Dear EarthTalk: Isn’t the interest in electric cars and plug-in hybrids going to spur increased reliance on coal as a power source? And is that really any better than gasoline/oil in terms of environmental impact? -- Graham Rankin, via e-mail

It’s true that the advent of electric cars is not necessarily a boon for the environment if it means simply trading our reliance on one fossil fuel—oil, from which gasoline is distilled—for an even dirtier one: coal, which is burned to create electricity.

The mining of coal is an ugly and environmentally destructive process. And, according to the U.S. Environmental Protection Agency (EPA) burning the substance in power plants sends some 48 tons of mercury—a known neurotoxin—into Americans’ air and water every year (1999 figures, the latest year for which data are available). Furthermore, coal burning contributes some 40 percent of total U.S. carbon dioxide emissions. The National Academy of Sciences (NAS) estimates that coal mining and burning cause a whopping $62 billion worth of environmental damage every year in the U.S. alone, not to mention its profound impact on our health.

Upwards of half of all the electricity in the U.S. is derived from coal, while the figure is estimated to be around 70 percent in China. As for Europe, the United Kingdom gets more than a third of its electricity from coal, while Italy plans to double its consumption of coal for electricity production within five years to account for some 33 percent of its own electricity needs. Several other countries in Europe, where green sentiment runs deep but economics still rule the roost, are also stockpiling coal and building more power plants to burn it in the face of an ever-increasing thirst for cheap and abundant electricity.

On top of this trend, dozens of electric and plug-in hybrid cars are in the works from the world’s carmakers. It stands to reason that, unless we start to source significant amounts of electricity from renewables (solar, wind, etc.), coal-fired plants will not only continue but may actually increase their discharges of mercury, carbon dioxide and other toxins due to greater numbers of electric cars on the road.

Some analysts expect that existing electricity capacity in the U.S. may be enough to power America’s electric cars in the near future, but don’t rule out the possibility of new coal plants (or new nuclear power plants) coming on line to fill the gap if we don’t make haste in developing alternate sources for generating electrical energy. And while proponents of energy efficiency believe we can go a long way by making our electric grids “smarter” through the use of monitoring technologies that can dole out power when it is most plentiful and cheap (usually the middle of the night), others doubt that existing capacity will be able to handle the load placed on even an intelligent “smart grid” distribution network.

Environmentalists—as well as many politicians and policymakers—maintain that the only viable, long-term solution is to spur on the development of renewable energy sources. Not long ago, the concept of an all-electric car charged up by solar power or some other form of clean renewable energy was nothing but a pipe dream. Today, though, such a scenario is within the realm of the possible, but only if everyone does their part to demand that our utilities bring more green power on line.

Pictured: Virginia Electric and Power Company's Mount Storm coal-fired power plant in northeastern West Virginia
Photo Credit: Rich McGervey, courtesy Flickr

CONTACTS: EPA/mercury emissions; www.epa.gov/ttn/atw/utility/hgwhitepaperfinal.pdf.

SEND YOUR ENVIRONMENTAL QUESTIONS TO: EarthTalk®, P.O. Box 5098, Westport, CT 06881; earthtalk@emagazine.com. Read past columns at: www.emagazine.com/earthtalk/archives.php. EarthTalk® is now a book! Details and order information at: www.emagazine.com/earthtalkbook.

Trying to understand what happened, Stewart asks about the relationship between Wall Street and the SEC: “Is it that the SEC is over-matched?   Is it that it’s an inside job?”

In response to the threat of a public campaign by a U.S.-based lobbying group, Ingersoll-Rand PLC joined a group of publicly-held companies that have agreed to halt sales of products to customers in Iran even though the sales are apparently legal and in compliance with U.S. laws that severely restrict exports to Iran.

Caterpillar Inc., General Electric Co. and Huntsman Corp. have recently made similar announcements.  Siemans AG has said it will not “accept new business with Iran” starting in mid-2010.

Ingersoll-Rand President and CEO Michael Lamach, in a letter (PDF) to  the group United Against Nuclear Iran (UANI),  noted that “in light of very real and escalating concerns about the intentions of the current regime in Iran, many leading global companies around the world have opted to refrain from doing business with Iran.”

He said “Ingersoll-Rand now joins with those companies, and effective immediately will have its foreign subsidiaries stop accepting orders for all products, components and parts where the subsidiary knows such products, components or parts would be destined for Iran.”

