In Proxy Votes, Harvard Abstains on Warming

The Harvard Corporation largely sidestepped the growing national debate over global warming this year with a handful of abstentions on proxy votes of corporations in which the University holds shares.

The Corporation Committee on Shareholder Responsibility (CCSR), which votes the University’s shares, released its annual report earlier this week explaining votes on nearly 100 shareholder proposals involving social issues, including nine proposals related to global warming and greenhouse gas emissions.

The report covers all CCSR-related votes from the spring 2003 proxy season, the March through June period during which many publicly-held corporations hold their annual shareholder meetings.

The CCSR chose to abstain on six of those proposals, which called for various reports on gas emissions and reduction by a forest products company and five electric utility firms.

Five of the six abstentions contradicted non-binding recommendations by the Advisory Committee on Shareholder Responsibility (ACSR), a 12-member board of students, faculty and alumni formed in conjunction with the CCSR in 1972 to provide student input on the University’s investment decisions and shareholder voting actions.

The CCSR followed the ACSR’s advice on 66 of the 98 proposals, but where the two groups diverged—on issues ranging from labor to animal rights—the advisory committee’s recommendations tended to fall to the political left of the Corporation committee’s final decisions.

Harvard’s annual votes on shareholder proposals are highly anticipated by corporations as well as other investors.

As a significant institutional investor in the equities market—the University holds nearly $3 billion in stock—Harvard is a powerful proxy voter in corporate America.

At the same time, many groups, including other Universities with large investments and the Washington-based Investor Responsibility Research Center, look to Harvard as a bellwether on socially-oriented proxy proposals.

Despite strong ACSR support for a yes vote on an environmental code of conduct—known as the Ceres Principles—proposed this year to Plum Creek Timber shareholders, the CCSR abstained on the measure. However, a letter by the Corporation committee to the company last spring sought “to express support for the underlying goals of the Ceres Principles,” according to the report.

Elizabeth A. Gray, secretary to the CCSR, explained the committee often abstains when it supports an issue in principle but has qualms with the specific wording of a proposal.

“The proxies should be clear and direct,” Gray said. “If they are ambiguous, they become increasingly difficult to support.”

Working on Labor

A proposal for labor reform sponsored by the International Labor Organization (ILO) and submitted to multiple firms garnered broad, though far from unanimous, support among members of the ACSR but drew mixed responses from the Corporation committee.

The proposal, which bans the use of child labor and asserts trade union and collective bargaining rights, was submitted this year to seven companies in which Harvard owns stock, including Stride Rite and Home Depot.

The advisory committee’s votes supported the ILO standards for all seven companies, but the CCSR only voted for the proposal in three cases. The committee abstained on the remaining four, citing “ACSR’s very narrow margin of support” and a precedent of no-votes from both committees.

Concerns over alleged human rights violations by American companies overseas came to a head in a number of shareholder proposals with which the two committees grappled.

The ACSR threw unanimous support behind a proposal that oil giant ExxonMobil “review its policies related to human rights,” and the CCSR followed suit with a vote in favor of the measure.

But the Corporation committee abstained on other human rights proposals submitted to Coca-Cola, AOL Time Warner and Boeing, in light of split votes on the ACSR.

Voting in Shares

Harvard’s significant stock holdings—in companies from consumer products manufacturer Avon to aerospace firm Lockheed Martin—entitle the University to powerful votes on a wide range of proxy issues which set financial and social policy within corporations.

The CCSR consists of Corporation members Conrad K. Harper, James R. Houghton ’58 and D. Ronald Daniel, who is also the University treasurer.

“Personally, I think it would make more sense to have it operating as a joint committee” between the Corporation and the advisers, said Emma S. Mackinnon ’05, one of four students and the only undergraduate on the ACSR.

The Corporation committee, which was formed following cries for divestment from companies conducting business with the Apartheid government of South Africa, has continued to play an important role in shaping the University’s stance on investing in politically contentious stocks.

Over the past 15 years, the CCSR has moved to completely divest Harvard of its shares in tobacco companies and prohibit future purchases of tobacco stock.

While the city councils of Boston and Cambridge voted last spring to impose smoking bans at local bars and restaurants, the CCSR cast its vote in favor of a similar smoking ban at the restaurant chains of Yum! Brands, which include KFC, Pizza Hut and Taco Bell.

Taco Bell was also the subject of another proposal, in response to concerns over the Mexican fast-food restaurant’s Florida tomato pickers, who have objected to the company’s labor practices. The committee abstained on the measure, which would have required Yum! Brands to prepare a report on the company’s social, economic and environmental practices.

The CCSR and ACSR both agreed to support proposals at Dover, J.C. Penney, ExxonMobil and Centerpoint Energy adding the category of sexual orientation to the non-discrimination policies of those companies.

Similarly, the two committees agreed on their opposition to a shareholder proposal at Coca-Cola to remove sexual orientation from the company’s equal employment policies and “cease support of homosexual lifestyle and other deviant lifestyle behaviors opposed by the majority of the people.”

Also at Coca-Cola, the CCSR agreed—after a unanimous ACSR vote—to oppose a measure to withdraw company support for National Public Radio in light of the station’s allegedly biased coverage of the Middle East.

The Corporation committee also opposed a shareholder proposal at J.P. Morgan to “refrain from making charitable contributions.”