Wednesday, May 25, 2005
"Big bucks bucking big biz"
Star op-ed columnist Dan Carpenter writes in today's Indianapolis Star:
So who is John Harrington anyway, and where does he get off trying to tell one of Indiana's largest companies how to run its business in China?
Cummins brass gave assurance they're working on a code of proper conduct for Chinese enterprises with which they deal. Meanwhile, shareholders, as expected, voted down an 11-point human rights initiative based on a United Nations model.
That proposal came from Harrington Investments Inc. of Napa, Calif., which earned the forum by purchasing about 5,000 shares of Cummins stock.
Harrington doesn't think they're bad guys at Cummins. In fact, if Cummins dealt in, say, child labor, union-busting or tobacco, there would be no buy-in and lobbying to begin with.
Harrington, founded in 1982, is one of the granddaddies of the socially responsible investment movement, and the 59-year-old father of the firm still keeps the fires burning behind his genial manner.
"I think I've turned more radical," John Harrington said in a phone interview. "As things have changed, they have not changed that much. Instead of staying on top of corporate conduct, too many in my industry are just passive screeners."
In other words, image-savvy companies can stay on the good side of the $2 trillion conscientious-investment community by pledging enlightened labor practices and environmental concern. But are they ultimately good for you, me and our neighbor in that New Delhi factory? In Harrington's view, less and less.
"We have moved away from what I consider to be a free market. What we have now is what I call oligopolistic capitalism. We have moved away from local communities to global enterprises with very little substance at the local level.
"In your sector (news media), very, very few players dominate the market. Wal-Mart is not a competitive enterprise. It is a dominant enterprise. This is not good. We need diversity."
Diversity and diversification. Handling more than $140 million in assets despite refusal to invest in defense (it deems the Iraq war illegal and immoral) and World Bank bonds (in protest of the bank's policies toward poor countries), Harrington Investments validates the leader's belief "a lot of people want to do more than make money for making money's sake."
But executives, at Cummins and elsewhere, still run the show, Harrington notes; and he sees too many with too little interest in principle -- even though "in the long run doing the right thing will enhance shareholder value and protect the company."
As a counselor, lecturer, shareholder and author (his new book is "The Challenge To Power: Money, Investing and Democracy" from Capital H Press), he'll keep sending the message. But he understands how Cassandra of ancient Troy felt.
"I'm not sure I'm very optimistic about global corporate enterprise. Corporations have more power than governments. We've lost our sovereignty, or nearly lost it. They're almost impossible to control. That's what I talk about in my book, how they play states and nations off against each other. This is a monster that may devour us."
Monday, May 23, 2005
"Schwab Responds to Activist Shareholders"
Bob Hirschfeld writes for Financial-Planning.com:
On May 19, shareholders voted to change how the board of directors will be elected at discount broker Charles Schwab. And CEO Charles Schwab clarified the company’s stand on the privatization of Social Security, which the company appeared to be advocating.
The discount broker had come under fire from at least one investor/client, Harrington Investments, for its corporate governance, which is currently “classified,” for its lagging share price, and for its avowed support of Social Security privatization. Harrington Investments is a socially conscious registered advisory firm based in Napa, California.
In an open letter issued prior to Schwab’s May 19 shareholder meeting, Harrington called on fellow shareholders to vote “yes” on a proposal by the New York City Pension Funds to “declassify” the board of directors. Currently, only some of the 10 board members come up for election on an annual basis. Declassifying the board would mean each of the 10 would be elected each year.
“The current situation keeps board control out of the hands of shareholders,” says Peri Payne, Harrington’s social research advocate. The assumption is that declassified boards are more democratic.
At Thursday’s meeting, 57% of those shareholders voting approved the proposal for annual elections. A Schwab representative said the company was evaluating the results of the vote.
“In 1996, close to 75% of our stockholders approved the current system of electing directors,” says Schwab spokesperson Glen Mathison. “The reason people voted in favor is that it increases the chances that there will be directors with prior experience on the board.”
Harrington, which is a custodial client of Schwab’s as well as an investor in Schwab shares, also criticized CEO Charles Schwab for his membership and support of a single-issue group, the Alliance for Worker Retirement Security, which is dedicated to promoting private accounts in Social Security.
Claimed Harrington, “Where is board accountability when the CEO appears to be on an ideological mission?”
“The thing that’s disconcerting is that Schwab has stated they are remaining neutral when it’s a known fact they are supporting a one-issue organization,” adds Payne. “That’s an obvious disconnect.”
During the question-and-answer section of the May 19 meeting, CEO Charles Schwab responded by noting that the company had taken no position on the issue and regretting that his personal position and the company’s position tend to get merged. “We are not a political company,” said Schwab.
As to Harrington’s third plaint, which concerns Schwab’s share price, spokesperson Mathison was more agreeable. “We’re not happy about the stock price, either, but it’s going in the right direction,” he said. “It is up since Chuck Schwab took over the company last summer.”
“The client attrition he [Harrington] is referring to is decreasing in the wake of our price cuts. Client accounts are one measure, but the point is we bring in more new client money than any other firm reporting that number and our total client assets are at a record level,” says Mathison. “We got $16 billion in new client assets in the first quarter. In the past year we have been steadily removing costs. We feel we have the company headed in the right direction.”