Shareholders speak up.

Producers of agrochemicals and related products are under fire from shareholders who are asking about potentially damaging environmental practices. To reach upper management, many shareholders rely on a tool available only to those who have owned at least $2,000 worth of company stock for a year or more: the shareholder resolution.

While not legally binding, "the shareholder resolution by its very nature commands the attention of top management and ultimately the board of directors," says Nicole St. Clair, communications manager at the Coalition for Environmentally Responsible Economies, a Boston-based coalition of investment funds and public interest groups. "If they can't be resolved through dialogue, shareholder resolutions, in addition to corporate responses, will appear in the company's annual [investor statement]. This ... raises visibility for shareholders who are clearly dissatisfied with management on some issue."

Monsanto shareholders have asked that company to disclose its policies for exporting potentially carcinogenic pesticides that are banned in the United States to developing countries, and describe potential liabilities associated with the sale of genetically modified (GM) plants. Bayer, which is implicated in the 1999 deaths of 24 Peruvian children who accidentally consumed methyl parathion (marketed by Bayer as Folidol) that was confused with powdered milk, is under pressure from shareholders to take responsibility for the poisoning and provide treatment and financial compensation for the children. And one shareholder has asked The Dow Chemical Company to outline plans for cleaning up dioxin contamination near its plant in Midland, Michigan, and prevent future releases. All of these requests are still pending.

Shareholder resolutions often couch potential liabilities in financial terms, adds Doug Cogan, deputy director of social issues at the Investor Responsibility Research Center (IRRC), a Washington, D.C.-based investor research firm. "Shareholders aren't just focused on their own social or environmental agenda," he says. "They also believe their recommendations can help a company achieve better financial performance."

In Monsanto's case, shareholders worry that GM organisms and banned pesticide exports enhance vulnerability to lawsuits and negative publicity. Leslie Lowe, director of the program on energy and environment at the Interfaith Center on Corporate Responsibility (ICCR), a New York organization representing religious investment groups, says shareholders have long worried that Monsanto's business model overrelies on GM products, even as consumer resistance and scientific unknowns erode the market in this area.

Regarding banned pesticides, Lowe adds, "It's entirely possible that these products could make people sick in the countries where they are used. This makes it likely that injured parties would sue the company in U.S. courts, where they do have access."

Shareholder resolutions in most cases request a tangible strategy for dealing with environmental problems. But, Lowe says, investors who turn to the resolution process often encounter resistance from the companies, which typically view the process as hostile and infused with bureaucracy.

"Some companies won't even talk to investors who take this confrontational approach," says Samuel Smolik, global vice president for environment, health, and safety at Dow. "So, we always encourage investors to not take that step." But, he adds, "although we believe there are better ways to handle issues, we will willingly work with people who do choose to file [resolutions]."

Cogan agrees that filing shareholder resolutions should be considered a last resort. "But when management is turning a deaf ear to shareholders' concerns," he says, "this is a highly effective way to get them to sit up and listen."