[Intl-tobacco] BAT follows troubled Burma road

[Robert Weissman]

BAT follows troubled Burma road - Glasgow Herald

 Fund manager seeks clear commitment on human rights issues from tobacco
giant
 Monday, May 26, 2003

 SIMON BAIN

 BRITISH American Tobacco is likely to come under renewed pressure from
shareholders over its presence in the pariah state of
 Burma.

 Insight Investment has called on BAT to "establish clear and
well-justified boundaries for its decisions about whether and how to
 operate in situations where human rights are in jeopardy".

 The call comes as Tony Blair faces scrutiny by MPs and anti-smoking
groups over his personal friendship with Alain Dominique
 Perrin, whose company owns 21% of BAT shares.

 It is claimed that a government inquiry into whether BAT deliberately
stimulated the cigarette smuggling market to boost profits
 has been delayed or diluted.

 BAT has a joint venture with a company owned by the military junta in
Burma, the state which three years ago became the first to
 be "outlawed" by the International Labour Organisation.

 Insight has met with BAT, which has responded that its operations are
managed to high human rights standards. It is playing a
 proactive part on raising awareness in Burma, and to disinvest would do
more harm than good, BAT added.

 Insight, which manages =A360bn and is the first major fund manager to
launch a campaign on global corporate responsibility,
 reports in its first progress bulletin that abuses in Burma "include
the widespread use of forced labour to build infrastructure,
 media censorship and imprisoning union and opposition party members".

 Insight says: "BAT's view that the tender shoots of progress towards
democracy may be vulnerable to divestment seems to have
 some plausibility. However, we understand from the Foreign Office that
there has been disappointingly little progress towards
 democracy in recent months. As further progress becomes more and more
unlikely, this particular concern about BAT's
 divestment loses its force."

 After last month's annual meeting, which featured a strong protest by
the Burma Campaign, BAT said: "In our view undermining
 the Burmese regime is a political objective and should be pursued
through political channels."

 However, BAT has told Insight it is "currently reviewing its business
principles" and will include a consideration of human rights
 issues in general.

 Ken Clarke, the former Cabinet minister who is BAT's deputy chairman,
has admitted he is "uncomfortable" with the Burmese
 venture.

 Insight concludes: "Concerns about tobacco health risks, ongoing US
litigation, questionable marketing practices and cigarette
 smuggling have undermined the tobacco industry's reputation.
Widely-held concerns about corporate involvement in Burma
 expose BAT to unwelcome additional reputational risk".

 Insight launched its campaign for global business principles late last
year by writing to leading fund managers and to the chief
 executives of the FTSE-100 companies. It now reports that 29 companies,
representing 59% of the index by market value, have
 made commitments to one or other of three key international standards:
the Universal Declaration of Human Rights, the ILO
 Tripartite Declaration of Principles on Multinational Enterprises and
Social Policy, and the OECD Guidelines for Multinational
 Enterprises.

 Insight says: "We were disappointed that a number of large companies
that have international exposure to human rights and
 sustainable development issues do not yet appear to have made a
commitment to respect international standards. This includes
 companies from the utilities, armaments, chemicals, banking and tobacco
sectors.

 "Insight will approach these companies in due course to discover their
reasons for not acknowledging these codes and encourage
 them to do so."

 Dr Craig Mackenzie, head of Insight's investor responsibility team,
commented: "Five years ago, there were perhaps two or three
 companies in the 100 which made explicit commitments to international
standards. We are quite optimistic that within a year or
 two the majority will have made some kind of public commitment."

 He added: "Within the traditional corporate governance agenda this
started out as a box-ticking exercise, but more and more
 companies have accepted it is legitimate, and we are now going well
beyond box-ticking to serious debates."

 Insight has engaged with almost a quarter of the companies in the
all-share index, equating to 87% by value, over a range of
 corporate responsibility issues already this year.

 Its concerns with BAT highlight the difference between socially
responsible investment as a growing dimension in mainstream
 fund management, and niche ethical funds, which for instance tend not
to invest in tobacco companies so cannot attempt to
 influence them.

 Meanwhile, Anglo American, the mining group, is facing legal action in
a US court from the Colombian mineworkers' union,
 accusing Anglo of tuning a blind eye to human rights abuses.

 On the executive pay front, Kingfisher is reported to have revised
contract and share option packages for directors in response to
 shareholder pressure, while a survey has found 17 chief executives have
"golden parachute" deals that would pay out more than a
 year's salary if they lost their jobs.

 -May 26th

 http://www.theherald.co.uk/business/archive/26-5-19103-0-10-2.html