David E. Ortman
"For we are contending … against the spirituality of institutions, against the ideologies and metaphors and legitimations that prop them up, against the greed and covetousness that give them life, against the individual egocentricities that the Powers so easily hook, against the idolatry that pits short-term gain against the long-term good of the whole.'" [Walter Wink, Naming the Powers: The Language of Power in the New Testament (Philadelphia: Fortress, 1984), 140]
"This is not a job for us, it's a religion". Jim Bob Moffett, CEO, Freeport McMoRan Copper and Gold. [John McBeth, "Bull's Eye," Far Eastern Economic Review, Dec.4, 1997 (v160n49).]
"An Indonesian ruler remarked of the Portuguese adventurers, 'The fact that these people journey so far from home to conquer territory indicates clearly that there must be very little justice and a great deal of greed among them.' This had made them 'fly all over the waters in order to acquire possessions that God did not give them.'" [John M. Merriman, A History of Modern Europe (New York: W.W. Norton, 1996), 40]
It is a long way from Russia to Indonesia. And the journey begins over fifty years ago. It is World War II on the eastern front. The Soviet Union has withstood the devastating Operation Barbarossa, the long planned invasion by Germany that took place in 1941. By December of that year, the massive German attack had stalled twenty miles from Moscow. In 1943 the Soviets were pushing the Germans back toward Eastern Europe. As the Germans retreat along the eastern front, many of their soldiers are weary, sick, and injured. The Germans take over a Russian hospital. A local German speaking Russian Mennonite woman is among those ordered to help process the paperwork. She meets a soldier who has typhoid fever. He knows that the evacuation train is leaving soon. He knows he is not going to be on it. A Catholic priest had come along and given him last rites. So had a Lutheran priest.
We can not examine the historical records or consult the hospital charts to verify what happens next. But one thing that is certain in this soldier's mind is that the Mennonite woman he met in the hospital changed his paperwork. He made it on the evacuation train. She saved his life. And he has never forgotten.
The soldier returned to Germany and survived the war. He eventually came to the United States. He read a great deal, lived frugally and began investing in the stock market. During the 1970's and 80's, he looked for stocks that had good growth potential with real assets, such as oil and gas drilling companies and mining corporations. By buying and borrowing to add shares over a long period of time, he accumulated a sizable portfolio. He guarded his privacy and lived alone in Seattle in a small apartment. He had few friends and detested doctors. By this time he was getting up in age. But he never forgot how it was that he had survived that terrible war on the eastern front. And so, approximately twelve years ago, he looked in the phone book to see if he could find a Mennonite church.
Church bylaws, articles of incorporation, and guidelines are of little help when a stranger calls and makes a proposal to donate a large stock portfolio. In the first place, most Mennonite congregations do not own stock. Churches are often the named beneficiary in a will and upon their death members will sometimes leave a sizable gift, perhaps in the form of land (which is then normally liquidated) or in cash. Unexpected windfalls of this type often bring unexpected conflicts: church organ versus paved parking lot; bell tower versus overseas missions. Sometimes the wishes of the beneficiary are known ahead of time so spending the money on behalf of the church is seen as carrying out what the member wanted.
But it is quite unusual for someone still living to want to make a large donation. And so when the Seattle Mennonite Church, at that time a small urban fellowship in a rented facility in north Seattle, received this call, it raised a host of questions. But the bottom line was this. A man who once was near death believed that a Mennonite had saved his life and now he was asking the Mennonites to accept his gift.
After much discussion and with a hazy vision of where this might lead, the Seattle Mennonite Church agreed to accept the donation. But a number of concerns needed to be addressed. While a mutual fund can also fluctuate, a dozen or so individual stocks, many in the same sector, are extremely volatile. It was unsettling for SMC to have a portfolio that gained and lost more money in a week than their entire annual budget. There was recognition that SMC needed to move into a less risky management style, but could this be done in a way that would not be viewed as dismantling years of work by the donor?