However, Lamach’s letter was highly critical of UANI’s tactics, asserting: “Although you have raised a legitimate issue for discussion, we are deeply disappointed in some of your organization's tactics, which strike us as fundamentally unfair and calculated solely to pressure Ingersoll-Rand in the public spotlight without regard to factual accuracy or even our input.”

Lamach told UANI that “total revenues derived from the company's foreign subsidiaries have been immaterial in the context of the company's total world-wide revenues. Ingersoll Rand has no employees, operations, or assets in Iran.”

UANI is a U.S.-based non-profit that describes itself as “a non-partisan, broad-based coalition that is united in a commitment to prevent Iran from fulfilling its ambition to become a regional super-power possessing nuclear weapons.”  The organization’s board of advisors includes former U.S. Ambassadors Richard Holbrooke and Dennis Ross.  UANI’s President is Mark D. Wallace, a former Ambassador to the United Nations under President George W. Bush.

In September 2009, General Electric Senior Vice President and General Brackett B. Denniston III signed a formal affidavit with UANI – “United Against Nuclear -- Iran Business Declaration" (PDF) – in which the company certified that neither the company nor any of its subsidiaries is “engaged in any business or providing any goods or services in Iran, except authorized humanitarian goods and services (including activities related to informational materials and media content).”

In the affidavit, GE’s Denniston “certifies that any and all profits made by the Company from authorized humanitarian activities (which in the case of the Company are solely and exclusively made through HeaIthcare sales) in Iran will be donated to reputable charity organizations so long as Iran remains designated as a State Sponsor of Terrorism by the US government.”

Caterpillar told UANI that that the organization had “jumped to conclusions” about the company's businesss in Iran.   In a March 25 letter (PDF), Caterpillar Chairman and CEO James Owens said “indirect sales through dealers and distributors of Caterpillar branded products in Iran amount to less than two tenths of one percent of Caterpillar's 2009 worldwide sales and revenues. In no way are these sales material in a quantitative or qualitative sense.”   Even those sales “comply with applicable U.S. export control and economic sanctions laws and regulations,” Owens wrote.

However, Caterpillar agreed that it would prohibit its non-U.S. subsidiaries from “accepting any orders for Caterpillar machines, engines and new parts where the subsidiary knows that the product would be shipped to Iran.”

UANI’s web site features the Iranian Business Registry, a database of media and academic reports about companies doing business in Iran.  UANI says the registry “can be used for a number of ways for peaceful activism,” including shareholder divestment of companies continuing to do business in Iran.

Before I came to work in corporate America, I spent 15 years in a monastic community as a Catholic priest.  Actually the work’s proven to be quite similar, only the pay’s now a lot better.  With all the recent scandals plaguing the business world, the question of integrity often arises: How can I tell if an executive is trustworthy? What are the signs to look for in promoting leaders in this new era of doubt and suspicion?  With over 20 years in the workplace, here’s my litmus test for gauging executive credibility and trust.

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1 – How do they treat waiters?

Character is revealed by how we treat those with no power.  Watch how executives act around folks who have a vulnerable stature in the community: waiters, secretaries and bathroom attendants.  People who are powerless draw out our internal dispositions.  No one watches how you treat those on the margins.  If what we do when nobody’s watching reveals character, start paying closer attention.  Executive assessment has now become as plain as day.

If you can’t join your corporate bosses for lunch, do the second best thing: observe how they act around children.  Johnny Carson never liked having kids on The Tonight Show because they stole the limelight and often got more laughs.  People who are focused on themselves and require absolute control and personal adoration don’t mix well with children.  So at the next company picnic, be vigilant about how your leaders respond to the kids in the crowd.  It’s more statistically significant than 360-degree feedback.

2 – Can they pass the “Carl Sandburg test”?

This Chicago poet was the champion of ordinary folks, the common men and women of the workplace.  Pay attention to how executives relate to the folks who make up the rank and file of organizations.  These are not your high potentials that get chauffeured away for Executive Development. They’re the ones who do the chauffeuring or stay behind and get the work done.  Corporate success resides in engaging their passion and commitment.  Sam Walton’s spirit must have plummeted when news reached Heaven about rogue Wal-Mart managers locking store doors and forcing their laborers to work unpaid overtime.   I wonder if there’s an Enron in the making somewhere in that corporate culture?

Look closely at how executives treat their daily laborers.  Do they talk with them and invite them to any of their employee meetings?  Do they have a personal relationship with a few and know something about their families?  It gives me hope when I see my leaders authentically relate to our entry-level workers.  If it were up to me, Sandburg’s “The People, Yes” would be required reading for climbing the corporate ladder.  I believe most of the world would respond favorably to a C.E.O. who could quote poetry.

