Very Nice – G&A Institute Article Among Top 5 Views in 2013 on Ethical Corp Platform

by Hank Boerner – Chairman, G&A Institute

Ethical Corp magazine is a well-read, very well-known publication focused on accountability, ethics, strategy, business intelligence, stakeholder engagement, corporate responsibility, and sustainability, among many topics of interest to investors, NGOs, corporate managers, and public sector managers.

Looking at the most read articles of 2013 on the platform colleague Liam Dowd advised us from London that our article — in the Top 5 CR Reporting and Communication category downloads — was ranked at #2.  The title was: “Why [Sustainability] Reporting Does Matter.” The analysis remains popular reading; in recent weeks we’ve had 1,000 and more downloads.

You can see the report highlights at (see research menu link) or use this direct link –

The report is free with our compliments.

The Ethical Corp article (published in January 2013) is a detailed explanation of the analysis the G&A Institute team conducted of S&P 500 Index and Fortune 500 companies and their sustainability reporting activities in 2012. (Key finding:  the majority of both universes of companies now reports.)  The opening line: New research shows how companies reporting on sustainability outperform their peers

We invite you to read the article here:

Our team is pleased to learn of these results.  And of course a shout out — thank you! — to the editors for publishing the article.

Other top ranked articles in the category for 2013 – “How to Shout About Sustainability Effectively” (at #1); “Sustainability Reporting – the Dog That Didn’t Bark”; “Full Product Transparency is the Future of Reporting”; Sustainability and Communications, Now and Soon.”

Our thanks to the editors of Ethical Corp, and to Liam Dowd, marketing manager at Ethical Corp and Useful Social Media for passing along the info.

More information about the publication is at:

Read – Ethical Corp magazine

After 150 Years, the Civil War Still Affects How We Do Business in the US



Wheeling, W.Va.:  Suspension Bridge (1849) across  Ohio River's main channel.  The slave market was one block from WWVA  sign.  3/13/12
Wheeling, W.Va.: Suspension Bridge (1849) across Ohio River’s main channel.  The slave market was one block from WWVA sign on right. 3/13/12

The death of Nelson Mandela on Dec. 5 brought reflections on the reconciliations he advanced in South Africa and on continents far away from Robben Island.

Without taking away anything from the transformations Mandela achieved, for their own well-being, Americans must ask:

-Will the century-long trauma of Apartheid take at least as long to heal truly?

-If so, what are Apartheid’s long-term effects, and how long is ‘long-term’?

-What does experience tell us about reconciliations of peoples who’ve suffered great hurts through war or genocide?

For America, the Civil War was our greatest trauma.  On Dec. 20, 1860, South Carolina seceded from the Union, as I wrote a couple of years ago.  The Civil War, I’ve speculated, reverberated for 100 years in the lives of the men who fought it and their children.  And still the differences between the new Solid South and the rest of the country put America at some distance from reconciliation.

Yesterday I read an interesting academic study that confirms my hunch.


          ‘Within U.S. Trade, and the Long Shadow of the American Secession’ is by two scholars at the Leibniz Institute for Economic Research at the University of Munich, Gabriel Felbermayr and Jasmin Groschl[1] asks:

‘But does the long defunct border between the [Confederacy] and the Union still affect economic relations between U.S. states that belonged to different alliances today?  Is the former border still relevant, still divisive, for economic transactions?'[2]

Their analysis indicates, yes.


           Contemporary state-level data show the ‘North-South divide’ quite clearly, both economically and culturally.[3]  Felbermayr & Groschl’s discovery of a ‘Secession effect’ is not surprising, though its dimensions are:

‘[W]e find a robust, statistically significant, and economically meaningful trade-inhibiting effect of the former border.  …[On] average, the historical border reduces trade … by about 13% to 14%.  In comparison, the Canada–U.S. border restricts trade by 155% to 165% [citations omitted].  …[The] former border between East and West Germany restricts trade by about 26% to 30% in 2004.'[4]

Hence, ‘…historical events have shaped cultural determinants of trade which still matter today.’[5]  ‘Our results show that the United States is not a single market, even 150 years after the Civil War. The historical conflict still is divisive today.'[6]

