U.S. Investors Press Olympic Sponsors on Russian Antigay Stance

Institutions ask companies backing the Winter Games to take a stand for LGBT rights in Russia. So far, only Swatch has complained.

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Traditional Russian dolls, also known as Matryoshka, sit in the window of a Swatch Group AG wristwatch outlet at the GUM department store in Moscow, Russia, on Thursday, May 16, 2013. Russia’s government is split over charging the central bank to support the economy as part of efforts to revive growth, leaving President Vladimir Putin to decide, according to an official familiar with the proposals. Photographer: Andrey Rudakov/Bloomberg

Andrey Rudakov/Bloomberg

In June the Russian parliament passed a law prohibiting the distribution of “propaganda of nontraditional sexual relations” among minors. According to many analysts, the law amounts to a ban on gays and the criminalization of human rights groups and certain kinds of speech in Russia, a country with a poor record protecting its lesbian, gay, bisexual and transgendered (LGBT) citizens. The law triggered an outcry in the U.S. and Western Europe. A month later Russian President Vladimir Putin signed a bill into law banning gay couples or single people from countries that allow same-sex marriage from adopting Russian children.

Russia’s crackdown is happening at a time when most developed countries are moving toward equal rights and antidiscrimination policies for LGBT citizens. For example, the U.S. Supreme Court upheld the right to gay marriage in two landmark rulings in June.

The issue has drawn more attention because in February Russia will be hosting the Winter Olympics in Sochi, a resort on the Black Sea. Russia’s policies sparked concerns for the safety and civil liberties of LGBT athletes taking part in the games, stirred diplomatic problems for countries sending delegations to the games and have become a problem for sponsors of the games, some of which have been asked to take a stand for LGBT rights and against the Russian government.

In October first-term New York State Senator Brad Hoylman, who represents a district in Manhattan, wrote a letter to New York State Comptroller Thomas DiNapoli requesting that the state’s $160.7 billion pension system, the New York State Common Retirement Fund, divest shares in public companies that are sponsors of the Sochi games; DiNapoli is the sole trustee and manager of the pension system.

“It is important because it really sends a message that there are economic repercussions as a result of human rights violations,” says Hoylman. “The Olympics is all about marketing and reputation, not just for the companies but for the host country. The phrase ‘the world is watching’ cannot be overstated when it comes to the Olympics.”

The letter was co-signed by New York State Assemblyman Daniel O’Donnell, who in 2002 became the first openly gay man elected to the Assembly.

The Winter and Summer Games are particularly dependent on corporate sponsors. According to International Olympic Committee data, 92 percent of marketing revenues, which totalled $8 billion from 2009 to 2012, come from broadcast and sponsorship fees. U.S.-based sponsors for the Sochi games include Coca-Cola Co., Dow Chemical Co., General Electric Co., McDonald’s Corp., Panasonic Corp., Procter & Gamble Co. and Visa Inc.

Institutional investors typically prefer not to divest stock of companies whose policies or practices they disagree with, arguing that engaging with them, whenever possible, is more effective. Rather than embrace divestiture, DiNapoli’s office built a coalition of investors representing more than $327 billion in assets. In early December this 13-member group sent a letter to publicly traded U.S.-based sponsoring corporations, as well as overseas sponsors French consultancy Atos, Swiss watchmaker the Swatch Group and Japanese consumer products giant Samsung Electronics Co. The coalition requested that these sponsors ensure that their own internal nondiscrimination policies are strong and globally enforceable, called on leaders of the Russian Federation to rescind the June law and asked the IOC to obtain a firm commitment from the Russian government “ensuring the safety and human rights of all athletes and attendees of the Winter Games.”

Besides DiNapoli, other signatories include outgoing New York City comptroller John Liu, the Nathan Cummings Foundation and the Oneida Tribe of Indians of Wisconsin, as well as leading socially responsible asset managers. Bennett Freeman, senior vice president in charge of sustainability research and policy at the $12.5 billion Calvert Investments, a Bethesda, Maryland–based socially responsible money manager, says, “Calvert was among the signatories of the statement given our long-standing support for LGBT rights and hope that Olympic sponsors disassociate themselves from such discrimination.”

Shelley Alpern, director of social research and advocacy at $220 million in assets Clean Yield Asset Management, a socially responsible firm based in Norwich, Vermont, says that silence from sponsors should not be an option. “These companies are profiting from and underwriting a series of events that are going to benefit the Russian economy,” says Alpern. “It is not asking too much of them to speak out on these issues and use the microphone while they have it.” Silence, she says, “is taken as an approval or indifference.”

Susan White, the director of the Oneida Trust , says everyone needs to be equally recognized, and in Russia “that isn’t happening.” She calls Russian government policies toward the LGBT community “dehumanizing.” The Oneida have been fighting to prevent the National Football League, notably the Washington Redskins, from using Indian iconography. White sees a parallel in the two issues. The situation in Russia, she says, “is somewhat similar to the mascot issue and how Native Americans are dehumanized because they are still being used as mascots.”

So far only Coca-Cola, Dow Chemical and the Swatch Group have replied. Dow Chemical and Coke assured the group that they share its concerns about human rights and the LGBT community. “I have personally, as early as July, expressed our concerns about the antigay propaganda law to the International Olympic Committee as well as with the Sochi Organizing Committee,” wrote George Hamilton, vice president of Olympic operations for Dow Chemical, to DiNapoli.

Mark Preisinger, Coke’s director of corporate governance, wrote, “We are working closely with [the] International Olympic Committee on concerns raised about human rights, including issues related to the LGBT community.”

However, Swatch, which owns Omega, has been more dismissive of the shareholders’ request. “Omega is official Time Keeper [sic] of the Olympics since 1932, not a sponsor,” wrote Swatch CEO Georges Nicolas Hayek. “Politics always tried to use Olympics for their causes claiming always good reasons, but Omega as a Time Keeper remains always only dedicated to the athletes.”

Hayek suggested to DiNapoli that if, “as you claim, you are an investor in Swatch Group, you should be equally preoccupied about what has been publicized lately: the massif [sic] collection of date [sic] of the NSA worldwide including Switzerland.” He argued that confidential information is key to the success of Swatch. (The New York Common Retirement Fund has been active on privacy issues.)

State Senator Hoylman says he’s surprised that Swatch, a fashion brand, would be so dismissive of LGBT concerns, mostly because of the community’s consumer power. Research also suggests that companies that promote an LGBT-friendly environment may perform better. In October Credit Suisse launched the Credit Suisse LGBT Equality Index, which includes companies in the Standard & Poor’s 500 index that the Swiss bank identifies as having progressive employment policies for its LGBT workers. Since its launch the LGBT index has slightly outperformed the S&P 500.

Clean Yield’s Alpern says the shareholder group’s next step is to work with sponsor corporations to make sure they are doing everything to protect the rights of their LGBT employees, both domestically and internationally. “It is in their best interests to make sure their employees are safe, whether they are a national or have been asked to move to one of the 76 countries [where homosexuality is illegal].”

As the start of the Sochi Olympics draws closer, Russia’s LGBT record continues to draw criticism. Last week the White House said President Barack Obama, his family and senior administration officials will not attend the event and that the U.S. delegation will include openly gay athletes such as former tennis star Billie Jean King and figure skater Brian Boitano.

Putin has insisted that everyone will be welcome in Sochi regardless of race or sexual orientation.

As for Hoylman, he says he’s pleased with how responsive DiNapoli and his office were to his suggestion and wants to evaluate the responses as they come in. But, he says, he will continue to push pension funds to divest from sponsoring corporations that don’t take appropriate action.