3 – What’s their “interior” business conversation?

Part and parcel of business life is making decisions.  Whenever I can, I listen for the hidden dialogue that’s used in pondering and resolving ethical business issues.  What goes into the executive’s moral judgement-call?  Is it only about profit, sales and career advancement?  Is there any semblance of an “interior life” that exists within this business leader?  Some  consideration of purpose, meaning or legacy?  Are there other facets being viewed: impact on the customer, the environment and the local community?  Was some thought given to corporate values, ethical principles or (God forbid!) employees’ feelings?

I still remember the day when I was hosting an executive meeting and we were informed that one of our managers had just died of cancer.  As the President shared the news with the group, he then asked for a minute of silence for him and his family.  Moments later, we composed ourselves and continued the meeting.  This small gesture said volumes about how the executive viewed his workers and their contributions.  I think that was the juncture where I fell in love with my company.  Something inside me realized that corporations are truly human systems - they live, breathe and grow.  And I decided that they’re worthy of my affection.  It’s sort of like being with family.  Not that I always like what they do, but I work at loving them just the same.

4 – Do they occasionally see themselves as part of the problem?

I’ve grown weary of hearing every C.E.O. who gets before the media, glibly announce: “We have no ethical problems in my company.”  Huh?  If we’ve learned anything in these recent months - it’s that all man-made systems are flawed and full of mistakes.  As long as organizations are comprised of people, they’re not going to be infallible institutions.  This is something even the Catholic Church, experts on infallibility, have recently come to appreciate.  The revealing executive question is: “What is your contribution to the problem that you’ve come here to explain away?”  If they see none, then we’re in for trouble.

Not that I’m asking all executives to bare their corporate souls in public, but business leaders need to create the environment for surfacing flawed practices and taking decisive action.  This line of thinking has a confessional aspect to it, and the priest in me likes it.  I find that those who have the humility to acknowledge corporate shortcomings offer us some hope that business justice will eventually be served.

5 - Can they make the workplace friendly for artists?

My favorite definition of integrity is “… a firm adherence to moral and artistic values.” The moral part of this discussion is obvious.  The artistic side often gets lost in business.  Executives can’t rely solely on accountants and engineers to safeguard the integrity of our corporate institutions.  We need artists to complement their efforts.  They are the ones who have the language, mythology and requisite skills for building the spiritual side of business.  In large part, it is the voice of the artist that has remained silent during these corporate failures.  It is they, however, who are the shamans of the 21^st century.

Business and religious leaders have left us feeling violated and without hope.  We need spokespeople for the Sacred and the True, which co-exists within the world of commerce.  Our organizational charts long for those who can use word, color and brush to reveal that the world has became surprisingly small.  That my individual action reverberates across the globe.  Artists  remind us that misdeeds done by a few can injure the many.  Just as we look to our internal “adult” for moral direction, we should look externally to the poets, painters and mystics in our places of work to shore up the frailty of the human condition in the marketplace.  Like Walt Whitman of old, I believe that present day artists will usher in a new era of celebration in business … revealing the sacredness of the human spirit, its vast potential for world good and its rectitude in the face of deceit and transgression.

It’s a message of hope.   The Corporate world could use more of it these days.  I believe it’s a legitimate demand to place upon our leaders.

P.S.  If you’re thinking about writing me, give in to the temptation.   I love getting mail ... and being influenced by what you have to say.  Please e-mail me at kennythemonk@yahoo.com.

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Kenny Moore (www.kennythemonk.com) is co-author of The CEO and the Monk: One Company’s Journey to Profit and Purpose (John Wiley and Sons), rated as one of the top ten best selling business books on Amazon.com and based on his experiences as a Human Resources executive for a large international energy company where he reported directly to the Chairman and CEO.  Kenny’s numerous writings have been published in Warren Bennis’ Leadership Excellence magazine, OD Practitioner and The Journal for Quality and Participation. He is also an "Executive in Residence" to the Institute for Corporate Productivity (i4cp).

Prior to his corporate career, Kenny spent 15 years in a monastic community as a Catholic priest.   He is now President of Kenny Moore Consulting, LLC and is a well-regarded keynote speaker, executive coach and business consultant in the areas of Leadership Development, Change Management and Employee Engagement. Kenny Moore can be reached at kennythemonk@yahoo.com.

