More On Legal & Compliancefrom The Advisor's Professional Library
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
- Pay-to-Play Rule Violating the pay-to-play rule can result in serious consequences, and RIAs should adopt robust policies and procedures to prevent and detect contributions made to influence the selection of the firm by a government entity.
The largest pension fund in the Netherlands, Algemeen Burgerlijk Pensioenfonds (ABP), with more than $300 billion in assets, has washed its hands of Walmart, divesting itself of shares in its longtime investment and citing the company's poor labor practices and anti-union position as its reasons.
According to a Wednesday report in the Huffington Post, the company announced its decision to blacklist Walmart and sixteen other companies from its investment portfolio, with nearly all of the others excluded for producing chemical or nuclear weapons that violate the Nuclear Non-Proliferation Treaty. Walmart, however, was dropped for noncompliance with the United Nations' Global Compact principles, which defines a set of core values that relate to human rights, labor standards, the environment and anti-corruption efforts.
ABP has held Walmart shares for some time. Although it has not revealed how much money was involved, according to ABP records, as of June 30, 2011, it had invested some 95 million euros ($121 million) in Walmart. The pension fund adopted its responsible investing policy in 2007, after which it began to review its portfolio holdings for corporate responsibility. Anna Pot, a senior sustainability specialist involved in the decision, said in the report that ABP took notice of the substantial number of lawsuits and National Labor Relations Board complaints against Walmart.
In 2008, ABP sent its first letter to Walmart about its concerns over these issues. It met repeatedly with both employees and all levels of management in attempts to affect company policies over a four-year period, but at last decided that, although there has been some minimal change, the company was not making a substantive effort to comply.
While 2011's ABP Responsible Investment Report said that "the company has taken steps in the right direction," and indicated the $100 million Walmart paid to settle court actions just in
One of these was a union presentation at the company's annual shareholder meeting by some employees and a union analyst that sought to demonstrate that company labor practices were damaging to its long-term value. That was dismissed by Walmart executives who called the employee presenters a "bunch of malcontents" and characterized the presentation as a stunt by union organizers who wanted to "further their own political and financial agenda."
Another factor was a job description ABP found on Walmart's website last June that looked for a new director of labor relations; one listed job responsibility was "support continued union free workplace."
While Pol said that ABP would be pleased to reinvest with Walmart should it be able to demonstrate that it met international labor standards, she said in the report, referring to the job advertisement, "so long as we see lines like that, we know that is not yet the case."
While there is not exactly a rush to the exits on Walmart stock based on its policies, ABP is not the only major investor to divest. In 2006, the Government Pension Fund of Norway sold more than $400 million worth of Walmart shares, also citing labor standards and union obstruction.