Corporate Sunshine Working Group
co-chaired by
Friends of the Earth US, Washington, DC
Good Neighbor Project, Waverly, MA

December 14, 1998

Mr. Arthur Levitt, Chairman
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C., 20549

Jonathan G. Katz, Secretary,
U.S. Securities and Exchange Commission
450 Fifth Street, N.W., Stop 6-9
Washington, D.C., 20549

Subject: Initial Communication Regarding Need for Strengthened Corporate Disclosure on Environmental and Social Issues including File No. S7_30-98, "Aircraft Carrier" Proposal and Pending Staff Advisory Bulletin on Materiality

Dear Chairman Levitt,

On September 28, 1998 in an important speech at New York University ("The Numbers Game"), you called for a set of general reforms to enhance corporate disclosure. The undersigned public interest, labor and investment organizations and socially responsible businesses urge the SEC to particularly promote disclosure of environmental and social issues as a way of enhancing shareholder safeguards while simultaneously promoting socially and environmentally responsive business practices. A growing portion of the investment community is demanding social and environmental information on corporations both as a means of tracking the value of their investments and as a means of shaping the social and environmental impacts of their investments. We believe that the SEC should ensure that environmental and other social performance information are disclosed and integrated into financial statements and annual reports through better enforcement, clarified definitions and additional, standardized guidelines.

The leadership of the SEC leadership is required to respond to the changing information needs of corporate stockholders and other stakeholders, especially in the face of a private sector reporting mechanism that is currently tainted by conflict of interest. In particular, the undersigned groups urge the SEC to take the following steps:

§ Take Enforcement Action Against Identified Violators: Some of the undersigned organizations have identified certain companies, including Phelps Dodge and Freeport McMoRan Copper & Gold, that exemplify shortcomings in corporate reporting. We urge you to take a hard look at these companies as a good starting point for evaluation and enforcement of shareholder reporting requirements.

§ Revise SEC Rules to Clarify Reporting Duties: In addition to immediate enforcement, SEC reporting requirements and guidelines should also be clarified to ensure greater enforceability of environmental and social disclosure. The attached document includes suggested clarifications regarding definitions of materiality, and some types of data that can be specified for reporting.

§ New Securities Legislation Should Include Comprehensive Environmental and Social Reporting Duties: In October 1998 the SEC announced its intent to advance amendments to the Securities Act. We believe this is an opportune moment to establish a more detailed reporting scheme of benefit both to investors and other stakeholders, through legislative provisions that mandate standardized annual environmental and social performance reports by corporations.

§ Revive and formalize a Memorandum of Understanding with the Environmental Protection Agency: The SEC and the EPA should revive their Memorandum of Understanding to share information on companies' environmental liabilities.

Please find following an attachment that further elaborates on the points raised in this letter. Again, investors and the public interest community are encouraged by the SEC's recent moves toward greater corporate transparency and disclosure. We hope you will explicitly integrate social and environmental issues in corporate reporting requirements and take advantage of this opportunity to advance investor safeguards while promoting social and environmental protection.


Friends of the Earth - US

Good Neighbor Project

Washington, DC

Waverly, MA

National Environmental and Policy Organizations
Accounting for the Environment, by Christine Real de Azua, Director
Campaign to Safeguard America's Waters, by Gershon Cohen, Director
Center for Advancement of Public Policy, by Ralph Estes, Ph.D.
Center for International Environmental Law, by David Hunter, VP
CleanWater Action, by Paul Schwartz
Co-Op America, by Alisa Gravitz, Executive Director
Council for Responsible Genetics, by Kimberly Wilson
Essential Action, by Rob Weisman
Environmental Working Group, by Ed Hopkins
Friends of the Earth - US, by Brent Blackwelder, President
Foundation for Global Sustainability, by Samantha Pearson, Coordinator
Global Resource Action for the Environment, by David Brubaker
Good Neighbor Project, by Sanford Lewis, Director
Greenpeace, by Rick Hind and Charlie Cray
Institute for Agriculture and Trade Policy, by Mark Ritchie, President
Mineral Policy Center, by Stephen D'Esposito, President
Minority Environmental Lawyers Association, Mathy V. Stanislaus, Esq.
National Environmental Trust, by Jeff Wise, Policy Director
National Wildlife Federation, by Julie Tanner
OMB Watch, by Rick Blum
Protect All Children's Environment, by E.M.T. O'Nan, Director
Stakeholder Alliance, by Ralph Estes,Ph.D., Chairman