Dear EarthTalk: I see a lot of “healthy snacks” being marketed for kids that list “natural flavors” but don’t identify them. Should I use these products? -- John Stein, Methuen, MA

Beloved food writer Michael Pollan recommends steering clear of foods that advertise their green attributes on their label. According to his line of reasoning, why give a child a fruit roll-up when you can give him or her a piece of fruit? Only processed foods need to advertise what’s natural about them, whereas an apple speaks for itself, providing wholesome nutrition without the need for marketing hype.

But most of us depend on the occasional packaged or processed food, so choosing between the lesser of two evils sometimes has to be the way to go. If a product lists natural ingredients on its label—anything from real fruits, vegetables and nuts to cereals, grains and other healthy foods you can recognize without a food dictionary on hand—it’s probably better than a food reliant on artificial flavors and sweeteners.

“One way for your kids to enjoy healthy snacks is to get them started on naturally sweet foods,” says Christine Steendahl of Kid Approved Meals, which sells menus and shopping lists to parents looking for guidance in meal preparation. “Since most kids crave sweets…naturally sweet foods such as fruits are perfect,” she says. Real bananas, oranges, apples, cherries, strawberries and other fruits are popular with most kids. “You can mix in yogurt or even make a fruit smoothie with some milk and a drop of chocolate or other natural flavors,” Steendahl suggests.

“One thing to recognize about children is that if they try enough types of natural and healthy snacks, they will find one that they enjoy,” says Steendahl. “The problem is that many times parents give up trying to find the snacks that their kids like and settle for popular junk foods instead.” She stresses the importance of teaching kids which snacks to eat and which to avoid early in life so that they can sidestep obesity problems altogether. Nuts and dry cereals, for example, are good alternatives to chips and other junk food.

According to California-based pediatrician and author William Sears, who markets his own line of healthy kids snacks called Lunchbox Essentials, parents should make sure that any snack foods they give their family members provide both fiber and protein, which give the feeling of fullness, and taste good as well. He adds that parents should learn to read labels so they can tell which products contain hydrogenated oils, artificial colors, preservatives and high-fructose corn syrup—all of which should be avoided.

As a last resort for especially finicky kids, parents can find packaged snacks that might look like junk food but are actually healthy and nutritious, including certain brands of fruit roll-ups and granola bars. Look in the snack aisle of your local natural foods market for such items, and don’t be afraid to ask store personnel for recommendations. It’s important to take your child’s nutrition seriously. Whether he or she ever realizes it, you are setting patterns that will enable them to live healthier and longer lives.

CONTACTS: Michael Pollan, www.michaelpollan.com; Kid Approved Meals, www.kidapprovedmeals.com; Dr. Sears’ Lunchbox Essentials, www.drsearshealthykids.com.

SEND YOUR ENVIRONMENTAL QUESTIONS TO: EarthTalk®, P.O. Box 5098, Westport, CT 06881; earthtalk@emagazine.com. Read past columns at: www.emagazine.com/earthtalk/archives.php. EarthTalk® is now a book! Details and order information at: www.emagazine.com/earthtalkbook.

Photo: Tree & J. Hensdill, courtesy Flickr

Television viewers in more than 3 million homes in New York City and its suburbs discovered this morning that their cable TV provider was no longer carrying local station WABC, flagship of the ABC Television network, raising the possibility that they might not be able to watch tonight’s globally-televised 82^nd annual Academy Awards ceremony.

The cutoff came after the breakdown of negotiations between The Walt Disney Company, which owns ABC, and Cablevision Systems Corporation, one of the nation’s largest cable companies.   Disney wants more from Cablevision in so-called “retransmission fees” for the right to transmit the WABC signal to the cable company’s subscribers.  When the two sides couldn’t reach agreement by their current contract deadline, Disney pulled the WABC signal.

These two prosperous companies will undoubtedly sort out their dispute, maybe even in time for tonight’s orgy of Hollywood self-congratulation.   What’s notable about the confrontation, however, is the harsh public language used by corporate combatants and the hints it provides of progress in the movement toward corporate governance reform.

On its web site for customers, for example, Cablevision argued: “It is wrong for ABC to demand $40 million in new fees, which is nothing more than a new TV tax, to help pay the salaries and bonuses for top ABC executives.”  (Translation: Executive compensation levels at Disney are a real issue.  That affects the type and quality of TV programming you receive.)

