On Your Behalf—January 2009
The General Board Reaffirms Its Policy on Divestment
Wesleyan Heritage
In a famous sermon entitled The Use of Money, John Wesley commends money as a means to better the world around us. He says that money “is food for the hungry, drink for the thirsty, raiment for the naked…a defence for the oppressed, a means of health to the sick…” He proceeds to give instructions on how to earn money, how to save it and how to give it away.
John Wesley’s instructions on the use of money remind us that from its beginnings, Methodism has been keenly aware that financial resources can be a positive force in working for good. From smuggling to slavery to temperance to gambling, churches in the Methodist tradition always have believed they can make a difference in the world.
The General Board and Socially Responsible Investing
Throughout its history, the General Board of Pension and Health Benefits (General Board) has followed Wesley’s example and endeavored to earn and save money responsibly. It has, as Wesley suggested, avoided investments in certain industries. It has used the tools of proxy voting and shareholder advocacy to influence companies toward greater responsibility, fairness and sensitivity. And believing with Wesley that money is “food for the hungry, drink for the thirsty, [and] raiment for the naked,” the General Board has committed more than $1.5 billion to affordable housing, community development and microfinance projects around the world.
Thanks to Wesley, Methodism has a deep commitment to social and economic justice. Many United Methodists strongly believe that we should use our financial resources to uphold our Social Principles and to work for change in the world.
Divestment
One of the strongest ways we can use our financial resources to express our values and bear witness to the goals outlined in the Social Principles is through divestment, one of the socially responsible investing tools available to the General Board. In the investment of money, The Book of Discipline 2004 (¶716) clearly authorizes all boards and agencies of the Church “to give careful consideration to shareholder advocacy, including advocacy of corporate disinvestment.”
During the apartheid era in South Africa, the General Board seriously considered divestment, and in 1985, it announced it would divest from any company not signing the Sullivan Principles within a two-year period. The Sullivan Principles attempted to hold companies operating in South Africa accountable for ethical business practices and for conducting business in a way that did not further or support the system of apartheid. In 1987, in accordance with this policy, the General Board divested nearly $28,000,000 worth of shares from seven companies. Over the next several years, an additional 10 companies were eliminated from the General Board’s investment portfolio. Nonetheless, the General Board reaffirmed its preference for the other socially responsible investing tools—including direct communication with company management, the voting of proxies and the filing of shareholder resolutions.
In late 1991, the General Board attempted to engage Kmart over issues related to the sale of adult fiction at Waldenbooks, a Kmart subsidiary. Letters were sent, meetings were arranged and, finally, a shareholder resolution was filed. Still unsatisfied with the company response, the General Board chose to divest its more than 800,000 shares of Kmart stock.
South Africa and Kmart remain isolated examples of divestment by the General Board. In nearly all cases, the General Board believes that when dealing with companies and important social issues, constructive engagement, not divestment, is the most powerful tool for change. Though divestment always is an option, it is to be considered only after other avenues of engagement have proved unsuccessful. In the General Board’s experience, shareholder advocacy—though it takes time—is a more effective and successful way to influence corporate decision-making than divestment.
Shareholder Advocacy
The General Board’s typical company engagement process involves:
- writing a letter,
- meeting with company executives or representatives, and/or
- filing a shareholder resolution.
The order of the steps may vary, but the ultimate goal is to have a face-to-face meeting. Companies with business practices that are not aligned with the values of the Church and are unresponsive or unwilling to entertain shareholder concerns may be targets of divestment. But it has been the General Board’s long-standing practice to consider divestment only after other attempts at shareholder engagement have been exhausted. The General Board will continue to consider divestment a final step in the long process of shareholder advocacy.
Israel/Palestine and Sudan
Over the past several years, several United Methodist organizations have called for divestment from companies perceived as aiding the Israeli occupation of Palestinian areas. Though it later withdrew its petition, the General Board of Church and Society petitioned General Conference 2008 to consider divestment specifically from Caterpillar, Inc.
Though General Conference 2008 did not adopt any proposals calling for divestment from companies operating in the Middle East, it did authorize the creation of a Socially Responsible Task force with specific instructions “to seriously consider global human rights needs, for example, the Middle East, Sudan and China.”
General Conference was more specific with the situation in Sudan. Though not mandating divestment from companies operating in Sudan, General Conference directed United Methodist investors “to prayerfully consider divestment of the personal and pension assets under their control from any company doing business with the government of Sudan.”
The Sudan Divestment Task, Force, a project of the Genocide Intervention Network, has classified several companies operating in Sudan as “highest offenders.” In general, these companies have a business relationship with the government of Sudan, are unwilling to provide public disclosure on their policies and practices and are unresponsive to shareholder engagement efforts. The General Board has attempted to engage one such company, the Oil and Natural Gas Company (ONGC) of India, for more than a year. Having received no response, the board of directors voted to divest all ONGC shares. For more information, see the General Board’s press release at www.gbophb.org/news/releases/pr20090108.asp.
The General Board’s official statement on divestment, especially as it relates to Sudan and the Middle East, is available at www.gbophb.org/UserFiles/File/resources/pdf/gc2008/divest.pdf. It reaffirms the use of traditional shareholder advocacy tools to work for change—both within companies and in regions undergoing social and political unrest.
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