As they later say, ‘…the former border reflects a cultural divide.’[7]


           Cultural divides, Felbermayr & Groschl insist, cannot be wished away:

‘This is an important lesson for the European integration process, which is more complex [than the post-Civil War reconciliation] due to the lack of a common language, a common legal/judicial system, common regulatory framework, and—most important in our context—the fact that the last huge conflict is not 150 but only 67 years away.'[8]

As for the US:

‘From a welfare perspective, …it could be that the Secession has had lasting effects on trade costs.  By shaping the distribution of (railway) infrastructure or business networks (production clusters), and more generally, by affecting bilateral trust, South–North trade frictions are still higher than intra-group frictions.  …[It] signals a long-lasting welfare loss due to the Secession.'[9]

Later, Felbermayr & Groschl note: ‘One may conjecture that the Secession has continuing negative effects on the level of trust between market participants.’[10]  Still later,

‘…one cannot conclude that the Secession has caused the observed border effect in [contemporary] trade data.  Including historical variables that relate to the deep reasons for the Civil War goes some way in dealing with reverse causation.'[11]


           ‘Reverse causation … means that the effect has preceded the cause.’  So here, the Secession Effect would have preceded Secession, as it did.

Why lies in the origins of the lack of trust between cross-Secession border market participants.  The first sentence of Article I section 2.3 of the US Constitution (1787) makes them plain:

‘[Members of the House of] Representatives and direct taxes shall be apportioned among the several States…, according to their respective numbers, which shall be determined by adding the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three-fifths of all other persons.’

In a fascinating article, Albany Law School Professor Paul Finkelman explains the ‘Three-Fifths Clause: Why Its Taint Persists’.  The clause was the price slave holders extracted for agreeing to the new Constitution.

At once the ‘Three-fifths clause’ enshrined racial inequality and gave the South disproportionate power.  Slaves had no say in the new government, but they counted in determining who did have a say.  The number of Representatives of the almost entirely free populations in the North were balanced out by the inflated number in the South.

Add to that another great Constitutional compromise, on the equal representation of states in the Senate, and the South’s control over the national political process was nearly complete.  Hence, the signposts marking the highway to civil war:  the Compromise of 1820, the declaration of war on Mexico, the Fugitive Slave Act, the Kansas-Nebraska Act….

The forty-year struggle over whether to admit more slave states was not just about the legislative branch.  Since the number of electors each state has in the Electoral College depends on its number of Representatives, the South dominated the Presidency from Jefferson until Lincoln.


           Leaving aside the moral issue of slavery (which Prof. Finkelman does not), the lack of trust created by the Constitution’s structural imbalance of power must have produced the Secession Border Effect long before South Carolinians began bombarding Ft. Sumter 152 years ago.

Through the end of their war to preserve the right to enslave, the South spoke in terms of its ‘peculiar institution’.  The term is apt and accurate.

The South’s ‘peculiar institution’ wasn’t merely one man’s right to own other humans.  It was a complex, opaque culture with rules and standards which Northeners could not accept when they could understand them.

For instance, a Southerner slandered by a social inferior could attack him and even kill him.  So on May 22, 1856, two South Carolina Representatives found US Senator Charles Sumner at work at his desk on the Senate floor.  After saying two sentences to Sumner, Preston Brooks struck Sumner’s head with a cane and kept beating him until he was all but dead.  Brooks accomplice, Laurence Keitt, held off rescuers with his pistol.[12]

Brooks became a hero across the South.  In the North, the poet and journalist

‘William Cullen Bryant of the New York Evening Post, asked, “Has it come to this, that we must speak with bated breath in the presence of our Southern masters?…  Are we to be chastised as they chastise their slaves? Are we too, slaves, slaves for life, a target for their brutal blows, when we do not comport ourselves to please them?”‘[13]


           ‘It is no wonder’, Prof. Finkelman writes, ‘that the great abolitionist William Lloyd Garrison considered the Constitution “a covenant with death, and an agreement in Hell.”’  Garrison used those words at an anti-slavery rally on July 4, 1854, just before he put a match to a copy of the Constitution.  As it burnt, he ‘cried out: “So perish all compromises with tyranny!”