Disney’s WABC fired back: “Cablevision pocketed almost $8 billion last year, and now customers aren’t getting what they pay for – again.  It’s time for Jim Dolan and the Dolan family dynasty to finally step up, be fair, and do what’s right for our viewers.”  (Translation: The Dolan family makes an awfully good living because it tightly controls publicly-held Cablevision through its ownership of a special Class B common stock.  That affects the type and quality TV programming you receive.)

It’s no wonder that The Morning Bridge, a TV industry newsletter, published a special Sunday morning bulletin focusing on the war of words and asking: “Think anybody wins in these situations?”

(Update: Disney and Cablevision reached a tentative agreement and the ABC signal was restored 14 minutes into the Oscar broadcast.)

Is the tide turning?

Well, it could be that the movement for corporate governance reform is actually beginning to score some wins, if only because average citizens and small shareholders are beginning to understand that these issues can really mean something to them.  The question is whether these victories are only short-term tactical advantages or constitute signs of longer-term success.

“Up until now, it’s been sort of a Soviet system,” is the way shareholder democracy is described by Stephen Davis, executive director of the Millstein Center for Corporate Governance and Performance at the Yale School of Management.  “We have been operating in the United States under the myth that boards have been accountable to shareholders.”

Davis’s views are reflected in a generally upbeat weekend New York Times article on shareholder democracy which concludes that “the tide is beginning to turn, albeit slightly” for shareholders.  In addition to various rules changes, the Times cites the availability of more Web resources that help educate smaller investors to the issues, including ProxyDemocracy.org, Shareowners.org and MoxyVote.com.

Governance activist and blogger James McRitchie agrees that that the tide “is turning to become more balanced through increased voice from shareowners. Of course, we are still a long way from the point where most directors feel more accountable to shareowners than CEOs,” he adds.  McRitchie says his optimism about the outlook for shareholders, like that of other activists, is also fed by the work of the Securities and Exchange Commission’s newly-formed Investor Advisory Committee.

“A many-splendoured thing…”

Bob Monks

Seemingly less sanguine about the prospects for shareholder democracy is Robert A.G. “Bob” Monks, one of the world's most provocative thinkers on corporate governance.  Back in 2005, my colleague Marjorie Kelly, co-founder and then Editor of Business Ethics Magazine, wrote that “Monks seems to have invented the term ‘corporate governance.’”  As a co-founder with Nell Minow of the Corporate Library, a governance research firm, and founder of Institutional Shareholder Services (acquired in 2007 by RiskMetrics Group), Monks has an established track record in the field.

“Clearly, the modern shareholder, like love, is a many-splendoured thing, but while we can admire such diversity, we also have to ask whether any single class so broadly writ can ever begin to exercise its ownership rights vis a vis entrenched and well-funded corporate power,” Monks writes in a new, lengthy and colorfully-written post on the Harvard Law School Forum on Corporate Governance and Financial Regulation.

Monks goes on: “The practical effect of having ownership spread so broadly is that shareholders as a group have virtually no effective ownership rights they can exercise. Senior management pays itself, boards sit idly or complacently by, corporations abrogate ever more authority to themselves and gain an ever stronger voice in the political process, and when it comes time for the piper to be paid, the shareholders pony up in lost equity value and increasingly of late taxpayers pick up the final tab. This is a condition that ultimately serves no public good.”

One possible solution, suggests Monks, is a standard corporate structure with two classes of stock ownership: “passive shareholders, who choose not to exercise ownership rights, and stewardship shareholders, who already bear a fiduciary responsibility for funds under their management.”  Accomplishing that, Monks says, would require federal government action to create “a framework of legally enforceable responsibility.”

Speaking of Oscars…

None of this is likely to help some 3 million Cablevision subscribers in the New York area watch the Academy Awards tonight.   Their outrage is reflected in the comments on local newspaper web sites:

“GREED THY name is america.......if you make a gazillion dollars you want a bazillion......”

“Corporate blackmail with the consumer caught in the middle. Time for regulatory reform.”

Indeed, the current state of shareholder rights calls to mind the Oscar-winning performance of Peter Finch as TV anchorman Howard Beale in the prophetic 1976 film “Network.” Outraged by the respective states of society and the TV industry, Beale explodes spontaneously on-camera, driving ratings through the roof as he gets millions of viewers to join him in screaming: “I’m as mad as hell and I’m not going to take this anymore.” (YouTube)

It’s a message that the senior management and boards of Cablevision and Disney – and many other publicly-held U.S. companies – should listen to again and take to heart.

