Turning up the noise on CSR: activist groups like the Rainforest Action Network have taken to the streets recently to protest corporate policies. At the same time, however, a nascent backlash movement is questioning companies about their "green" initiatives.

Judging by activity taking place this proxy season, the noise over corporate social responsibility (CSR) has been turned up a few decibels.

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Consider the action taken against Wells Fargo & Co. in late April. Led by the Rainforest Action Network (RAN), a group committed to preserving equatorial rainforests, a sizable group of protesters descended on the banking giant's annual meeting in San Francisco. Protesters toted giant puppets and banners to highlight what it called "Wells Fargo's bad investments in oil and coal companies infamous for environmental destruction and human rights abuses, and bad practices like predatory lending in poor communities."

The protest at Wells Fargo's meeting followed a week of outdoor advertisements and actions. Thousands of posters reading "Wells Fargo: Lootin' and Pollutin' Since 1852" began appearing throughout the Bay Area in the days before the meeting.

But not all of the action is coming from the proverbial left. This spring, environmentally related initiatives at the Goldman Sachs Group and General Electric Co. were publicly challenged by a small but vocal mutual fund, The Free Enterprise Action Fund. Meanwhile, Exxon Mobil Corp., a major target of activists in the global warming debate, has acknowledged funding groups whose positions it supports, including one that successfully urged the Internal Revenue Service to investigate Greenpeace's taxexempt status.

The increasingly vocal nature of a few challenges comes as most social responsibility advocates continue to work the time-honored channels, filing ballot resolutions for the annual proxies and then seeking to negotiate privately with companies about those initiatives. Data from the Social Investment Forum, released in late April, found that an estimated 180 social and environmental shareholder resolutions either had already been voted on or were scheduled to be decided at U.S. corporate meetings for the first half of 2006, compared with 169 for the same period of 2005.

"I wouldn't say what the Rainforest Action Network is doing is new--there are groups who have protested actions outside companies for many years," says Meg Voorhes, Director of Social Issues Service at Institutional Shareholder Services. "Sometimes they will also file resolutions, so they will use both avenues."

Conservative actions aren't novel, either, Voorhes notes; anti-abortion groups have frequently filed resolutions asking companies to stop contributing to certain causes or nonprofits. But the "green" backlash is new, she says.

While still quite small, this movement has garnered support from conservative media voices like Forbes and The Wall Street Journal editorial pages. These anti-activist forces maintain that environmental, religious and organized labor advocates have captured something of a monopoly on the public debate over socially responsible ventures. Many companies have indeed felt pressured to accede to activists' proposals in order to bolster their firm's image. Others have responded more proactively, believing that demonstrating concern about societal issues brings them widespread approval from customers and, hopefully, shareholders.

But, as noted in a special report in the July/August 2005 issue of Financial Executive, corporate social responsibility initiatives are fraught with difficult questions. How important are they to investors? How much will they cost, and is the cost worth the gain?

If they are put in place, how can they best be leveraged for maximum effect? All are issues that CFOs would likely be involved in helping determine.

Noise from the Other Side

Leaders of the anti-CSR movement include the Competitive Enterprise Institute (CEI), a Washington think tank that calls itself "a leader in the fight against the global-warming scare," and Public Interest Watch (PIW), a Washington-based watchdog group that has drawn much of its funding from Exxon Mobil.

Exxon Mobil has donated handsomely to groups like CEI and PIW; the latter asked the IRS to audit Greenpeace, which the agency did. (It found that Greenpeace continues to qualify for a tax exemption as a nonprofit entity.) According to a March ARTICLE in The Wall Street Journal, virtually all of the money that PIW reported in contributions in one recent fiscal year came from Exxon Mobil.

Exxon Mobil has publicly said that it gives money to think tanks and other nonprofits that it believes support its position on environmental issues such as global warming. PIW was founded in 2002 "in response to the growing abuse of charitable funds by nonprofit organizations and the lack of effort by government agencies to deal with the problem," according to its website.

The Free Enterprise Action Fund (FEAF) is the mutual fund arm of the Free Enterprise Education Institute (FEEI). The institute says its website, FreeEnterpriser.com, "will provide the information and tools needed to counter-pressure CEOs who are more worried about anti-business 'stakeholders' than their shareholders."

"Left-wing, anti-business special interest groups have advanced their social and political agenda through the open back door labeled 'Wobbly CEO,'" charges Steve Milloy, FEEI's executive director and publisher of a related website, junkscience.com. "It's about time someone closed up and boarded that door."

Early this spring, Milloy and a colleague, Tom Borelli, sharply criticized Goldman Sachs CEO Henry Paulson at Goldman's annual meeting. They asked him if his position as chairman of the Nature Conservancy, and his publicly announced program to make the investment bank a big donor to environmental causes, conflicted with his duty to shareholders.

Noting that the investment bank had helped steer a donation of 680,000 acres of shareowner property in Chile to a nonprofit, Milloy said, "An investment bank that aims to be truly socially responsible should be looking for ways to facilitate economic development in poor countries--not to prevent such development."

At GE's annual shareholder meeting on April 26, FEAF voted to withhold its support for approving CEO Jeffrey Immelt as a director. "Mr. Immelt's fascination with pandering to fringe advocacy groups is distracting him from focusing on the business," said Borelli in a statement after the meeting. "He is acting more like a politician than a CEO."

FEAF's shareholder proposal requesting GE to report on the economic benefits of its global warming policy received 5.9 percent of the votes cast--enough to automatically qualify the proposal to appear on next year's proxy statement.

