Coca-Cola proposal endorsement may have domino effect elsewhere

Coca-Cola Co., Atlanta, for the first time ever, is endorsing a shareholder proposal.

The board is urging shareholders to support a proposal calling on the company to issue a report on the economic impact of HIV/AIDS, tuberculosis and malaria on its operations.

PepsiCo Inc., Caterpillar Inc. and ChevronTexaco Corp. are opposing similar resolutions, which are proceeding to votes at those companies.

All resolutions are being sponsored by members of the Interfaith Center of Corporate Responsibility, New York, which is hoping Coca-Cola's board endorsement will bolster support at the other companies.

A board endorsement "is fairly rare," said Patrick McGurn, special counsel and vice president and director-corporate programs at Institutional Shareholder Services Inc., Rockville, Md., who said there may have been a handful or so in the last several years.

Such a board endorsement "is a virtual guarantee of nearly unanimous support for the proposal," Mr. McGurn said.

The primary sponsor of the Coca-Cola proposal, the $100 million investment fund of the Adorers of the Blood of Christ, Wichita, Kan., was joined by five other religious groups and the $1 billion Service Employees International Union Master Trust Fund, Washington, as co-sponsors. All are members of ICCR, a coalition of faith-based and other institutional investors representing $100 billion in assets.

Coca-Cola's endorsement came after meetings over two years among the company staff, members of the Coca-Cola Africa Foundation and representatives of the ICCR groups, said Daniel Rosan, ICCR program director for public health, and confirmed by a company spokeswoman.

Mr. Rosan expects the resolution to be adopted because of the company's endorsement.

The board, in the proxy statement recommending shareholders vote in favor of the proposal, summarized its existing global activity on AIDS and other health care and said, "It is in this spirit of collaboration that we welcome this opportunity to work with our shareowners in coordinating additional resources and skills in the fight against HIV/AIDS."

Coca-Cola's annual meeting is April 21 in Wilmington, Del.

In fact, Mr. Rosan said company officials told him they hope to have the report ready to present to shareholders at the meeting.

"HIV/AIDS is a critical issue for the business and for our share owners," said Lori George Billingsley, Coca-Cola director-media relations. "Because the issue is important to the business, we believe this is an opportunity for share owners to not only express support for the resolution, but also voice their support for the company's approach to this issue."

The resolution is the first time Coca-Cola ever endorsed any shareholder proposal, Ms. Billingsley said.

Shareholder proposals calling for reports on the economic impact of AIDS are going for a vote at PepsiCo, where it received only 7.5% of the vote last year, and at Caterpillar and ChevronTexaco, both where it appears for the first time.

Purchase, N.Y.-based PepsiCo, whose annual meeting is May 5 in Plano, Texas, expects to issue its proxy statement in the next week, said Elaine Palmer, manager-corporate information. PepsiCo belongs to the Global Business Coalition on HIV/AIDS, a corporate group that also includes Coca-Cola and ChevronTexaco.

"We do understand their (ICCR group's) point of view and appreciate it," Ms. Palmer said. "We agree as responsible corporate citizens we need to address this issue."

PepsiCo has begun to use guidelines of the Global Reporting Initiative for reporting on social and environmental as well as economic factors. The Global Reporting Initiative, started by the Coalition for Environmentally Responsible Economies in 1997, became an independent institution in 2002 to develop voluntary globally applicable and sustainable reporting guidelines.

"We feel because we will use the global reporting initiative, this (ICCR shareholder proposal) would have been redundant," Ms. Palmer said. "We need time to report. They (the ICCR groups) wanted us to report in six months."

Caterpillar, Peoria, Ill., in its proxy statement, calls the proposal excessive, noting sub-Saharan Africa accounted for only 1% of the company's total assets, 3% of net earnings and 3% of the company's sales and revenues. The statement points out employees in the region have access to company-subsidized health benefits covering counseling, voluntary testing and treatment programs for HIV/AIDS. Caterpillar's annual meeting is April 14 in Chicago.

Mr. Rosan said ICCR representatives had telephone conversations with Caterpillar officials to try to reach a compromise on the proposal. Despite Caterpillar's health-care effort with its employees, he said, "If the company (Caterpillar) has good policies, there is no reason for them not to report.

"Reporting in a proxy statement isn't enough," Mr. Rosan said. "Reporting on a narrow workplace setting isn't enough. Our resolution calls for reporting on the economic impact. If (Caterpillar) contractors aren't treated, if the communities around them (Caterpillar operations) are destabilized (by AIDS), that's a problem for investors.

"The issue is, are we doing this (introducing shareholder proposal) as humanitarians or shareholders? As humanitarians, Caterpillar‘s response is fine. As fiduciaries, it's not sufficient."

ChevronTexaco, San Ramon, Calif., opposes the proposal in its preliminary proxy statement. ChevronTexaco's annual meeting is April 28 in San Ramon. Company officials met with an ICCR representative, a ChevronTexaco spokesman said.

The company's preliminary proxy statement opposes the proposal, noting in part ChevronTexaco's "numerous actions to help address HIV/AIDS, tuberculosis and malaria and uses all available vehicles to communicate its efforts," saying "a special report would only divert resources from its efforts to alleviate the suffering from these diseases."

"The company launched an effort to comprehensively assess its practices around the world, benchmark itself against world-class corporate programs, and design a process for formally assessing the potential impacts of HIV/AIDS on the company's operations," the statement continues

The statement notes the company's activities in on this health issue "is published in its annual Corporate Responsibility report."

ICCR groups are also working with Ford Motor Co., Dearborn, Mich., on a similar AIDS proposal, according to Mr. Rosan. Ford officials couldn't be reached for confirmation and comment.

Coca-Cola's board, by the way, opposes the six other shareholder proposals in its proxy statement; none of the others involves ICCR.