Disclosure: Michael Connor is a past employee of Cablevision Systems Corporation and ABC Television.

Oscar Photo: Darren Decker / ©A.M.P.A.S.

Dear EarthTalk: I work for an office equipment company selling copiers, fax machines, computers and printers. Each year new models come out making old ones obsolete. As a result, we have loads of trade-ins with nowhere to go. What can we do with this old equipment? -- Jeff P., Worcester, MA

Electronic waste, or “e-waste” as it’s called, is a growing problem in the United States and abroad, as obsolete or broken computers and other electronic equipment are taking up increasingly precious amounts of landfill space and potentially leaking hazardous substances into surrounding ecosystems.

The nonprofit Silicon Valley Toxics Coalition reports that 70 percent of the heavy metals in U.S. landfills are from discarded electronics—even though the e-waste itself accounts for only two percent of the trash by volume. The U.S. Environmental Protection Agency reports that Americans trash two million tons of unwanted electronics each year—six times the amount they recycle. To make matters worse, U.S. companies often ship old equipment to poor nations whose landfills and incinerators are ill equipped, subjecting already struggling populations to lead, cadmium, beryllium, and other contaminants.

So what can be done? If your old units still work but have merely been eclipsed by newer models, then by all means donate them to a needy cause that will either put them to good use or resell them to help fund their programs. You’ll earn a tax deduction for a charitable donation and, by keeping the equipment alive, prevent the manufacture of new units and thus, if ever so slightly, reduce the footprint of your operations.

But not every charity accepts old equipment, and no one wants to spend all day calling around to find one that does. A good place to look, then, is Goodwill, which will accept your equipment and then sell it through any one of its 1,500 retail stores across the country. Proceeds fund programs to help the disabled, illiterate, homeless, and those on welfare by providing job training and placement programs. The Salvation Army runs similar programs and also typically accepts donated old office equipment.

Another option is to donate your equipment to needy schools, either directly or via a service like iLoveSchools.com, which helps teachers find free supplies and equipment for their classrooms. The National Cristina Foundation also matches donated technology with needy schools and nonprofits. Also, the website GreatNonprofits.org maintains a list of charities in need of various types of office equipment. You can also offload equipment via Freecycle, a free service that helps find homes for unwanted stuff.

While finding a new home for your old gear is preferable, recycling is also an option. Recyclers harvest parts from old equipment that can be reused or resold. Several websites, including My Green Electronics, E-cycling Central, and Earth911, list electronics recyclers across the U.S. Some of these vendors will charge a small fee to recycle an item for you; others may do it for free. Also, Office Depot, Staples and some other stores will take back used electronics—even if not purchased there—usually for a small fee.

CONTACTS: Silicon Valley Toxics Coalition, www.svtc.org; Goodwill, www.goodwill.org; Salvation Army, www.salvationarmy.org; iLoveSchools.com, www.iloveschools.com; National Cristina Foundation, www.cristina.org; GreatNonprofits.org, www.greatnonprofits.org; Freecycle, www.freecycle.org; E-cycling Central, www.ecyclingcentral.com; Earth911, www.earth911.org; Office Depot, www.officedepot.com; Staples, www.staples.com.

SEND YOUR ENVIRONMENTAL QUESTIONS TO: EarthTalk®, P.O. Box 5098, Westport, CT 06881; earthtalk@emagazine.com. Read past columns at: www.emagazine.com/earthtalk/archives.php. EarthTalk® is now a book! Details and order information at: www.emagazine.com/earthtalkbook.

Photo: George Hotelling, courtesy Flickr

Encouraged by recent Securities and Exchange Commission guidance, institutional investors have filed a record 95 shareholder resolutions on climate change issues for the 2010 proxy season.

The resolutions, up 40% from last year, have been presented to some of the nation’s largest coal companies, electric power and oil producers, home builders, big box retailers, financial institutions and “other businesses that investors believe are not adequately disclosing and managing potential climate-related business impacts,” according to the Ceres coalition of groups working on sustainability issues.

Ceres directs the Investor Network on Climate Risk, composed of 80 institutional investors with collective assets of $8 trillion.

The SEC in January said a number of areas involving climate change may trigger disclosure requirements when they involve the impact of legislation and regulation, the impact of international accords, the indirect consequences of regulation or business trends, and physical impacts of climate change.

"We are not opining on whether the world's climate is changing, at what pace it might be changing, or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics," SEC Chairman Mary Schapiro said at the time. "Today's guidance will help to ensure that our disclosure rules are consistently applied."

