R E S P O N S I B L E I N V E S T M E N T F O R A S U S T A I N A B L E E C O N O M Y SHAREHOLDER ENGAGEMENT ACTIVITY REPORT Q4/07 October 1 December 31
ENGAGEMENT AT A GLANCE Disclosure & Transparency Engagement Themes Human Rights Labour Footprint Corporate Governance Environment 0 1 2 3 4 5 6 S&P/TSX 60 Index S&P/TSX Composite Index Engaged this Quarter 18% Engaged this Quarter 5% Sectors Engaged this Quarter Mining & Materials 2 Financials 6 Retail 3 Industrial Technology 1 Real Estate 1
contents Executive Summary 3 Activity Snapshot 4 Disclosure & Transparency 5 Human Rights 5 Global Labour Footprint 6 Corporate Governance 7 Shareholder Resolutions 7 Company Progress Summary 8 2 SHAREHOLDER ENGAGEMENT ACTIVITY REPORT
Executive Summary This report details SHARE s Shareholder Engagement Activities for the fourth quarter of 2007. SHARE conducts focused and constructive engagement dialogues with public corporations on behalf of institutional shareholders. The goal of our program is to improve the environmental, social and governance (ESG) performance of the companies in our clients investment portfolios. For more information on SHARE s Shareholder Engagement Services, please visit www.share.ca/shareholder_engagement. SHARE contacted a total of 13 companies in the fourth quarter of 2007. We continue to engage with companies on the issue of disclosure and transparency to improve the quality and consistency of companies social and environmental reporting practices. SHARE met with Westport Innovations regarding its upcoming Sustainability Report, which will utilize the Global Reporting Initiative (GRI) Guidelines. We wrote to Kinross Gold regarding its disclosure practices, and assisted Meritas Mutual Funds in filing a shareholder proposal regarding the GRI with Shoppers Drug Mart Corporation. On the issue of Human Rights, we continue a constructive dialogue with Goldcorp Inc. SHARE, in cooperation with a coalition of other shareholders, wrote Goldcorp to request a meeting to continue our discussions regarding the company s policies and performance on human rights, community relations and environmental impacts. On October 30, 2007, SHARE, in partnership with the Atkinson Charitable Foundation, hosted a successful multi-stakeholder roundtable on Responsible Contractor Policies in the property management industry. Approximately 30 people joined the Atkinson Foundation and SHARE at the roundtable including real estate investors, commercial property owners, property management companies, trade unions and grassroots advocacy groups to discuss precarious employment practices in the property service sector. SHARE was in contact with Canadian Tire Corporation regarding supply chain management issues, and worked with Meritas Mutual Funds to file a shareholder proposal with Harry Winston Diamond Corporation (formerly Aber Diamond Corporation) regarding disclosure and supply chain management. SHARE also continued to engage with Canada s five banks on governance issues, and assisted Meritas Mutual Funds in filing shareholder resolutions at the Bank of Montreal, Bank of Nova Scotia, CIBC, Royal Bank and TD Bank. The resolutions requested the banks to implement an advisory shareholder vote on executive compensation. SHAREHOLDER ENGAGEMENT ACTIVITY REPORT 3
Activity Snapshot Disclosure & Transparency GRI Reporting Companies 3 Kinross Gold, Shoppers Drug Mart, Westport Innovations Human Rights Companies 1 Extractive Industry Goldcorp Inc. Labour Footprint Companies 3 Precarious Employment Supply Chain Management Brookfield Asset Management Harry Winston, Canadian Tire Corporate Governance Companies 6 Advisory Vote on Executive Compensation Bank of Montreal, Bank of Nova Scotia, CIBC, Royal Bank, Sun Life Financial, TD Bank Total 13 4 SHAREHOLDER ENGAGEMENT ACTIVITY REPORT
