Who owns Exxon? We do.
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Sullivan's enlistment of large-scale investors provided an example for CERES; the Valdez oil spill provided a name. There were ten Valdez Principles in all, drafted with agreement among the CERES members (listening to Bavaria talk, I got an impression of endless telephone debates over minor wording changes). The first six principles are such standard tenets of corporate environmentalism as sustainable use of natural resources, waste reduction,"wise use" of energy, and the marketing of safe products
But the last four principles had more -- well, more teeth. Number seven suggested that after causing any ecological damage, companies would "make every effort to fully restore the environment and to compensate those persons who are adversely affected." Number eight promised to disclose any potential environmental, health, or safety hazards. Number nine promised to appoint someone representing environmental interests onto the board of directors of the company. And number ten promised an annual public audit of a company's progress
How successful have the Valdez Principles been? Depends on how you define success. The 21 companies that have signed so far include some iconic standard-bearers of Good Business Practice: Smith and Hawken Tools, Stonyfield Yogurt, and the Aveda cosmetics company. (Ben & Jerry's ice cream company is reportedly considering signing.) Some giant companies, including such prominent large "environmentalist" firms as Du Pont, McDonald's, and General Electric, were targeted by CERES members (notably by church groups, who by now are old hands at stock proxy battles). These companies are ruminating over the Principles. Signing would mean tremendous public-relations value (CERES encourages companies to announce that they have signed them); but corporate lawyers have worried that the Valdez compensation and disclosure clauses might give potential litigators more grounds for a lawsuit.
More significant still is the effect which the Principles might have on institutional investors. The pensionfund managers whom Wayne Silby spoke to, a year and a half ago, sat stonily through his talk. They asked if he wanted them to invest in charity projects, like subsidized housing for the homeless, and sacrifice their return on investment. But this October, the Association for Basic Management Research - - a group of pension-fund analysts -- held their own conference on socially conscious investing. Meanwhile, investors' resolutions at 40-odd companies will be voted on this spring, sponsored by CERES members, suggesting that GE, Du Pont, Chrysler, GTE, and others sign the Principles. Most of the proxy battles will involve institutional investors -- who flexed their muscles a little bit in 1989 by forcing Exxon to add an environmentalist to their board of directors. (The funds suggested Robert Redford, Gary Hart, or Gaylord Nelson, the senator who had first suggested Earth Day. Instead, Exxon chose Dr. John H. Steele, the president and senior scientist of the Woods Hole Oceanographic Institution.)
Most of these proxy battles will probably fail; last year's Valdez Principles resolutions scored around five percent of the vote each. But Silby, Bavaria, and Hayes, each in their own way, insisted that wasn't the point. Five percent is considered a fair showing for a first-year proposal. Also, faced with the Valdez Principles, companies and industries are introducing their own codes of environmental ethics, or debating such codes at top corporate levels. Some of these ethics include agreements (by Kodak, Ford, GM, Corning, American Express, Gannett) to answer CERES' intensive questionnaire. Sometimes, this represents the first time a CEO has considered his company's pollution or energy practices.
Like many of the corporate reform efforts of the past few years, the Valdez Principles will require an immense amount of data-gathering about companies. Indeed, CERES' people (while they've released their first questionnaire for corporations, in a booklet resembling an SAT exam) are still deciding what sorts of disclosure they should require from companies. Should they seek pollution-measuring numbers? Or (asks Bavaria) will numbers turn out to be as potentially misleading as budget projections have been in the financial world? (That's the unknown scandal of the "bottom line": all too often, it doesn't measure anything.) If CERES describes a company's record in words, how can they ensure that the words are fair? They'd have to standardize such evanescent forms of data before one company's good works could be measured against another's
But no less a luminary than Peter Drucker is writing that systematic audits can be conducted -- indeed, must be conducted -- before the problems in pension-fund socialism can be resolved. Institutional investors can't make hunches: they need data. With what Drucker calls "systematic audits" of every aspect of a company's performance, they can reward those companies that actually think ahead. Environmentalists wouldn't have even been part of this reform ten years ago; now, if the Valdez Principles continue to grow in influence, they'll lead it.