Institutional Investors, Financial Services Firms and Providers
A.C.L., Inc., by Jerry Garcia, CFO
American Friends Service Committee, by John M. Blachard, CFO
Aquinas Funds, by Frank Rauscher
Ariel Mutual Funds, by Krista Tag
As You Sow, by Conrad McKerron
Astrologer's Fund, by Susan Hahn
Avalon Trust Company, by Clark H. Woolley
Richard Barr, First Affirmative Financial Network*
Mary Becker, CFP, First Affirmative Financial Network*
Jan Bryan, CFP, First Affirmative Financial Network*
Christian Brothers Investment Services, by Frank Coleman
Cascadia Revolving Fund, by Shaw Canele
Citizens Funds, by Samuel Perse, President
Clean Yield Group, by Rick Hausman
Crown Futures Corp, by Stuart T. Valentine
Domini Social Investments, by Adam Kanzer
Bob Dreizler, CLU, ChFC, First Affirmative Financial Network*
Dubuque Bank Trust, by Mel Miller, Senior Vice President
Joe Ficalla, First Affirmative Financial Network*
Franklin Research and Development, by Simon Billenness
Georgette Frazer, CPA/PFS, CFP, First Affirmative Financial Network*
Green Century Capital Management by Tracy Graham
Kinder, Lydenberg and Domini, by Peter Kinder, President
Troy Horton, First Affirmative Financial Network*
Interfaith Center for Corporate Responsibility, by Tim Smith and Ariane Van Buren
Robert E. Jones and Associates, Inc. by Samuel F. Jones
Longworth Investors, by David Bush-Brown
Laurie McLean, Principal, Socially Responsible Investing
BJ Medley, registered representative, Socially Responsible Investments
McDonald Investments, Inc. by Donald Kaplan, First Vice President
Mennonite Mutual Aid, by Mark Regier
Middle Mountain Tax Services, Ltd., by Ron Cohen
Joyce Moore Financial Services, by Joyce Moore, LUTCF
New Alternatives Fund, by David Schoenwald
Northstar Asset Management, by Julie Goodridge, President
Pax World Family Funds, by Anita Green
Parnassus Investments, by Jerome L. Dodson
Progressive Investment Management, by Jim Madden
Rose Foundation for Communities & the Environment, by Tim Little, Executive Director and
Jill Ratner, President
Charles Sandmel, First Affirmative Financial Network* U.S. Trust Company
Eric A. Smith, CFP
V.H. King Associates, by Virginia H. King
Walden Capital Management
Winslow Management Company, by Jackson Robinson, President

International Labor Unions
United Steelworkers of America, by Leo Gerard, Secretary-Treasurer
Oil, Chemical & Atomic Workers International Union, by Bob Wages, President
United Paperworkers International Union, by Boyd Young, International President
International Brotherhood of Teamsters, by Bartlett Naylor, Director, Corporate Affairs

Regional Environmental, Workplace and Community Groups
Alice Water Protection Association , by Patricia A. Paul and Adeline Leichliter, Co-Exec. Dirs.
Agricultural Resources Center, North Carolina, by Allen Spalt
Alabama Rivers Alliance, by Brad McLane
Arizona Toxics Information, by Michael Gregory, Director
Atlantic States Legal Foundation, by Samuel Sage
California Communities Against Toxics, by Jane Williams, Executive Director
Citizens' Committee to Complete the Refuge, Palo Alto CA, by Florence LaRiviere, Chair
Coast Range Association, Corvallis OR, by Chuck Willer, Executive Director
Communities United Against Pollution, Puerto Rico by Rosa Ramos
Cook Inlet Keeper, Homer AK, by Bob Shavelson
Center for Public Trust, Montgomery AL, by Mike Odom, Executive Director
Delta Land Trust, Jackson MS, by T. Logan Russell, President
Desert Citizens Against Pollution, Lancaster CA, by Lyle Talbot
Don't Waste Arizona, Inc., by Steve Brittle, President
Earth Concerns of Oklahoma, by B.J. Medley
Earth Day Committment, Edgecomb ME, by Raymond Shadis
Ecology Center of Ann Arbor, by Tracey Easthope
Environmental Action Center, Puerto Rico, by Sarah Peisch
Environmental Health Network, by Linda King
Environmental Health Fund, by Gary Cohen
El Puente, Brooklyn NY, by Analia Penchaszadeh
Forest Guardians, Santa Fe NM, by John Horning
Friends of the Coast - Opposing Nuclear Pollution, Edgecomb ME, by Raymond Shadis
Gila Resources Information Project, Silver City NM, by Harry Browne
Grand Calumet Task Force, by Bowden Quinn
Great Lakes United, by Margaret Wooster, Executive Director
Green Environmental Coalition (Midwest), by Bruce Cornett, Director
Group for the South Fork, Bridgehampton NY, by Adrian Drake
High Country Citizens' Alliance, Colorado, by Steve Glazer, Board of Directors
Kansas Sierra Club, by Terry Shistar
Lake Superior Greens, Superior WI, by Jan Conley
The Lands Council, Spokane WA, by Dan Heilig
Landwatch Monterey County, Monterey CA, by Gary Patton, Executive Director
Maryland Pesticide Network, by Ruth Berlin, Coordinator
Massachusets Public Interest Research Group, by Paul Burns
Michigan Environmental Council, by Dave Demsey, Policy Director
Midwest Coalition for Responsible Investment, by Susan Jordan, Coordinator
Montana Environmental Information Center, by Anne Hedges, Program Director
Multiple Chemical Sensitivities Task Force of New Mexico, by Ann McCampell, MD, Chair
New Jersey Environmental Lobby, by Marie A. Curtis, Executive Director
New Jersey Work Environment Council, by Rick Engler, Director
New York Lawyers for the Public Interest, by Eddie Bautista
Ohio Citizen Action, by Sandy Buchanan, Executive Director
Ohoopee River Preservation Corps, Cobbtown GA, by Marilyn Lanier
Oregon Clearinghouse for Pollution Reduction, by Dr. Lisa Brenne, President
Organization of Waterfront Neighborhoods, New York City, by Eddie Bautista
Pennsylvania Environmental Network, by Brian Laverty, President
Potomac Headwaters Resource Alliance, West Virginia, by Margaret Janes
Save the Dunes Conservation Fund, Michigan City, IN, by Sandra Wilmore, Program Director
Safe School, Lafayette LA, by Irene Wilkenfeld
Save the Valley, Madison WI, by Richard Hill, President
Silicon Valley Toxics Coalition, San Jose, CA, by Ted Smith, Director
Texas Consumers for Safe Food, by Steve Sprinkel
Tulane Institute for Environmental Law and Policy, by Jerry Speir, Director
Vermont Public Interest Research Group, by Dave Rapaport
West Valley Citizen's Air Watch, Cupertino CA, by Joyce Eden
Wyoming Outdoor Council, by Dan Heilig, Executive Director

