A recent decision by the Securities and Exchange Commission means it’s likely that JP Morgan Chase shareholders will see a proposal about investments linked to genocide in the proxy ballot for this year’s annual meeting on May 17.
The proposal was submitted to JP Morgan in late November as part of an ongoing effort led by Investors Against Genocide, a privately funded Boston-based non-profit. It asks that the “board institute transparent procedures to prevent holding investments in companies that, in management’s judgment, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.”
But JP Morgan took issue with the proposal and what it called “vague and indefinite” wording in the phrases “holding investments” and “substantially contribute to genocide or crimes against humanity.” On January 11, it submitted a no-action request to the SEC, asking for permission to omit the proposal from its proxy ballot.
The SEC replied that it would not grant such permission. In an early March letter, the SEC responded to JP Morgan’s request by stating, “We are unable to conclude that the proposal is so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company in implementing the proposal, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires.”
JP Morgan won’t confirm for certain whether the proposal will be on its 2011 proxy ballot until the document’s official release in April, but Eric Cohen, chairperson of Investors Against Genocide, says, “Based on the discussions we’ve had with JP Morgan, we expect them to put it on the ballot now that they have lost their appeal to the SEC.”
The proposal grew out of the ongoing debate over investments tied to Sudan, whose president, Omar Hassan al-Bashir, faces International Criminal Court charges of genocide. Any investment link to his government, particularly through the nation’s oil industry, makes groups like Investors Against Genocide uneasy; a former Sudanese finance minister confirmed that 70 percent of oil revenue funds the nation’s military, which has been accused of permitting and committing atrocities. JP Morgan is a large holder of PetroChina (with holdings worth about $1.3 billion, according to the shareholder proposal), which is the majority-owned subsidiary of China National Petroleum Company, a major player in Sudan’s oil industry.
A JP Morgan spokesperson says that the firm’s official stance on the matter is that it already factors human rights issues into its decision-making: “While we share the shareholder’s concern about human rights generally and about genocide in particular, we believe the firm’s existing policies and procedures appropriately address these issues.”
Cohen of Investors Against Genocide says he fully expects that the proposal will be voted down – this time.
“We do not expect to win,” he says, explaining that his group will need time to educate and organize support among shareholders who might otherwise throw away their proxy ballots without voting, or simply vote with management. “But we do expect to pass the minimum requirement to resubmit next year.” That minimum requirement is 3 percent of the shareholder vote – if support for the proposal meets or exceeds that threshold, it can be resubmitted in 2012.
“As support for this builds,” says Cohen, “we hope that JP Morgan will take the perspective that this is something shareholders care about.”