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California & Global Corporate Accountability:

California & Global Corporate Accountability:. Responsibilities & opportunities for California’s citizens and investors by Sandy Buffett The Nautilus Institute for Security & Sustainable Development.

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California & Global Corporate Accountability:

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  1. California & Global Corporate Accountability: Responsibilities & opportunities for California’s citizens and investors by Sandy Buffett The Nautilus Institute for Security & Sustainable Development

  2. Californians need to demand greater levels of environmental, social, and ethical disclosure from multinational corporations.As the fifth largest economy in the world, California's citizens, public pension funds, and legislators have special opportunities and obligations to influence the terms of globalization. The Sustainable & Responsible Corporate Governance Initiative explores opportunities for California's institutional investors to exert leadership and leverage in the global economy.

  3. California is the 5th largest economy in the world 2000: Gross Product (billions of dollars) • 1 United States 9,882.8 • 2 Japan 4,677.1 • 3 Germany 1,870.1 • 4 United Kingdom 1,413.4 • 5 CALIFORNIA 1,357.8

  4. Globalization: Regulatory Gaps,Ethical Dilemmas • Economies are global, norms are not • Accountable to shareholders rather than stakeholders • Differences in national environmental and labor standards • Differences in basic societal frameworks of norms and governance • Intense competition for investment keeps national standards ‘stuck in the mud’

  5. Global corporations need global rules • Two possible approaches: Markets—Pressure companies to adopt accountability standards and require greater disclosure through shareholder/investor power, consumers, and labor/NGO action. Government—Work for legal/regulatory reforms at state, national, international level to set common rulesand standards.

  6. What can Californians do? • Raising the bar in California on global corporate disclosure is a way to increase corporate accountability • California’s public $$ should be invested in alignment, not at odds with CA policies toward sustainability, I.e. renewable energy targets • California’s public $$ is a powerful force on Wall Street that could serve the public good • State-level ‘entry points’ can create precedents for new global standards

  7. Leveraging California’s investors to demand better corporate governance • CalPERS: $151 billion in assets • Largest public pension fund in US, 3rd largest in world • Holds stock in over 1,600 corporations • $21 billion invested in California companies • When CalPERS acts, Wall Street Notices

  8. Public pension funds and Fiduciary Responsibility • The duty of loyalty– they must act solely in the interest of beneficiaries • Toxic releases, polluted bays and deltas, superfund sites, human rights abuses, cancer clusters, neglect of renewable energy options, sprawl, and poor labor conditions are NOT in the interest of California beneficiaries.

  9. “CalPERS adopts new human rights screen” • Feb, 2002, new screen adopted for emerging market investments • Applies to overseas investments only, approx. $1 billion • Does NOT apply to MNCs • Country-based rather than Company-based • Adopted after pressure from labor groups

  10. What about the other $150 billion? • Corresponding push from California citizens, students, and pension beneficiaries could prompt CalPERS and other investors to adopt far-reaching environmental and social criteria for entire corporate portfolio

  11. What is CalPERS already doing? • CalPERS adopted Global Sullivan Principles • Disclose proxy votes • Have supported some environmental shareholder resolutions

  12. State Treasurer Philip Angelides stated: “There is a correlation between good corporate practices and good investment results. People in the investment industry often want to put up a wall between the two things, but they are related.”

  13. Leveraging the CalPERS effect Push for CalPERS to adopt policies on engaging corporate management on the following: • Require International Right to Know type disclosure of overseas operations • Companies adhere to standardized disclosure & reporting– GRI? • Broaden the language of “corporate governance” to embrace environment and human rights • Target egregious corporate performers through shareholder activism • Develop communication mechanism between CalPERS investment committee & stakeholders

  14. Enron debacle provides window of opportunity • CalPERS lost $62 million • It has formed a task force to reexamine corporate governance & disclosure • Kathleen Connell, State Controller & Board Member stated: “We have huge leverage in our portfolios. I would really like to see us emerge with some new forceful ideas and get them implemented…It’s time to tighten the screws”

  15. For questions or comments, please contact: Sandy Buffett, Senior Program Officer The Nautilus Institute for Security & Sustainable Development Berkeley, CA USA 510.295.6116 Email: sbuffett@nautilus.org Web: www.nautilus.org

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