2007 Progress on Disclosure In 2007, SHARE contacted a total of 30 companies, representing 20% of the S&P/TSX 60 Index and 9% of the S&P/TSX Composite Index, to request they publish a GRI report. Three companies we contacted plan to publish a GRI report in 2008 (Westport Innovations, Kinross Gold and Goldcorp Inc.), and another three companies will consider using the GRI for future reports (Nortel Networks, National Bank of Canada, and Penn West Energy Trust). Burma & Human Rights Shareholders have been questioning whether oil, gas, mining and tourism companies can responsibly operate in Burma, where violations of human rights are systematically perpetrated by the country s ruling Junta, and where economic revenues are used to prop up the military regime. Investors have taken their concerns regarding Burma directly to companies with operations in the country, including Chevron, Total S.A. and PetroChina, meeting with company officials and filing shareholder resolutions on the issue. For more information, visit www.share.ca/burma. Disclosure & Transparency Global Reporting Initiative Transparency about environmental and social performance is fundamental to the ability of investors to evaluate and manage risk, which is why SHARE made a significant effort in 2007 to engage with corporations about accurate and timely disclosure of social and environmental information. We have asked companies to prepare a Sustainability or Corporate Responsibility report using the Reporting Guidelines of the Global Reporting Initiative (GRI), an international initiative focused on improving the quality and comparability of sustainability reports (www.globalreporting.org). In September, SHARE met with a representative of Westport Innovations to discuss the company s upcoming GRI report. Westport has made a commitment to producing a detailed and transparent report, and to implementing a vigorous report planning and consultation process. We look forward to reading Westport s report when it is published in 2008. SHARE also wrote a follow up letter to Kinross Gold regarding GRI reporting, and was informed that the company will publish a report using the GRI Guidelines in May 2008. Finally, SHARE assisted Meritas Mutual Funds in filing a shareholder resolution with Shoppers Drug Mart Corporation, requesting that the company publish a GRI Report. Human Rights Extractive Industry SHARE s engagement with Goldcorp Inc. regarding human rights, community consultation and environmental impacts continued in the fourth quarter of 2007. After receiving a favourable response to our joint shareholder letter sent in May 2007, SHARE and a coalition of investors wrote to request a meeting with Goldcorp in early 2008. We expect a response in the next quarter. SHAREHOLDER ENGAGEMENT ACTIVITY REPORT 5
Responsible Contractor Policies Some public sector pension funds in the United States have established responsible contractor policies that support fair wages and benefits for contractors and subcontractors within their real estate investment portfolios. Examples include the California Public Employees Retirement System, the Illinois State Board of Investment and Connecticut State Retirement and Pension Funds. In addition, the Multi-Employer Property Trust (MEPT) in the US has a responsible contractor policy and has taken steps to ensure that all of the properties it invests in comply with that policy. Global Labour Footprint Precarious Employment SHARE and the Atkinson Charitable Foundation hosted a multi-stakeholder roundtable discussion in October 2007 addressing the issue of precarious employment practices in the property service industry. Approximately 30 people joined the Atkinson Foundation and SHARE at the roundtable including real estate investors, commercial property owners, property management companies, trade unions, and grassroots advocacy groups. The Canada Pension Plan Investment Board, the Ontario Municipal Employees Retirement System, OPSEU Pension Trust, Bentall Capital and Brookfield Properties took part in the proceedings, along with key trade unions and civil society groups including the SEIU, KAIROS and the Workers Action Centre. The roundtable discussions underscored the importance of evidence-based research that supports business case arguments for up-holding labour standards and creating positive working environments throughout business operations. At the same time, the roundtable illustrated the opportunities that exist for investors and other stakeholders to collaborate on these issues in order to better understand and find practical solutions to new and emerging challenges. Supply Chain Management As concerns over lead paint and toy recalls have recently highlighted, social, environmental or health and safety issues within a company s supply chain can have a significant impact on corporate reputation, sales, revenue and shareholder value. SHARE has been engaging