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October 24, 2001
Social Investors Press Unocal to Cut Ties to Burma
by Mark Thomsen
Social investors have become part of a sophisticated, multi-pronged campaign to keep the Burma
issue in front Unocal senior management. (part two of a two-part article)
SocialFunds.com --
Yesterday's article
related how a student campaign is working to push universities and colleges to divest from Unocal (ticker: UCL) because of the
company's business ties with Burma's (Myanmar's) ruling military regime. Social investors have
also been stepping up their activities to pressure the oil company. In the past they focused
mostly on shareowner resolutions and dialogue, but now they are beginning to make their presence
known at stock analyst meetings.
 "Investors are realizing the risk of doing business with
[Burma's military junta] simply outweighs the benefits," said Heidi Quante of the Unocal Corporate
Accountability Campaign. The Campaign, which is a project of Global Exchange, is working with
shareowners to get Unocal to withdraw from Burma. Global Exchange is a San Francisco-based human
rights organization that promotes environmental, political, and social justice around the world.
Shareowner support for resolving the Burma issue was evident at Unocal's annual meeting
this year. One shareowner resolution submitted by the AFL-CIO, which asked the company to
implement International Labor Organization standards in its worldwide operations, received over 23
percent support from voting shareowners. According to the Investor Responsibility Research Center,
that resolution is the third-highest vote-getter this proxy season.
Another resolution
requested that executive compensation at Unocal be tied in part to the social performance of the
company. The resolution, filed by a member of the Interfaith Center on Corporate Responsibility
(ICCR), included unfavorable mention of the company's Burma operations. That resolution also
received significant support, garnering almost 16 percent of shareowner votes.
Concerned
investors are not stopping there, however. In July, the AFL-CIO sent a report on Unocal to company
investors and analysts. The report details how Unocal is lagging behind its peers in terms of
financial performance, how income from the company's Yadana gas pipeline project in Burma remains
uncertain, and how the political and legal risks of Unocal's Burma investments pose a danger to
shareowners.
The legal risks have already appeared in the form of lawsuits. EarthRights International, a human
rights and environmental group, is assisting 12 Burmese in suing Unocal for its complicity in human
rights violations inflicted by Burma's military. The violations include forced labor, rape, and
murder.
A federal court has found that Unocal knew Burma's regime used forced labor on the
Yadana pipeline "as early as its initial deliberations as to becoming a co-venturer with the
military." The court also found that once involved, Unocal benefited from forced labor.
Despite these facts, the federal court concluded that Unocal could not be held liable. A
subsequent appeal is pending. However, a case filed in Unocal's home state of California has
survived a movement for dismissal and may proceed to trial next summer. The same 12 plaintiffs are
suing for assault, battering, false imprisonment, and unjust enrichment.
According to the
AFL-CIO report, "Given that Unocal expects at least a value of $1 billion from the Yadana project,
the company may be liable at a minimum for that amount in this case." This litigation risk should
be a concern to all shareowners, not just social investors.
"Unocal's involvement in Burma
is a virtual 'poison pill,'" said Simon Billenness, Senior Analyst at Boston-based Trillium Asset
Management. "Being linked to a rogue regime is depressing the stock price and preventing
respectable major oil companies from purchasing Unocal."
On behalf of Trillium's clients,
Mr. Billenness has been questioning Unocal senior management at analysts meetings about business
operations in Burma. At a meeting in Boston a few months ago, he discussed the AFL-CIO report and
handed out copies to other analysts.
The Unocal Corporate Accountability Campaign is
pushing the Burma issue even further at analyst meetings. It is taking the extraordinary step of
organizing protests outside the analysts' meeting places. Even though Unocal has stopped posting
its analyst meeting schedule on its website, the Campaign has continued to organize the protests.
Meanwhile, human rights abuses by Burma's military continue today. According to
EarthRights International, light infantry battalions responsible for patrolling areas around the
pipeline still force villagers to carry supplies for them.
The government officially
does not allow such forced labor. The soldiers, however, have taken to asking the heads of
villages to provide porters, and members of the village are forced to work for the battalions on a
rotating basis. Those who try to refuse are told they must pay money. Some villagers have
reported being beaten and others have had land confiscated for short periods.
Mr.
Billenness said he hopes Unocal's CEO, Chuck Williamson, will see that it is in Unocal's long-term
interest to clear up the company's tainted reputation.
"When Peter Bijur took over Texaco
in 1996, Texaco had a dreadful reputation. He reached out to concerned investors and stakeholders,
took Texaco out of Burma, effectively handled the company's diversity problems, and left the
company with a clean plate," said Mr. Billenness. "I am hoping that Chuck Williamson will do the
same for Unocal."
©
SRI World Group, Inc. All Rights Reserved.
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