The resolution, filed by Harrington Investments, Inc., a Napa, California-based socially responsible investment advisory firm, is calling on Pepsi to stop using genetically-altered products until long-term safety testing has shown that they are not harmful to humans, animals, and the environment, and to label products containing GMO ingredients in the interim.
“From an investor standpoint, it’s like sitting on a time bomb,” says John Harrington, President and CEO of Harrington Investments, Inc. “We want to avoid a scenario like the tobacco and pesticide industries where safety hazards were overlooked until it was too late.”
The shareholder vote comes just after Frito-Lay, the PepsiCo snack food subsidiary, recently instructed its suppliers to stop using genetically-modified corn. “Frito-Lay has already identified the potential liabilities of using genetically-altered products,” says Harrington. “It is only logical that PepsiCo follow suit.”
The resolution cites the resistance of international markets to genetically-modified foods, increasing scientific concerns about safety, and consumers’ “Right to Know” as significant factors for shareholders to consider. It notes a January 1999 Time/CNN poll which found that 81 percent of Americans want genetically-altered foods to be labeled.
While PepsiCo previously tried to block the resolution, saying it interfered with the everyday operations of the company, the Securities and Exchange Commission (SEC) ruled that the proposal raises significant policy issues and must be considered.
Harrington Investments filed a similar resolution at Coca-Cola, Inc., on behalf of client William Wardlaw, III, a Coke heir. Wardlaw, according to Harrington, “clearly wants to see Coca-Cola do well, as much of his financial future depends on the company’s success.”
Despite a recommendation from the Board of Directors against the proposal, 8.2% of Coca-Cola’s shareholders supported it at a shareholder meeting held in Wilmington, Delaware on April 19. Harrington says this number is “very significant, showing the support of many individual shareholders.”
The pressure on multinationals to stop using genetically-engineered products has raised major concerns for investors. Companies like Monsanto, Inc., one of the world’s largest producers of genetically-altered seed, experienced such a drastic fall in share price that it is selling off its biotechnology division. Lawsuits have been filed against Monsanto, USDA, and the EPA for inadequate safety testing.
Much of the skepticism that has driven stock price down comes from abroad, where consumer panic over genetically-altered foods has led the European Union to place a one-year moratorium on growing genetically-modified crops. Labeling laws for products containing GMO crops have been passed in South Korea, Japan, Australia and New Zealand.
“What we have overseas is a state of panic,” says Harrington. “And in a global economy, perception of risk is intricately linked to shareholder value. All the vitamin-enriched, pest-resistant corn in the world is worthless if consumers won’t eat it.”
Currently, one-quarter of the corn crop and one-half of the soybean crop in the U.S. contains transplanted genes. While advocates see genetically-engineered food as a future solution to world hunger, skeptics point to many potential risks. They fear the development of antibiotic-resistant genes, higher toxin levels in crops, and the emergence of “superweeds,” which would require large doses of hazardous chemicals to kill them.
The clients of Harrington Investments, Inc. hope to leverage the buying power of major corporations to affect positive change in the agricultural sector. They have filed similar resolutions at McDonald’s, General Mills, Proctor & Gamble, Quaker Oats and Sara Lee.
Harrington Investments, Inc. manages over $172 million in client assets for individuals and institutions. They work closely with the Interfaith Center for Corporate Responsibility (ICCR), a New York-based interfaith organization which coordinates the filing of shareholder resolutions by religious and socially responsible institutional shareholders.