with companies regarding supply chain management on behalf of Meritas Mutual Funds to ensure the companies owned by Meritas meet the highest labour and safety standards throughout their supply chains. In the fourth quarter of 2007, SHARE contacted Canadian Tire Corporation requesting a meeting with senior managers to discuss the company s policies and procedures for monitoring its apparel and non-apparel supply chains. We also assisted Meritas in filing a shareholder resolution at Harry Winston Diamond Corporation (formerly Aber Diamond Corporation). The resolution asks the company to develop a supplier code of conduct and report to shareholders on how it plans to implement the code. 6 SHAREHOLDER ENGAGEMENT ACTIVITY REPORT
Corporate Governance What is a shareholder resolution? A shareholder resolution (or shareholder proposal) is a legal document submitted to a company, circulated to all shareholders, and put to a vote at a company s annual meeting. Resolutions typically request the company s board of directors to take action on an issue that shareholders believe affects corporate performance, and that may not have been adequately addressed by the company. Shareholders of companies incorporated in most Canadian jurisdictions are entitled to file shareholder resolutions, provided that they meet certain requirements set out by the federal or provincial Business Corporations Act under which the company is governed. Advisory Vote on Executive Compensation Ensuring that compensation for corporate executives reflects on-the-job performance is a priority for SHARE s engagement program. In 2007 we initiated engagement dialogues with nine companies on behalf of Meritas Mutual Funds, regarding implementing an advisory vote on executive compensation. The advisory vote allows shareholders an annual non-binding vote to either approve or disapprove of the report of the compensation committee on executive pay. In the 2007 proxy season, shareholders submitted proposals calling for the adoption of an advisory vote at more than 40 companies in the United States. Approximately 20% of the proposals submitted in the US garnered majority shareholder support. In the fourth quarter of 2007, SHARE assisted Meritas Mutual Funds in filing shareholder resolutions at Canada s five banks, Bank of Montreal, Bank of Nova Scotia, CIBC, Royal Bank, and TD Bank. The resolutions ask shareholders to support the adoption of an advisory shareholder vote on executive compensation. Shareholder Resolutions This quarter, Meritas Mutual Funds filed seven shareholder resolutions. Issue Company Filed by Disclosure & GRI Reporting Supply Chain Management Advisory Vote on Executive Compensation Shoppers Drug Mart Harry Winston Diamond Corporation Bank of Montreal Bank of Nova Scotia CIBC Royal Bank TD Bank Meritas Mutual Funds Meritas Mutual Funds Meritas Mutual Funds SHAREHOLDER ENGAGEMENT ACTIVITY REPORT 7
Company Progress Summary Company Topic Progress Bank of Montreal Advisory Vote on Compensation Resolution Bank of Nova Scotia Advisory Vote on Compensation Resolution Brookfield Asset Management Precarious Employment p Canadian Tire Corporation Supply Chain Management 1 CIBC Advisory Vote on Compensation Resolution Goldcorp Inc. Human Rights, GRI Reporting 1 Harry Winston Diamond Corporation Supply Chain Management Resolution Kinross Gold GRI Reporting p Royal Bank Advisory Vote on Compensation Resolution Shoppers Drug Mart GRI Reporting Resolution Sun Life Financial Advisory Vote on Compensation q TD Bank Advisory Vote on Compensation Resolution Westport Innovations GRI Reporting p Total: 13 companies p Positive u On Track/Neutral q Negative/ No Response 1 Response Pending 8 SHAREHOLDER ENGAGEMENT ACTIVITY REPORT
The Shareholder Association for Research and Education (SHARE) is a non-profit organization based in Vancouver, British Columbia. Since its creation in 2000, SHARE has provided leadership, expertise and advocacy in the area of responsible investment and active share ownership. SHARE assists institutional investors implement responsible investment strategies through our Active Ownership Services, including: Pension Investment & Governance Education Proxy Voting & Advisory Services Shareholder Engagement Responsible Investment Advisory Services Suite 1200, 1166 Alberni Street, Vancouver, BC V6E 3Z3 Canada T 604 408.2456 F 604 408.2525