Actually, by filing a resolution asking for a report about GE's policies, FEAF has adopted a mainstream approach acceptable to a lot of institutional investors--and one that has a lot of logic, says Voorhes at ISS. "Regardless of what one believes about climate change, one could say that a company should explain its reasoning and how it is positioning its business."

Voorhes notes that the FEAF also has filed a resolution at JP Morgan Chase--which has largely accepted RAN arguments about lending for Third World development--seeking a report on the process it uses to identify public policy initiatives.

Yet, news reports suggest that the CSR train, if anything, has been gathering momentum. The Business Council, whose members comprise Fortune 500 companies, last fall endorsed principles for environmental stewardship and sustainability reporting advocated by Ceres, an investor coalition focused on climate change issues. In one week in April, such iconic companies as Nike Inc., Hewlett-Packard Co., Dell Inc. and UPS issued press releases touting environmentally related initiatives, noted Thomas Kostigen of marketwatch.com.

In late April, the heads of large institutional investor organizations in 16 different nations, representing more than $2 trillion in assets owned, signed the Principles for Responsible Investment during a launch event at the New York Stock Exchange. The principles came out of a determination by the investors that "investment decision-making does not sufficiently reflect environmental, social and corporate governance considerations."

And, Paulson's actions at Goldman Sachs were staunchly defended by a director there, John H. Bryan, the former CEO of Sara Lee Corp. Bryan noted that the decision to donate the land in Chile was unanimously approved by the board's nine-member governance committee. He added in a letter published in The Wall Street Journal that "virtually all of the comments Goldman Sachs has received on its environmental initiatives and the donation of 680,000 acres has been positive ... less than .01 percent of [shareholders] support[ed] the resolution that questioned those procedures."

The anti-green movement has piqued interest because it is new, and contrarian. But at a time when activists have made "sustainability" a major issue, the opposition needs to prove that it, too, can grow into a sustainable force.

RELATED ARTICLE: Variety of Agendas Makes Response Difficult

Which would you rather deal with: an orderly group of professionals in suits or a ragtag army carrying placards and singing derisive songs?

That question carries over to shareholder activists, not all of whom are created equal and who may be focused on different issues. Some are adept at street theater; others are serious and sedate. Religious groups like the Interfaith Center on Corporate Responsibility have compiled long records as champions of what are usually perceived as "liberal" governance issues, dating back to the fight to force U.S. companies to withdraw from South Africa when it practiced apartheid.

These variances can make it hard to understand where individual groups are coming from--and that can present difficulties for executives working to formulate responses to their interests or demands.

Take DuPont Co. The giant chemical conglomerate scored an 85 on a 100-point scale from investor group Ceres, making it the top U.S. corporation of 100 (and second globally behind BP plc) rated by the group in a range of industries. The report, published in late March, used a "Climate Governance Checklist" to evaluate how major industrial corporations are addressing climate change in five broad areas: board oversight, management performance, public disclosure, greenhouse gas emissions accounting and strategic planning. In fact, DuPont spotlighted that ranking in a news release later that day.

The same day that Ceres released its findings, Christian Brothers Investment Services (CBIS)--a religious group--said it planned to detail its pending shareholder resolution at DuPont. The issue? What CBIS calls "the potentially material risk and 'off-balance sheet liability' that may be posed by its manufacturing and distribution of food-related genetically modified organisms (GMOs)."

CBIS said it has been trying since 1999 "to encourage DuPont to come to grips with the potential long-term risk posed to shareholder wealth by the company's involvement in genetically engineered agriculture." It added that "a wide variety of government, industry and scientific experts have raised concerns about the lack of adequate testing and controls that are in place" for GMOs.

DuPont opposed the shareholder resolution, saying many of the safeguards sought by the investors are in place. "In the area of genetically engineered food products, the pre-market testing is a robust, multiyear process," the company said in its proxy statement.

Then there is the almost-frivolous nature of some activists' moves, like the nominations of candidates with no real corporate experience for board seats. That happened recently at forest products giant Weyerhaeuser Co. The move was made by the Rainforest Action Network (RAN), which has had considerable success pressuring huge banks on their lending policies in Third World countries.

It's easy to see why a resolution seeking three board seats got nowhere with Weyerhaeuser, which was not required by law to put the issue to a formal shareholder vote. None of the nominees offered serious credentials in terms of corporate experience or decision-making. One of the candidates, Michael Brune, is RAN's executive director. Another nominee, Lynne Barker, "is a green-building specialist who develops policies and programs to advocate for higher standards in the commercial, institutional and residential markets," RAN noted in an announcement.

The third candidate, Bonnie Swain, "is a mother and member of the Canadian Grassy Narrows First Nation community," according to the announcement. "I welcome the chance to be heard as a Native person and a person who doesn't profit off the land, but survives off of it," Swain said. "If a Native person went and started cutting trees, they wouldn't cut it all because there would be no animals, nothing to look at, nothing there."

--Jeffrey Marshall

RELATED ARTICLE: takeaways

* Public protests have turned up the noise over corporate social responsibility (CSR) issues, which are still generally challenged more privately.

* A new wrinkle this year has been the emergence of a "backlash" group challenging green initiatives at General Electric and Goldman Sachs.

* Evidence in the greater corporate world suggests that social responsibility efforts are, if anything, gaining more traction and acceptance from companies.

* The nature of activists' sophistication and motivations vary, which can make it hard for companies to determine a response.