically and socially repressive policies related to speech and privacy has a chilling effect on users and violates universally recognized human rights. When pressed for details on how Cisco addresses these risks, they come up short."

At the November 18, 2010 annual meeting of shareholders, Cisco did not answer yet another request for engagement with shareholders. This followed a September 30, 2010 letter to independent board member and Stanford president John Hennessy requesting his assistance in establishing a meaningful dialogue between Cisco and shareholders on human rights. Similar to previous attempts to engage the Board as a whole, Hennessy did not respond to the request.

"As technology becomes more prevalent in the world, we expect human rights related concerns will become more, not less prominent," said Nevin Dulabaum, president of Church of the Brethren Benefit Trust, a long-time shareholder of Cisco Systems and active participant in the investor-driven human rights campaign. "For all its talk about the 'human network' and adherence to the United Nations Universal Declaration of Human Rights, Cisco has not demonstrated in any concrete way that it fully recognizes its potential impact on human rights around the world."

Boston Common's ESG Team recommended the removal of Cisco Systems from its portfolios because of strong reservations about its human rights performance and poor shareholder engagement on the issue.

Deceptive Vote Tallying Behind Proxy Results Announced at Annual Meeting
In an apparent attempt to downplay votes in favor of shareholder sponsored proposals on the proxy ballot, Cisco used two different methods to calculate proxy results announced at the annual meeting-one for proposals put forward by its own management and a second for proposals sponsored by Cisco shareholders which served to dilute support.

"If management is reporting votes one way for their own proposals and another way for shareowner sponsored proposals, that is deceptive. It speaks volumes about management's attitude towards their own shareowners - a flashing red light. Ignore it at your peril," stated Glyn Holton, executive director, United States Proxy Exchange.

Boston Common's human rights proposal was supported by 34% of voted shares when calculated using the standard SEC method, the one Cisco used to calculate support for its own proposals, including the advisory vote on pay.

If Cisco used the same method based on all outstanding shares to calculate support for its own proposals, not just those sponsored by shareholders, its executive compensation package would have received support from just over half of its shareholders.

"The voice of shareholders fall on deaf ears at Cisco," stated Wolfe. "About a third of Cisco Systems shareholders voting their proxies have supported our proposal over the years, voting in favor of greater disclosure on issues of censorship and privacy. Cisco's deceptive tallying practices in 2010 do not change that. The investor coalition will march ahead, and perhaps one day Cisco will wake-up and realize how dedicated these shareholders are to the company's success. Until then, significant questions remain about its ability to manage risks it is reticent to recognize."

About Boston Common Asset Management
Boston Common Asset Management is an investment manager specializing in sustainable and responsible equity and balanced strategies. We pursue long-term capital appreciation by seeking to invest in diversified portfolios of high quality, socially responsible stocks. Through rigorous analysis of financial, environmental, social, and governance (ESG) factors we identify attractively valued companies for investment. As shareholders, we urge portfolio companies to improve transparency, accountability, and attention to ESG issues. Our focus is global; we manage U.S. and international portfolios, customized to the needs of institutional and individual investors.

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Boston Common Asset Management

Boston Common Asset Management

Boston Common Asset Management is an employee-owned investment firm dedicated to the pursuit of financial return and social change. We offer social investors an unrivaled range of customized social investment products. These include U.S. core- or value-oriented equity and balanced accounts, as well as international and small cap options. Our efforts on the social dimension include thorough independent research, tenacious shareholder advocacy, and community development investing.

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