The portfolio had been leveraged through the use of a margin account. This meant that money had been borrowed to accumulate more shares. So long as the stock price continues to rise, it is one way of accumulating wealth rapidly. But if the stock price goes down, it is possible to quickly lose the entire portfolio. A church could not be expected to take such risks, so the margin account was paid down.
Many positive uses for the portfolio were brought forward. Among these were the establishment of a foundation that could distribute grants for worthwhile causes. At this point, the donor made clear that he had given this portfolio to be used to benefit the Seattle Mennonite Church and so the idea of a foundation was set aside.
Beginning in 1993, when the Seattle Mennonite Church chose to accept this gift, all these issues took time to process and are still being processed. But concerns soon centered on one of the corporations in the portfolio itself - Freeport McMoRan, a multinational mining and oil & gas company incorporated in Delaware and headquartered in New Orleans, with powerful people such as Henry Kissinger on its board.
Freeport was in the process of spinning its overseas mining operation into a separate corporation, Freeport McMoRan Copper and Gold (FCX). In 1995, the church was issued stock in FCX and in 1996, they received a copy of the 1995 FCX Annual Report. It documented the immense scale of Freeport's Grasberg mining operation in West Papua (Irian Jaya), in the far-eastern part of the island nation of Indonesia, north of Australia.
While parts of Indonesia were originally a Portuguese colony, in the 17th century the Dutch took control of many of the large islands and in the 19th century the western half of Papua New Guinea. Although Indonesia declared itself a republic in 1950 with Sukarno as president, the Dutch hung on to West Papua until 1963. Then, in a deal brokered by the United States, the United Nations turned over the western half of the island to Indonesia, which promised a plebiscite that was not held in West Papua until 1969. The results of the vote were that West Papua was to remain a part of Indonesia, but this election has been disputed and opposed for over thirty years by the local people.
Prior to this election, Freeport-McMoRan negotiated a Contract of Work with the Indonesian government. This arrangement gave the company exclusive mining rights to the Erstberg copper deposits high up (over 10,000 ft.) in the mountainous region of West Papua. Later, in 1988, this was expanded to include a massive copper and gold deposit at Grasberg, now the world's richest copper mine.
The mining for the copper and gold in this lush mountainous tropical rain forest area is at once both complex and simple. The sheer task of gaining access to such a remote and high altitude site required the construction of a road system virtually straight up the mountain range. The mineral deposits are removed both by shaft mining and by open pit mining. As the top of the mountain is leveled, hundreds of thousands of tons per day of tailings (unwanted material) are shoved over the side into the Ajikwa and Otomona river systems that transport the tailings downstream and cover a vast acreage of former rain forests in a dead deposition zone. The remaining copper in the tailings is toxic to aquatic life and is slowly leaching into the estuary system and the Arafura Sea.
The indigenous Amungme, Mimika, and Komora people have ties to the rivers and hunting areas of the Grasberg region that go back 25,000 years. FCX is under contract to supply and help the Indonesian military which, in turn, provided protection and security for the mine site. Thus, FCX was linked to the torture and killing by the military of tribal members protesting FCX's mining practices. Tribal leaders, such as Yosepha Alomang, who won this year's Goldman Environmental Prize, were among those tortured.
The 1995 FCX annual report served as a wake up call to the SMC that, as stockholders, it shared moral responsibility with FCX management for the conduct of the corporation. Further research by SMC revealed allegations of inadequate environmental protection, conflict with indigenous peoples, and Indonesian military human rights abuses (see www.fcx.com for the company side of the controversy). An Amungme tribal leader had filed lawsuits in the State of Louisiana and in Federal Court against FCX, cases that would later be dismissed.
In late 1996, Micheal Roe, Chairperson of the SMC, wrote to Freeport's Chairman, James Moffett with a list of questions concerning Freeport's activities in West Papua. FCX Senior Vice President Thomas Egan responded with a letter stating that Freeport had transferred all Irian Jaya mining operations to FCX and basically requested that the SMC prove its ownership of FCX stock.