Felbermayr & Groschl’s Secession Effect has a history as long as our Constitution’s, at the least.  The struggles between the Confederate states and the Union states that have continued since Appomattox have hardly wiped away the distrust of the Antebellum years.  It is only remarkable the effect is a small as it is.

How Americans might realise the vision of Nelson Mandela, I don’t know.  It is so comfortable to persist in the pursuit of power, of dominance, and in the delusion of racial superiority.


H/T:  Andrew O’Connell, an editor with the Harvard Business Review Group and the author of Stats and Curiosities from Harvard Business Review, contributes to the invaluable HBR Blog Network where he called my attention to this important article.

1.    Their article appears in the Western Economic Association International’s refereed journal, Economic Inquiry, for January 2014.  The authors’ first language evidently is not English.  Though they write quite serviceably, they make some incorrect word choices, as in ‘contemporaneous’ for ‘contemporary’, ‘Confederation’ for ‘Confederacy’.  In quotations, I have left their choices in place except where it affects their point.  (Here, I make the ritual lament about the disappearance of editors.)  I must also note that I lack the training to understand their statistical analysis which comprises half the paper.  I have dealt only with their prose.

2.  Gabriel Felbermayr & Jasmin Groschl, ‘Within U.S. Trade, and the Long Shadow of the American Secession’, 52 Economic Inquiry 382 (2014) § I.  As this paper is 22 pages long in the journal and is not paginated on the web, for ease of checking sources, I will refer to its sections in these notes.

3.  Id.

4.  Id.  See also § III.A.

5.  Id.

6.  Id.

7.  Id., § III.D.

8.  Id., § I.

9.  Id.

10.  Id., § III.D.

11.  Id., § V.B.

12.  David Herbert Donald, Charles Sumner [1960], vol. I (New York:  Da Capo Press, 1996), pp. 288ff.  This is one of the great American biographies.  The Wikipedia entry, ‘Charles Sumner’, is quite good.

13. Wikipedia entry, ‘Charles Sumner’, quoting William E. Gienapp, The Origins of the Republican Party, 1852-1856, (Oxford University Press, 1988), p. 359.

The Corporate Proxy Season is Underway – ESG Issues Are in Focus

by Hank Boerner, Chairman, G&A Institute

It’s a new year and the 2014 corporate proxy season is really underway, and the topics in focus are reflective of asset owners’ and managers’ concerns about key societal issues. Managements taking no action on the issues, deciding the wrong actions, or boards and managers ignoring the facts regarding key topics of concern to the asset owners could lead to greater risk, lost opportunities, and dramatic hits on corporate reputation — and share price valuations.

And all of that that could affect the value of the investors’ holdings. Since many of the shareowners are fiduciaries (think of SRI mutual funds, public employee pension funds, state trust funds), the growing consensus is that as fiduciaries, asset owners have a duty to be vocal, to actively engage with corporate management, and to take strong stands on key ESG issues. And, in some cases, to bring those issues to the electoral process at proxy time so all shareholders can have their say. Of course, there is usually negative press resulting for some companies.

“Proxy season” used to be those times of year when certain gadflies showed up to (in the view of management and board) ” harass” the assembled corporate leadership. (Such pioneer proxy luminaries as the Gilbert Brothers and Evelyn Davis come to mind.)

Today, the proxy  season is actually a year-round engagement, with advocates such as the Interfaith Center on Corporate Responsibility (ICCR) institutional members active in dialogue with corporate managements and board members on various E-S-G issues. One sea change of a decade ago or more was the linking of traditional corporate governance concerns with environmental and social or societal issue concerns, and working through the barriers to getting their resolution to the proxy statement and to vote.

Linking “good governance” practices with progress (or lack of) on supply chain issues, or product stewardship, marketing practices, protection of natural resources, or lobbying and political spending, now helps advocates avoid the “no action” letter from the SEC that allowed corporate managements to ignore the shareholder’s resolution. (In the past, the usual practice of SEC staff was to advise the company protesting the draft resolution that “no action” would be recommended to the commissioners if the company ignored the draft.)

