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May 25, 2006

Drilling for Integrity

We received multiple reader letters in response to a news brief we published early last week about a vote by ConocoPhillips investors.

The following statement was written by the brief's original author (Jessica Azulay) and its primary editor (Brian Dominick). The entire PeoplesNetworks Collective has approved of the statement.

Shareholders shot down a resolution to study the ecological impact of oil exploitation on Alaska’s North Slope wilderness area, and the environmentalists behind the initiative wanted it covered badly enough that they produced a press release announcing the result. That caught our attention.

As we described in an earlier blog entry about the brief, we took the particular "angle" that we did – highlighting the loss as a defeat for the supposedly "pro-environment" camp among ConocoPhillips’s investors – because it just seemed like the straightforward and honest way to approach the subject. Rather than accept what we saw as the "spin" of deeming the vote a relative success because a substantial 25 percent of share votes were cast in favor of conducting the research, we took the glass-is-three-quarters-empty perspective typically warranted by a three-to-one defeat.

In reply, readers sent us a number of letters suggesting we had taken the wrong attitude toward the story. (Only one critic wanted his letter published, and it now appears as a comment to that earlier blog entry.)

Some suggested we didn’t understand the subject matter if we were unable to see the 25% vote in favor of conducting a non-binding, non-independent study as a victory of sorts, or at least as a promising sign.

We don’t have a collective editorial stance on the merits of what our critics call "shareholder activism." It’s something we’ve reported on from time to time, and will continue to monitor in the future. While we can’t claim complete objectivity on the issue (or any issue), we certainly weren’t out to slam the strategy of using shareholder votes to make corporate change for the better.

That said, there are some "objective" facts about the vote that our critics don’t appear to be taking into account. In (we think deceptively) portraying the 25% as taking a firm pro-environment stance, they seem to be overlooking the way US PIRG, representing a group of ConocoPhillips stockholders, went about arguing for the research initiative.

Among the reasons proponents stated shareholders should want to conduct the study was that it would give the appearance that the company cared about the environment, therefore giving ConocoPhillips a competitive edge over its supposedly less-sensitive counterparts like Shell and ExxonMobil.

From a speech at the shareholders’ meeting by Athan Manuel, director of the US PIRG Arctic Wilderness Campaign:

We think that [passing the resolution] would benefit the company's reputation because this issue of drilling near Teshekpuk Lake is starting to pick up more momentum in the public consciousness. A big article appeared just this month in the National Geographic and more and more Americans are starting to be concerned about what happens in this area near the lake. And so by being an industry leader, by being progressive and staying out of certain places, the company would enhance its reputation, not [just] with investors, with activists, and environmental groups, but also more importantly with consumers who increasingly care more and more about how they spend their dollars when they’re buying gas at the pump and want to make sure that the company they're supporting shares the same kind of values that they do. And one of these values, obviously, is concern for the environment, and now specifically the area on the North Slope near Teshekpuk Lake.

Also, from the resolution itself:

WHEREAS: pledging not to drill sensitive ecosystems will enhance our company's image and reputation with consumers, elected officials, current and potential employees and investors.

(Editors’ Note: Despite the above rhetoric, the resolution in no way actually resolved to call on "staying out of certain places" or "not to drill in sensitive ecosystems.")

So, given that even the proposal’s advocates acknowledged a profit motive behind support for the move, it’s difficult to tell if any of that 25% actually voted for the environment, as opposed to voting for the appearance of environmental concern.

Given that information, we were we unable to determine that any significant "pro-environment" sentiment had been expressed at all. It is far from obvious to us that polishing an environmentally devastating corporation’s public image constitutes the public interest.

While we do not question the sincerity of the groups and people behind the shareholder resolution, we thought that allowing those voices to set the agenda of our brief would have obscured a larger public-interest angle. They wanted the story to focus on a relatively successful shareholder action. (Most environmental shareholder resolutions don’t even get that much support.)

But we thought the more institutional issue – the hostility of corporate shareholders to even such a tepid proposal – needed to be highlighted. We thought the vote said much more about the nature of oil companies than it did about the efforts of shareholder activists.

Two letter-writers noted that in many cases, shareholder votes are undercounted as a result of a biased balloting method, and thus the 25% figure is possibly a distortion of sentiment among actual, participating shareholders. True as this is, we see it as speaking volumes about the undemocratic nature of corporations and the limited potential of shareholder activism.

One of the letter-writers asked, Wouldn’t TNS take 25% of its donating members very much to heart if they said we should do something. And of course we would, provided it did not compromise our integrity or mission. But we are a non-profit news organization that exists to give our readers the information they need, not a for-profit oil company that exists to enrich executives and shareholders by any means necessary.

Hard news in the public interest is the "dividend" we provide our supporters. And like the board members of a Fortune 500 company, we too have the other 75% and our primary mission to look after.

Comments...

Andrew Shalit: Drilling for Integrity

Yes, it's true: corporations, as currently structured in the U.S., exist to make money for their shareholders. Because of that, if a shareholder wants to convince a company to do something, they can strengthen their case by making a financial argument.

This doesn't amount to greenwashing. I don't know any shareholder advocates who urge companies to make misleading environmental claims. Rather, we remind management that having a good reputation helps sales, and that doing right by the environment will improve a company's reputation. Maybe it's facile to say, "be nice and you'll be popular," but some people still need to be reminded of that fact.

Andrew Shalit, Director of Shareholder Advocacy

Green Century Capital Management


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The NewStandard ceased publishing on April 27, 2007.