“We want our companies to closely look at the impact climate change legislation and regulation have on them, to realistically assess those risks, and to consider the indirect consequences of climate change-driven regulation and business trends on their activities,” said Jack Ehnes, CEO of CalSTRS (California State Teachers' Retirement System), which manages $131 billion dollars in assets.

Mindy S. Lubber, president of Ceres, said “climate change presents clear material risks and opportunities for U.S. businesses – and investors have a right to know which companies are well prepared and which are not.”

Investors often withdraw proposals when they receive a positive response from companies; 28 resolutions have been withdrawn this year, Ceres said.

Resolutions filed so far include measures asking for disclosures from ConocoPhillips on how it is addressing the impact of oil sands operations; from ExxonMobil on oil sands investments and reduction of greenhouse gases; and from Southern Company on GHG emissions targets and on the hazards of coal waste disposal.

When do you know that ESG (or factoring environmental, social, and governance issues into investment and corporate decisions) has gone mainstream? One clue is this week's announcement that MSCI (Morgan Stanley Capital International) is acquiring ESG research conglomerate RiskMetrics (which gobbled up ESG pioneers KLD, Innovest, and Institutional Shareholder Services over the past three years). Another is the agenda of last week's meeting of the Securities and Exchange Commission's Investor Advisory Committee (IAC), which included items such as "ESG Disclosure Work Plan" and "Proxy Voting Transparency." So what does this mean?

The fact that an Investor Advisory Committee even exists – one of SEC Commissioner Mary Schapiro's first initiatives, to return to the "Commission's traditional role as the investor's advocate" (in the words of Committee sponsor, SEC Commissioner Luis Aguilar) – is testament to the success of the G part of the ESG equation: the SEC is governing itself more democratically. The Committee acts as the SEC's sounding board, rebounding guidance to the Commissioners on their regulatory agenda. The Committee's 18 members each represent a different constituency – with the AFL-CIO's Damon Silvers representing labor, and ProxyDemocracy Director Mark Latham representing individual investors, for example.

"Of course, the Commission doesn't have to act on anything the Committee recommends," IAC member Adam Kanzer of Domini Social Investments, who represents the ESG community of social investors, told me in an interview this week. But the very existence of the Committee establishes a mechanism for expressing the public mind – so the Commission would need a damn good reason to act against its recommendations.

The ESG equation squares the circle, reuniting the bifurcation the ol' Investor Responsibility Research Center (which got eaten up by Institutional Shareholder Services in 2005 established with its separate "social and environmental" and "governance" departments (no more having to track down either Meg Voorhes or Carol Bowie, as ESG creates a both/and.) Also, the ESG formulation has turned on its head the traditional perception of sustainability issues as time-wasting, extraneous concerns that drain on returns to potentially material risks and opportunities that investment trustees and corporate directors must factor into decision-making.

Kanzer and Stephen Davis of Yale's Millstein Center for Corporate Governance, chair of the Investor as Owner Subcommittee, outlined the workplan on ESG disclosure (according to meeting attendee Peter DeSimone of the Social Investment Forum, the socially responsible investing industry organization):

• In April, Subcommittee members will hold a meeting on the benefits of ESG disclosure to investors from a risk management perspective;
• In May, they will look at accounting standards and triggers for disclosure of contingent liabilities in the United States and other markets;
• In June, they will review reporting standards, including the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI), and look at information collected by the European Commission during its six meetings on ESG disclosure over the past year;
• In the summer, the Subcommittee plans to hold a public hearing on ESG disclosure to coincide with another meeting of the entire SEC.

The SEC Staff Interpretation released last month – the Commission Guidance Regarding Disclosure Related to Climate Change – set precedent on the E part of ESG disclosure. The guidance does not introduce new rules, but rather clarifies existing rules requiring companies to disclose material risks related to climate change, such as projected impacts of new legislation and international treaties capping carbon emissions.

Predictably, the move prompted opposition: House Financial Services Committee Ranking Member Spencer Bachus (R-AL) fired a letter to Chairman Schapiro voicing "very serious concerns" that the move represents the SEC trying to "promote a political agenda through regulation" and "will impose potentially significant compliance costs on issuers with little apparent benefit to investors." The preponderance of evidence and opinion debunking his concerns (think Stern Report and CDP) raises serious questions whether Bachus is promoting a political agenda through obstruction. Similarly, Senator John Barrasso (R-WY) introduced the Maintaining Agency Direction on Financial Fraud (or MADOFF) bill explicitly to "block" mandatory climate risk disclosure.