So what is in store for 2014 corporate proxy voting — what are the issues in focus? Sustainable & responsible investing (SRI) advocates are raising issues with companies about public policy and climate. (As we write this, every US state is in the grip of a cold wave, that is being linked to climate change by experts.)  For two decades now, investors have engaged company managements about climate change.

Now, coalitions of shareholders are involved in a larger collective effort — “Raising the Bar” — in response, they say, to the expanding and alarming scientific evidence of our changing climate. And, as long-term advocates like Tim Smith of Walden Asset Management point out, the resulting significant environmental and economic impacts on the corporate enterprise. Investor interests are very concerned about climate change.

A number of companies — AEP, Chevron, Conoco, ExxonMobil — have received draft resolutions by coalition shareowners urging boards and managements to re-examine their opposition to regulation and legislation intended to address climate change. That includes their lobbying on climate change issues and disclosing more about those actions to their owners.

It’s not just direct company actions in focus — the shareowners include the corporation-funded efforts of the US Chamber of Commerce , the oil lobby (American Petroleum Institute) and the National Association of Manufacturers in the lobbying and advocacy on issues…

Beyond climate change, other proxy resolutions call for companies to re examine their state-level lobbying, especially through such groups as ALEC (the American Legislative Exchange Council), which operates primarily with corporate contributions and promotes conservative public policy issues with :”model” legislation which often moves from state-to-state. (An example is the “Stand Your Ground” laws adopted by a number of states.)

The companies in focus include Microsoft, Pfizer, Time Warner Cable, and UPS. Among the prime movers in this initiative: State of Connecticut Retirement Plans, Zevin Asset Management, Sisters of Charity of the Incarnate Word, and Walden Asset Management clients.

Some companies are responding to shareowner concerns — Coca-Cola, John Deere, Dell, P&G, GE, GM, Unilever, and Wal-Mart have reduced their involvement or quit ALEC,according to information provided by Walden Asset Management.

Other concerns: ICCR’s David Schilling advises that an issue now in focus is the garment industry’s pricing policies, following the Rana Plaza tragic fire in Bangladesh (killing 1,000+ people). The “Accord for Fire and Building Safety” addresses pricing practices and the almost 300 institutional members of ICCR and other shareholder advocates are focused on current pricing models, outsourcing, and prevailing wages in developing countries.

And, from Green Century Capital Management we hear that more than 40 institutional investors representing US$270 billion in AUM are urging the other invesotrs, major palm oil products, consumers, and major shareholders in such companies as food marketers Kellogg and financiers HSBC to support an effort to not contribute to further deforestation or support human rights violations. “Fueling deforestation is bad business for any company seeking to position itself as a responsible, sophisticated global player,” says Lucia von Reusner, Green Century’s shareholder advocate.

Ceres helps to mobilize business and investor leadership on climate change. Rob Berridge, director of shareholder engagement, says investors Ceres works with are asking corporate managements to actively address forced labor, deforestation, habitat destruction, and accelerating GhG emission, and to develop and operate palm plantations more responsibly.

Consumer-facing brand companies — Uniliver, Kellogg, Dunkin Donuts, HSBC — are facing high-profile consumer campaigns on palm oil issues. Some companies are saying in response that they will purchase of finance palm oil that has been certified by the Roundtable on Sustainable Palm Oil (RSPO).

There is much more action to come in the days ahead as the peak of proxy voting nears — we’ll bring you news and commentary and insight on trends in this space.  Stay Tuned to the 2014 ESG-focused proxy campaigns.

Green Purchasing by Uncle Sam – Are You a Federal Government Supplier – Contractor?

by Hank Boerner, Chairman, G&A Institute

The United States Government is the largest purchaser of goods and services in the U.S.A., and some project, in the world.  (US$500 billion in the latest budget.) So – if you are selling to Uncle Sam, tune in to the guidelines recently published the Environmental Protection Agency (US EPA).  In December EPA proposed (in draft form) rules for “greener and safer” products to be purchased by the Federal government.

The public comment period is open but expect that sometime soon we will see the official guidelines for supplier companies to follow.  Part of the initiative is to assess the growing number of “eco-labels” in use by trade associations, NGOs, standard setters, etc.