Human Rights and Social Justice Organizations
Economists Allied for Arms Reduction, by Dr. Robert Schwartz
Human Right Advocates' California Corporate Accountability Project,
by Prof. Naomi Roht-Arriaza
Maryknoll Fathers, Brothers Sisters and Lay Missioner's Office of Global Concerns,
by Rev. Peter Ruggere

Companies and Trade Associations
Earthwise Designs, by Carolyn Edwards
Environmental Media Services, by Arlie Shardt, Executive Director
Seventh Generation, by Jeffrey Hollander, President
Texas Organic Growers Association, by Steve Sprinkel
Verité, Inc. by Heather White

Individuals (affiliation for identification only)
Jack Brill, Financial Author, San Diego, CA
Stuart Auchincloss, Vice Chair, Atlantic Chapter of the Sierra Club
Bill Bingham, Austin, TX
Jonathan Block, Esq., Putney, VT
Jose B. Davila, Puerto Rico
Vic Edgerton, Costa Mesa, CA
Jon Entine, Journalist, Agoura Hills CA
Ron and Mary Forthofer, Niwot, CO
David Foster, Director, District 11 United Steelworkers of America
Kim Gohn,Red Lion,PA
Michelle Hartt, Sacramento, CA
Janet Heffner,Brogue,PA
Donald Heffner,Brogue,PA
Robert Hogner, Ph.D., Assoc.Prof. Business Env., Florida International University, Miami, Florida
Ken Leiserson, Engineer, Environmental Defense Fund
Charles Levenstein, Ph. D., M.Sc., Professor of Work Environment Policy, U of Mass. Lowell
Bebe Lising, Texas City, TX
James McRitchie, California
Fred Millar, PhD, Consultant, Chemical Accident Prevention, VA
David N. Pellow, Ph.D,Board of Directors, Citizens for a Better Environment in the MidWest
John Perquin, Assistant Director, Health, Safety & Envt Dept, United Steelworkers of America
Evelyn Robinson, Brogue,PA
Standley Robinson,Brogue,PA
Devorah Rosenberg, Worcester, MA
Robert Rutkowski, Esq, Topeka, KS
Mary Schmidt, Fort Wayne, Indiana
Wade Sikorski, Ph.D. Willard, MT
Gibson Smith - Brogue, PA
Gibson Smith IV, Brogue, PA
Gretel Smith, Brogue, PA
Sandy Smith, Brogue,PA
Wright Smith,Brogue,PS
Caryn Sykes, San Francisco, CA
Steven Thalheimer, Silver Spring, MD
Rand Wilson, Massachusetts Teachers Association
Steve Viederman, President, Jessie Smith Noyes Foundation
Jeff Wiggin, Troy, NY

*First Affirmative Financial Network, a division of Walnut Street Advisors, Inc. (WSA). WSA, a subsidiary of Walnut Street Securities, member NASA and SIPC, is a registered investment adviser with the SEC.

Jack Brill, Financial Author, San Diego, CA
Stuart Auchincloss, Vice Chair, Atlantic Chapter of the Sierra Club
Bill Bingham
Jose B. Davila, Puerto Rico
Vic Edgerton, Costa Mesa, CA
Jon Entine, Journalist, Agoura Hills CA
David Foster, Director, District 11 United Steelworkers of America
Michelle Hartt, Sacramento, CA
Robert Hogner, Ph.D., Assoc. Prof. