REPORT: 2003 PROXY SEASON EXPECTED TO SET RECORDS,
WITH CEO PAY AND GLOBAL WARMING AMONG TOP ISSUES

View ICCR's 2003 Shareholder Resolutions

CONTACT: Stephanie Kendall, (703) 276-3254 or skendall@hastingsgroup.com.

Continuing Tide of Shareholder Advocacy Felt in Full After Business Scandals;
Labor, Religious Groups Help Blur Distinction Between "Traditional" and "Social" Resolutions

WASHINGTON, D.C.//February 12, 2003///The 2003 proxy season is on track to be a record year for shareholder advocacy - in terms of the number of resolutions submitted, the number of resolutions likely to come to vote and, possibly, the level of shareholder support. As of February 1, at least 862 shareholder proposals had been filed at publicly traded U.S. companies, compared with just 802 in all of 2002, according to the Interfaith Center on Corporate Responsibility (ICCR) and the Investor Responsibility Research Center (IRRC) report issued today by IRRC, ICCR, the Social Investment Forum and CERES.

Among the fastest-growing issue areas for resolutions include concerns about excessive CEO compensation, global warming, dividing the positions of CEO and chairman, and sexual orientation anti-bias policies. Entitled "2003 Shareholder Proxy Season Overview: Social and Corporate Governance Resolution Trends," the new report notes that filings of corporate governance resolutions rose sharply to 625 by early February 2003, compared with 529 in all of 2002. At least 237 social and environmental resolutions had been filed by mid-February, up slightly from the number at this point last year.

IRRC Director of Social Issues Services Meg Voorhees said: "In what is a major trend, shareholder advocates concerned with their portfolio companies' social and environmental performance increasingly are reaching the conclusion that these policies cannot be considered in isolation from the companies' governance practices and structure. This is evident in relation to such issues as CEO pay and global warming."

"We see that 2003 is shaping up as the most active year ever for religious shareholder advocates in the United States," said ICCR Executive Director Pat Wolf. "So far this year, members of the Interfaith Center on Corporate Responsibility have filed 140 resolutions with 92 companies."

SIF President Timothy Smith said: "It is clear that 2003 will be remembered as the year when investors decided to stand up and be counted, using their voice and vote to call for strengthened corporate governance and solid corporate citizenship. Investors are moving from passive holders of stock to becoming active and responsible owners … understanding the leverage they have as individuals and institutions who have invested their capital and faith in these companies."

"Climate-change risk is not just an 'environmental' issue; it is directly related to the bottom-line viability of several leading American industries, including oil, utilities and autos," said CERES Executive Director Mindy Lubber. "In the wake of scandals at Enron and other corporations, investors are now wide awake to the issue of risk, and the awareness that all too many companies are not doing enough to assess, report and mitigate these dangers to shareholder value. The increasing shareholder focus on climate-change issues shows how such 'hidden risks' can no longer be swept under the carpet by unresponsive managers."

SOCIAL/ENVIRONMENTAL RESOLUTIONS

The leading categories for social shareholder advocacy in 2003 are the environment (particularly global warming), where 58 proposals have been filed so far, and global labor standards, with 27 proposals filed. Concerns over healthcare and drug development, equal employment opportunity (particularly the push for sexual orientation anti-bias policies), and tobacco have inspired numerous resolutions this year. New proxy issues for 2003 relate to the global AIDS crisis and sustainability reporting. This year, religious investors affiliated with ICCR once again have filed proposals related to "glass ceiling" concerns at major corporations and at defense contractors concerning their foreign military sales and involvement in space weapons programs.

Key trends among social/environmental resolutions include:

· Climate change. Environmental resolutions totaled 58 as of late-January 2003, compared to about 60 at the same point in 2002. The most growth was seen in relation to global warming-related resolutions, which have climbed from the 21 filed last year to 25 so far this year. Religious investors, investment firms specializing in socially responsible investment, public pension funds, and environmental groups have filed the proposals asking a variety of firms - including the leaders in such industry categories as autos, utilities and oil companies - to take action on climate change issues.

· Sexual orientation anti-bias policies. Galvanized by the November 2002 majority vote at Cracker Barrel, shareholder proponents of sexual orientation anti-bias policies have filed 19 proposals so far for 2003 meetings, up from nine in 2002. New York City pension funds proposed 11 such resolutions for 2003, six of which have already been withdrawn after the funds determined that the companies involved had revised their policies.

· Support level for social/environmental resolutions. If last year is an indicator, 2003 could see more unusually high votes for key social proposals. In 2002, average support for social issue proposals climbed to 9.4 percent, the highest level in 10 years. More strikingly, over 14 percent of the proposals voted on got at least 15 percent support, the highest proportion in at least a decade. Proposals that did particularly well in 2002 were those asking companies to expand or report on their fair employment policies or to report on their greenhouse gas emissions.

CORPORATE GOVERNANCE SHAREHOLDER RESOLUTIONS IN 2003

The business scandals of 2002 did not significantly affect the number of proposals submitted last year since most proxy submission deadlines already had passed by the time the most notorious cases came to public attention. But investors' ire was clearly reflected in high support levels during 2002 for virtually all proposals - including several being voted on for the first time. Proponents this year, especially labor union funds, are on a pace to break all records. With the SEC sensitive about shareholder concerns, it is expected that there will be fewer omissions and more proposals negotiated or voted upon in 2003 - and perhaps another record-setting year in voting support.

· Excessive CEO compensation. Last year, resolutions related to traditional anti-takeover and board issues accounted for most governance resolutions - 57 percent of all the proposals submitted. So far in 2003, executive pay issues are the overwhelming focus, accounting for a remarkable 44 percent of all the governance proposals. Last year's campaign to convince companies to expense stock options garnered substantial support -averaging 29.3 percent - at two companies that brought it to a vote (Clayton Homes and SWS Group). The SEC has reversed its original ruling that the proposal could be omitted on ordinary business grounds, and an astounding 101 such resolutions have been filed this year, almost exclusively by labor funds.

· Separation of chairman and CEO positions. While proposals related to director independence currently lag last year's numbers, a surge has emerged in resolutions asking companies to separate the positions of chairman and CEO - 27 have been filed so far, compared with just four for all of 2002. Three of those four were voted on last year, receiving average support of 35.8 percent of votes cast. The 2003 proposals have been submitted primarily by the AFL-CIO and various labor union funds, and some individuals.

· Offshore tax havens. A new proposal this year asks several companies that are currently incorporated in offshore tax havens to reincorporate in the U.S. They include Carnival, Cooper Industries Ltd., Ingersoll-Rand, McDermott International, Schlumberger Ltd., Transocean and Tyco International. All the resolutions have been submitted by labor-related funds.

ABOUT THE GROUPS
The Interfaith Center on Corporate Responsibility has been a leader of the corporate social responsibility movement for the last three decades. ICCR is an association of 275 faith-based institutional investors, including national denominations, religious communities, pension funds, endowments, hospital corporations, economic development funds and publishing companies. ICCR and its members press companies to be socially and environmentally responsible. Each year ICCR-member religious institutional investors sponsor over 100 shareholder resolutions on major social and environmental issues. The combined portfolio value of ICCR's member organizations is estimated to be $110 billion.

The Investor Responsibility Research Center (http://www.irrc.com) is the world's leading source of impartial, independent research on corporate governance, proxy voting and corporate responsibility issues. IRRC's mission is to provide the highest quality research on companies and shareholders worldwide. Today, in fulfillment of that mission, IRRC provides research, software products and consulting services to over 500 subscribers and clients representing institutional investors, corporations, law firms and other organizations. Founded in 1972, IRRC has more than 80 professional staff members. IRRC offers guidance and advice on proxy voting, enabling clients to make informed, considered decisions that reflect their investment philosophies. IRRC also offers company profile information for portfolio screening and other purposes.

CERES (http://www.ceres.org) is the leading U.S. coalition of environmental, investor, and advocacy groups working together for a sustainable future. The CERES Coalition is a network of over 80 organizations that includes investors, advisors, and analysts representing over $300 billion in invested capital.

The Social Investment Forum (http://www.socialinvest.org) is the national trade association for the social investment industry. It is dedicated to promoting the concept, practice, and growth of socially and environmentally responsible investing. The Forum's more than 500 members include financial planners, community banks, mutual fund companies, research companies, foundations, and community investing institutions. The Shareholder Action Network (SAN) is a project of the Social Investment Forum in cooperation with Coop America. SAN (http://www.shareholderaction.org) serves as a clearinghouse of information and analysis to the socially responsible investing community on shareholder advocacy.

EDITOR'S NOTE: The full report and a streaming audio replay of the news event marking the release of the report will be available online at http://www.hastingsgroup.com/2003ShareholderSeason.html.

Click here to read/download complete season overview (Adobe Acrobat)

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