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DOW FAILS TO IDENTIFY RISKS TO INVESTORS

The Need For Disclosure

• The emerging technology of BIOMONITORING that tests human tissues for the presence of harmful chemicals such as CHLORPYRIFOS. Legislative calls for manufacturer “markers” and technological advances will likely identify links of health impacts to chemical companies.
• Ever increasing PUBLIC POLICIES focused on eliminating dioxin-generating products that may result in a phase-out of Dow products.
• A class action by 2000 Michigan residents alleging DIOXIN contamination.
• A 2003 Supreme Court decision that may allow thousands of new US veterans’ AGENT ORANGE suits to proceed.

Dow spends hundreds of millions every year on environmental liabilities (Graph 1). Yet its existing disclosures do not describe the impacts that changing regulatory and market conditions can have for the company. As one of the world’s largest manufacturers of persistent toxic chemicals, Dow is on a head-on collision course with changing public policies.

The Dow opposition statement claims that its publications and websites contain the needed information and the report requested in the resolution would be duplicative. This is not so.

• Describe the mounting risks to the company posed by biomonitoring;

• Describe the impacts of recent and impending public policies on Dow product lines;

• Describe the potential liabilities from expanded dioxin and Agent Orange law suits.

What This Resolution Would Do

This resolution asks the company to:

• Account to investors on the impacts of changing public policies that target chlorpyrifos, dioxins and other persistent bioaccumulative toxics associated with Dow products.
• Provide a plan for phase-out of products targeted by public policymakers in the US and Europe.
• Fill in missing gaps in transparency and reporting.

Graph 1. Dow’s Disclosed 2003 Env. Liabilities

Biomonitoring assesses evidence of chemical exposure based upon sampling and analysis of human tissue, fluids and breast milk.

The Dow opposition statement says it “supports continued research on trace testing in human blood” but that “separate studies are needed to determine health effects.”

Dow fails to say that the policy advocates who call for phase-out of chemicals causing toxic body burdens are increasingly combining biomonitoring data with other data in litigation for personal injury damages (see figure 1). It appears that powerful evidence may be mounting against Dow for future litigation yet company reporting fails to describe this risk.

This resolution asks Dow for a plan to move away from chemicals – such as chlorpyrifos – that leave toxic “fingerprints” in humans and the environment.

Risk Analysis via Biomonitoring

Biomonitoring and testing for the presence of chemicals in humans will continue to draw connections between chemicals, avenues of exposure, exposed populations, human health impacts, and manufactures.

• Incidences of Diseases, Birth Defects, Learning and Developmental Disorders with Unknown or Untraced Causes

• Corresponding Set of Known Health Impacts Caused by Chemical exposure.

Figure 1. Risk Analysis via Biomonitoring

The Dow opposition statement asserts that chlorpyrifos is “one of the most thoroughly studied pesticides.”

Dow fails to say that there has long been scientific controversy about this chemical and a steady flow of studies indicating health and environmental problems.

Dow’s statements are largely silent regarding :

• The U.S. Centers for Disease Control (CDC) recent nationwide sample of 9,282 people that estimated 93% of the US population has chlorpyrifos in their bodies.
• The CDC average tested US child aged 6-11 was found to have exposure to chlorpyrifos at four times the level the EPA considers acceptable for long-term exposure.
• The EPA recently changed its assessment of chlorpyrifos, eliminating virtually all residential uses and is assessing even further restrictions.
• The EPA recently denied a Dow application to allow some limited residential uses.

Market analysis indicates that Dow Chemical likely contributed at least 80% of the chlorpyrifos exposure in the U.S. Yet current company reporting fails to describe this risk.

DIOXIN

Dioxins are a family of chemicals that:

• Persist in the environment.
• Accumulate in the food chain.
• Are highly toxic in tiny amounts.
• Have health effects including cancer, immune suppression, reproductive, developmental and liver damage.

The Dow opposition statement claims that the company is already reporting on dioxin emissions reduction.

• 151 nations have signed the Stockholm Treaty with the goal of eliminating dioxin and other persistent organic pollutants.
• The commission implementing theGreat Lakes Water Quality Agreementrecommends the US and Canada develop timetables to phase-out the use of chlorine containing compounds in industry.
• The European REACH program may restrict markets for Dow product lines.

REACH will be far-reaching

• Companies will need to provide data on their products including toxicity and information about how humans or the environment might be exposed to them.
• The industry will be responsible for the cost of information about these products.
• Likely outcome will be a ban on very toxic chemicals in favor of safer alternatives.
• Some industry associations suggest that up to 20% of chemicals on the market would have to be discontinued
• 33% of Dow’s 2002 revenues were derived from Europe, and 31% of revenues from its Chemicals and Performance Chemicals businesses.(2)

The proposed authorization process focuses on carcinogens, mutagens, substances toxic to reproduction, and persistent organic pollutants. These properties are well represented in Dow’s product lineup. It is impossible for investors visiting the Dow site to assess REACH’s impact on Dow.

Steve Waygood, Insight Investments, the asset management arm of UK’s HBOS banking group. 9/6/04

Dow publications do NOT address:

• The risks and liabilities associated with Dow’s commitment to products whose production lead to dioxin generation.
• The company’s plans to act consistently with the emerging phase-out policies.

Midland, Michigan

• Elevated dioxin levels have been found in Midland’s parks, public use areas and the floodplain downriver from the manufacturing facility (see figure 2).
• Residential sampling shows elevated levels of dioxin in the yards tested.
• A class action was filed against Dow in 2003 for medical monitoring and property damages on behalf of 2,000 residents. Property damages alone are estimated at $100 million.

Figure 2. High Dioxin Levels Detected in Testing In and Near Midland, Michigan (not to scale)

• Contamination has been detected as far as 50 miles downstream of the Midland facility, with chemical “fingerprints” pointing to Dow.
• The Michigan Dept. of Community Health has issued advisories restricting consumption of fish for the Tittabawassee River below Midland based on detected levels of dioxins and PCB's in fish.
• A State of Michigan study showed serious threats to wildlife and also warned residents to avoid contact with the contaminated soil.

AGENT ORANGE

A Yale University conference concluded, “the use of Agent Orange as a defoliant and herbicide in Vietnam was the largest chemical warfare operation in history, producing considerable ecological as well as public health damage.”

The Dow opposition statement argues that no court has yet found liability for Dow.

Dow FAILS to discuss the potential impact of the following facts:

• In 2003 the US Supreme Court opened the door to a new round of lawsuits by Vietnam veterans and their families due to exposures related to the herbicide produced by Dow and other companies;
• Roughly 100,000 claims of Agent Orange exposure-related health problems by U.S. veterans have been filed with the government since 2000;
• On Jan. 30, 2004 the Vietnam Association appealed a class action lawsuit for Victims of Agent Orange on behalf of Vietnamese citizens.

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2. CEO William Stavropoulos, Presentation to the Smith Barney Citigroup "14th Annual Chemical Conference" Dec. 3, 2003.

For more information contact

Michael Passoff (415) 391-3212, mp