Corporate accountability and filing shareholder resolutions have not been issues where Mennonites have historically played a role, although Mennonite Mutual Aid has moved more actively in this direction. Ironically, Mennonite Central Committee has had a long involvement in Indonesia, although centered on the island of Java, far from West Papua. However, none of MCC's work seemed to be directed at the role of multinational corporations (including those based in the United States) in environmental and human right issues.(1)
SMC learned that when a stock is purchased, the stockholder becomes an owner of that corporation and can vote yearly on the selection of the board of directors and various resolutions put forward by management (stock options, retirement plans, etc.). The sale and marketing of stocks and the relationships between shareholders and the corporation are regulated by the Securities and Exchange Commission (SEC) (see www.sec.gov). Under SEC rules, shareholders holding over $2,000 worth of shares for a year can file a resolution that can be voted on by all the shareholders at the next annual meeting of the company. (For more information on shareholder resolutions see www.scn.org/earth/wum )
By this time SMC also learned that a resolution had been filed with FCX in 1995 by the Congregation of the Sisters of Charity of the Incarnate Word, of Houston, after consultation with the Interfaith Center for Corporate Responsibility (ICCR), but had subsequently been withdrawn. SMC also learned that Paul Drescher and Roberta Friedman of Santa Cruz, California, had filed a resolution with Freeport in 1994, but this too had been withdrawn, because they owned non-voting shares of stock.
SMC contacted other institutional FCX shareholders including the Sisters of the Humility of Mary in Morgantown, West Virginia. After considerable discussion and additional research, including discussions with environmental groups in the U.S. and Indonesia, SMC agreed to jointly file a shareholder resolution with the Sisters of the Humility of Mary in November 1996 for the 1997 FCX Annual Meeting. An attorney, referred to SMC by ICCR, familiar with shareholder resolutions, reviewed the resolution. It called on Freeport to take steps to:
1. Postpone the expansion of milling operations until a just, accepted, peaceful, and permanent resolution of local indigenous concerns can be reached in consensus-based process with all stakeholders.
2. End company cooperation with the Indonesian military to the fullest extent possible so that PT-Freeport Indonesia (PT-FI, a subsidiary of FCX) does not provide food, transportation, or shelter to Indonesian military personnel; and urge Indonesian military to drastically reduce military presence in and around PT-FI's Contract of Work area.
3. Publicly release in their full entirety the 1996 Labat Anderson social audit, the March 1996 Dames and Moore environmental audit, and all other environmental audits from the last five years.
4. Allow independent environmental monitoring of PT-FI operations and local river and ecosystems by non-governmental organizations.
In November 1996, Micheal Roe, as Chairperson for SMC, and the Sisters of the Humility of Mary jointly filed the shareholder resolution with FCX. However, the Sisters of the Humility of Mary had to withdraw their sponsorship because they subsequently discovered that they owned non-voting shares of FCX stock.
Thomas Egan of FCX responded to Roe of SMC by letter regarding SMC's "misplaced concerns, misstatements, and misinformation." Follow up phone calls took place with FCX requesting SMC to withdraw the resolution.
FCX next notified the Securities and Exchange Commission that FCX intended to omit SMC's shareholder resolution from its 1997 proxy statement to be used in conjunction with the FCX Annual Meeting. The church filed a letter to the SEC in opposition to FCX's decision to omit the resolution and provided extensive material and references to document its concerns. As a result, in February of 1997, SEC notified FCX that it would not support a decision to omit the church's resolution.
The SMC Leadership Council (approximately eight persons) handled the shareholder resolution process. Bob Pauw (SMC Treasurer) presented the resolution at the April 1997 Annual Meeting in April 1997 in New Orleans. Two other representatives of SMC also traveled to New Orleans, but were not allowed by FCX to attend the Annual Meeting. However, they were able to meet with Amungme tribal people from FCX's West Papua Contract of Work area who were also in New Orleans during the time of the Annual Meeting. This proved to be a profoundly moving experience, since these were representatives of those most directly impacted by FCX. SMC was pleased that its resolution received 2.5% of the vote at the 1997 Annual Meeting. Because FCX's board of directors or their supporters control over 50% of the outstanding stock, the resolution actually received over 5% of the non-board controlled votes.