Bachus and Barrasso may be spitting into the wind. The corporate community generally understands and even encourages climate change regulation to create certainty and level the playing field through initiatives such as Business for Innovative Climate and Energy Policy (BICEP) and the US Climate Action Partnership (USCAP). Even recently-departed USCAP members BP, ConocoPhillips, and Caterpillar "have reiterated their belief that climate change is a real and serious issue, and that greenhouse gas emissions must be reduced," according to SustainAbility Vice President Jeff Erikson, who pointed to a ConocoPhillips press release re-stating support for federal climate change legislation. "The disagreement instead seems to be in the details of which industries will be most disadvantaged under legislation that USCAP supports," Erikson continued, before voicing disappointment at the three companies' decisions to leave USCAP.

Finally, the Investor Advisory Committee returned to the question of democracy in the wake of the recent Citizens United v. Federal Election Commission case, which considerably expanded corporate political contribution rights. The Investor as Owner Subcommittee voiced its intention to mirror its ESG disclosure proposal by proposing better disclosure or corporate political contribution limits.

The very existence of the Committee expands democratic mechanisms at the SEC, which allows and encourages the submission of public comments to the Committee - twenty five have come in as of this date.  Given the leverage opportunity the IAC represents, maintaining SEC momentum on ESG and corporate democratization may require more of a groundswell to demonstrate widespread public support for these measures – time to "sharpen your pencils."

Bill Baue is Executive Director of Sea Change Media, and Executive Producer/Host of Sea Change Radio, a nationally syndicated show with a global podcast audience. This article was first published on CSRWire.

Some 55 publicly-held U.S.-based companies have now voluntarily agreed to hold annual advisory shareholder votes on executive compensation, according to shareholder advocates who have been pushing for adoption of the practice.

The number of companies with so-called “say-on-pay” votes has increased from only 6 in 2008, when Aflac Inc. became the first to adopt the practice, and 19 in 2009.

“Say-on-pay holds corporate leaders accountable for unjustifiable CEO pay,” said Gerald W. McEntee, President of the American Federation of State, County and Municipal Employees (AFSCME), a 1.6 million member union whose members participate in public pension funds with combined assets worth more than $1 trillion. “Shareowners are demanding sensible pay for performance programs that discourage excessive risk taking.”

In addition to the 55 companies that have adopted say-on-pay votes, companies participating in the federal government’s Troubled Asset Relief Program (TARP) are also required to have annual advisory votes.

More companies are “stating a higher comfort level with the concept” and there are “several companies whose boards have voted to adopt but have not gone public as yet,” said Timothy Smith, senior vice president of Walden Asset Management and a leader in the say-on-pay movement.  Shareholder proposals urging the adoption of annual say-on-pay votes have been filed at 70 companies in 2010, according to Smith.

Votes Are Advisory

The say-on-procedures voluntarily adopted by companies to date generally establish mechanisms that enable shareholders to annually register their approval or disapproval of compensation for senior management.  In most cases, said Smith, the advisory vote is likely to result in “pro-forma” approval of executive pay packages.  However, if shareholders consider compensation excessive, especially when combined with poor corporate performance, investors could vote to register disapproval.

“It puts the (board’s) compensation committee on notice,” Smith said.  “”A stubborn company could ignore it entirely, but I don’t think they would.”  Smith noted that a majority of shareholders at Royal Dutch Shell last year voted disapproval of management pay, prompting revisions of pay packages.  Advisory shareholder votes on executive compensation are mandated in the United Kingdom.

The coalition pressing for say-on-pay reform includes a number of public pension funds, labor funds, asset managers, individual investors, foundations and religious investors.  Denise L. Nappier, Treasurer for the state of Connecticut, said: “Corporate boards have a primary responsibility to their shareholders – and this includes getting input from them on how well the company’s executive compensation ties pay to performance.  These 50 and counting companies deserve credit for listening to their shareowners.”

Smith said a number of financial firms are among the companies recently announcing they adopted a say-on-pay vote, including American Express, Bank of New York Mellon, Goldman Sachs, JPMorgan Chase, State Street, SunTrust Banks and Wells Fargo. Other adopting companies, according to Smith, include Aflac, Ameriprise, Apple, Bristol-Myers Squibb, CVS Caremark, ConocoPhillips, Hewlett-Packard, Honeywell, Ingersoll-Rand, Intel, Motorola, Valero Energy and Verizon.