Says EPA:  “These guidelines will make it easier for Federal purchasors to meet the existing goal of 95 percent sustainable purchases, while spurring consumers and private sector to use and demand greener and safer products…” The EPA and the GSA (General Services Administration) created the guidelines for agencies and departments to use in their sourcing.

To emphasize:  The Executive Order requires Federal agencies to ensure 95 percent of new contracts to be “green.”

The EPA/GSA initiative is one of the most recent steps in a continuing journey toward greater sustainability by the Federal government.  Executive Order #13514 got this journey going in earnest in October 2009, soon after President Barack Obama got his administration up and running and cabinet posts filled.  It’s officially the “Federal Leadership in Environmental, Energy and Economic Performance” mandate for all government agencies to follow.

Haven’t been following this EO?  How about the one in August 2012 — “Accelerating Investment in Industrial Energy Efficiency?”  There’s sure to be lots of risk and opportunities inherent in this EO, which addresses the US industrial sector use of energy (30% of the total usage).  The Feds will encourage investment in combined heat and power systems (CHP); the effort involves key departments — Energy, Commerce, Agriculture, EPA, and the Office of Science and Technology Policy.

There’s lots going on at the Federal government level, and in similar activities in the trickle down into state and municipal governments, as some of the spate of EO’s call for assistance to public agencies at local levels.

We’ll be visiting the Federal government’s dramatic journey to greater sustainability to bring you more news and details…that could present risk or opportunity to your organization.

And in February (25 and 26) at the World Bank in Washington DC, Governance & Accountability Institute and partners, ISOS Group, will present a 2-day, interactive sustainability materiality and reporting workshop for public sector agencies and their suppliers and contractors.  This is the kick off of the GRI Business Transparency Program in the USA for the Public Sector (all levels).  Participants will receive certification and will enjoy specialized guidance during the 6 months that follow by G&A and ISOS.

For information —

Sector-specific sessions are now scheduled for Food & Agriculture, Beauty & Chemical, Energy & Utilities, Hotels & Tourism.  Details are at the above web site page.

You can also learn more about the agencies that you do business with as they publish their progress reports on sustainability.  These are due this month (all agencies are supposed to report in January of each year).  Also, the largest of the Federal contractors – think of Lockheed Martin or General Dynamics — are publishing sustainability reports.

Also – look at the US Postal Service and the US Army sustainability reports to get an idea of what your customers are saying about their role in the Federal sustainability journey.

Watch this space for news & updates on Federal government actions…especially as the White House issues Executive Orders in President Obama’s second (and last) term in office.

The Fed’s Janet Yellen, right person for the right time by Ken Cynar, executive vp, Governance & Accountability Institute

by Ken Cynar – Exec VP – G&A Institute

San Francisco Fed Bank President Janet Yellen, called “an unwavering advocate of the Federal Reserve’s aggressive steps to boost the U.S. economy,” is the right person for the right time to head the Federal Reserve System. Politics aside, she is highly qualified, focused and skilled in the fundamental role of the Federal Reserve and how it has evolved during the tenure of outgoing Chairman Ben Bernanke.
“If you were dreaming up a training school for Fed chairmen, it would be her life story,” stated Princeton University economist Alan Blinder, a former Fed Vice Chairman. Experience, experience and more experience jumps off her resume having spent more than a decade at the Fed.
Michael Hirsh of the National Journal described her as “…a nonideologue who will relentlessly follow the facts, whether they lead her toward solutions on the left or the right.”
Isn’t that what we are looking for in a Fed Chairperson? These are the kind of nominations that Americans seek. On paper she looks great; she has the experience, and has demonstrated the temperament. Does that mean I or the American people will always agree with her decisions? Well no, but at least there would be confidence that her direction was based on an intelligent analysis of the facts guided by her tenure at the Fed.
Thomas Ferraro of Reuters quotes Carl Tannenbaum, chief economist at Chicago’s Northern Trust “She really isn’t a new hand at all. She certainly will not need to be oriented to what’s going on over there, and so I expect a very smooth transition.”
A “smooth transition” is important as not to overly disturb the world markets who as to quote country singing star Tennessee Ernie Ford are as “nervous as a long tailed cat in a room full or rocking chairs.”
That’s how I see it……