| We believe there are numerous
reasons to warrant voting in favor of the resolution.
As we review the international activities of Unocal we
note the contradiction between its conduct in the communities
where it operates and those commitments expressed in Unocal’s
Guiding Principles and the Global Sullivan Principles
onto which it has signed. These sets of Principles offer
commendable statements regarding Unocal’s corporate values.
Unfortunately, it is obvious that these guidelines are
not followed with respect to human rights in Burma (Myanmar),
and elsewhere where Unocal operates. One important way
to ensure that any company is serious about its adopted
Principles is to provide incentives to executives through
their compensation formula to meet those goals. Numerous
companies including IBM, Kodak, Proctor & Gamble,
and Bristol Meyers Squibb have integrated social responsibility
goals and performance into their executive compensation
formula.
Human Rights have become an important business consideration.
In the 4/6/2000 New York Times article "A Call
to Put Social Issues on Corporate Agendas," the
article concludes that if companies do not address human
rights issues, they face a new kind of corporate risk
with operations, reputation, retention of quality employees
and shareholders.
We believe this is currently the case with Unocal as
the human rights abuses associated with its Yadana pipeline
project in Burma are causing the company disproportionate
financial and reputational liabilities.
A report by the Harvard Business School titled "The
Burma Pipeline" states, "The controversy
that emerged around Yadana quickly became serious enough
to put Unocal’s involvement in the project - and the
firm’s reputation – into serious jeopardy."
In short, -Unocal’s Yadana gas pipeline project in
Burma has produced minimal revenues for Unocal, while
involvement with Burma's oppressive military regime
and the human rights and environmental controversies
associated with this pipeline project have created disproportionate
financial and reputational liabilities for Unocal. While
other lawsuits have been dismissed in the past, Unocal
is currently facing costly lawsuits in both the State
of California and a U.S. federal court for human rights
violations conducted on the Yadana project. As the Oil
and Gas Journal noted in June 2000, Unocal is "again
facing legal and political pressure in (its) home country
and internationally for (its) involvement in Yadana
. . .it is the suits against Unocal that have the gravest
potential consequences. The class action suits, originally
filed in 1996, seek more than $ 1 billion in damages."
In its response last year to our shareholder resolution,
Unocal stated in the proxy statement that they believe
"this proposal in unnecessary" because "the
Company has not been involved in ‘egregious human rights
violations’ in Myanmar or anywhere else. Unocal is proud
of its human rights record." Yet U.S. Federal Judge
Ronald W. Lew concluded that Unocal executives were
complicit in human rights violations in their operations
in Myanmar stating that "The evidence does suggest
that Unocal knew that forced labor was being utilized
and that the Joint Venturers [Unocal, Total, MOGE and
PTT] benefited from the practice."
There is strong shareholder support for the Executive
Compensation resolution. Last year, 16.3% of the shareholders
voted in favor of the Executive Compensation resolution,
including such prominent shareholders as CalPERS.
CalPERS explained its support for the resolution by
noting that "CalPERS believes the company has a
poor environmental and human rights record. The requested
report could help dispel investors’ concerns about financial
liabilities in these areas."
.
In conclusion, we believe Unocal’s involvement in Burma
is inconsistent with its stated commitment to excellence
in corporate governance, human rights, and social accountability.
We are gravely concerned that Unocal’s continued presence
in Burma will place Unocal’s long-term profitability
at risk.
We also believe that the Executive Compensation resolution
will help to address this as well as other social issues
and ensure that the company strengthens its social accountability
goals, for example, taking into account environmental
and diversity standards
As concerned shareholders of Unocal and as sponsors
of this resolution, we urge you to vote for Proposal
No. 5.
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