Both the 1997 and the 1998 annual shareholder meetings held in New Orleans (FCX's corporate headquarters) were attended by representatives of SMC and other faith based organizations. They proved highly embarrassing to the company. The 1998 annual FCX meeting was preceded by a shareholder's briefing in New Orleans, organized by SMC, raising concerns about environmental and human rights issues. As a result, FCX moved its 1999 annual meeting to a small basement room in Wilmington, Delaware. No Board of Directors, no CEO, and no representative of the audit firm with direct knowledge of the FCX 1998 annual report and audit attended the 1999 FCX annual meeting.
As a result of this dismissive treatment of shareholders, the church filed another resolution with FCX in November 1999. It expressed concerns about FCX's mining practices in West Papua and the way it handled annual meetings and stockholder issues. The resolution requested that FCX provide a report to shareholders on Board attendance and matters that come before it at the annual meeting.
At the same time, other opportunities for raising concerns regarding FCX's mining activities were sought. SMC learned that shareholder resolutions can also be filed with mutual funds. In 1999, a SMC member filed a participant resolution with CREF (College Retirement Equity Fund - used by some Mennonite colleges, it is one of the country's largest retirement pension funds). It requested that CREF divest itself from FCX shares of stock. At the November 1999 CREF annual meeting in New York City, the resolution received 17% of the vote.
In December 1999, FCX notified the Securities and Exchange Commission that it once again intended to omit SMC's shareholder proposal (calling for an annual meeting report to shareholders) from FCX's proxy statement for the 2000 annual meeting. At this point, the church entered into direct discussions with FCX. In March 2000, FCX agreed to prepare the post annual meeting report as requested in the SMC shareholder resolution, post the report on its website within 10 days of the meeting, include the availability of this report in both FCX's proxy material and annual report, and mail a copy to any shareholder who requested it. In return, SMC notified the SEC that it would withdraw its resolution. Also in March, FCX's David Lowry, V.P. for Social Development and Human Rights Compliance flew to Seattle for a meeting with church members at which ongoing issues regarding human rights and environmental issues were discussed.
In early 2000, SMC also reviewed and raised questions about the latest (1999) environmental audit prepared for FCX by Montgomery Watson, a consulting company. The Montgomery Watson audit had found no significant environmental problems with FCX's mining operations, including their tailings and mine-waste disposal techniques. These results were proudly put forward in May at FCX's annual meeting in Delaware. That very same day, four FCX workers were killed when a section of the overburden stockpile at the mine collapsed into a water basin causing a wall of water to overtop the basin.
In fall of 2000, SMC submitted an executive compensation resolution to FCX to draw attention to FCX's Chairman James Moffett's compensation of nearly $8 million dollars over the two-year period from 1999-2000. This resolution received over 6% of the vote at the FCX 2001 Annual Meeting.
Though SMC felt it was making its point, it continues to wrestle with its ownership of FCX stock and issues of corporate responsibility. What is the appropriate balance between local and global needs? Would it be better to divest and use its resources and time to serve those in need in Seattle? Or should they hold on to the FCX stock and continue to speak out on human rights and environmental issues in West Papua (Irian Jaya)?
At this point, SMC still retains its FCX stock but has set aside all stock dividends to be used to fund corporate accountability work regarding the FCX and to work with local tribal people in West Papua. It has greatly diversified its stock portfolio, but in doing so, questions have been raised about corporate accountability with these new corporations. In addition, a proposal to purchase stocks located in the Northwest in order to work on corporate accountability issues locally has yet to be accepted.
There remains a mixture of views at Seattle Mennonite Church regarding the portfolio. And church members can only speculate on whether a Mennonite over fifty years ago somewhere on the eastern front would have any idea how her brave decision to save a life would impact a small congregation in Seattle, Washington, and the lives of tribal people in West Papua, Indonesia.
1. The first Mennonite missionary, Pieter Jansz, came from the Netherlands in 1852 to central Java. See Alle G. Hoekema, "Developments in the Education of Preachers in the Indonesian Mennonite Churches," Mennonite Quarterly Review (Oct. 1985), 398.