Activists Team Up

CRUSADERS HAVE BEEN attacking companies ever since Ralph Nader went after General Motors for selling unsafe cars. The phenomenon gained greatly in sophistication in the 1990s as coalitions of critics, linked by the Internet, went after Nike for its alleged use of sweatshop labor. But the activism appears to have reached a new level in this year's proxy and shareholder meeting season.

Religious, labor, environmental, community and single-cause activists of all stripes are not only uniting more frequently behind a common cause, they are also going across the aisle to team up with institutional shareholders such as mutual funds and pension funds. Activists with a moral or political agenda and investors focused on financial returns have found that together, they wield far more power than any of them can alone.

"They're finding common ground with each other," says Nell Minnow, editor of the Corporate Library, the watchdog group based in Portland, Me. "[The social activists] are taking on the vocabulary of risk and return. They've learned how to frame their concerns in a way that cannot be ignored."

Wal-Mart, which could once afford to ignore critics, has been on the receiving end of so much coordinated pressure that it has finally been forced to respond. The WakeUp Wal-Mart (www.WakeUpWalMart.com) coalition claims 235,000 members, including the United Food and Commercial Workers International Union, which by itself would not have nearly the clout that the coalition does. Aside from employees, it includes community activists, small business owners, environmentalists and religious leaders. It has targeted Wal-Mart for its health care policies and for allegedly allowing crime to fester in its stores, among other issues.

"The 235,000 people are really representative of people of all walks of life," says WakeUp Wal-Mart's campaign director, Paul Blank, who is based in Washington. "It is incredibly broad in terms of who has signed up." Also of note: Pension funds in Europe as well as funds based in New York and Illinois are watching. "Institutional shareholders are certainly taking notice," says Blank.

Such partnerships have forced Coca-Cola to limit sales of soft drinks in schools and led Disney to alter its long-term marketing alliance with McDonald's because of concerns about child obesity. Weyerhaeuser faced a particularly broad coalition consisting of the International Brotherhood of Teamsters, the Native American people of Grassy Narrows First Nation, the Boreal Forest Network, Rainforest Action Network and others. They wanted the company to adopt what they considered more environmentally friendly logging policies.

"Each of these groups has its own agenda," says Paul Barnum, the company's director of strategic communications. "But the Rainforest Action Network, which has been conducting this campaign for three years now, is adroit at pulling these groups together." At the annual meeting in April, fewer than 5 percent of shareholders supported the resolution, but the ENGOs, or environmental NGOs, are unlikely to relent.

Coalitions are also going after companies with governance-related resolutions—for instance, demanding that the chairman and CEO roles be split, that CEO compensation be limited or better disclosed, or that a company's political contributions be made public. And the buzzword "sustainability," which started out meaning companies should engage in practices that do not degrade the environment over the long term, now means companies should engage in practices that will spare its shareholders any unpleasant surprises over the long term.

Socially or morally oriented activists have become fluent in the shareholder's vocabulary. "You're seeing more language about investment risk as opposed to only the morality of the issue," says Meg Voorhes, director of social issues for Institutional Shareholder Services (ISS), based in Washington. "That's resonating with other investors who aren't necessarily activists."

The traditional alliances are constantly shifting, which makes it difficult to anticipate whether they will gain strength. Take the ambivalent relationship between organized labor and environmentalists, for example. "In some cases, the labor movement has been concerned about the impact of environmental protection on jobs," explains Damon Silvers, general counsel of the AFL-CIO. "In other cases, the environment includes the workplace. So there have been some alliances on health issues. There, we share an underlying view."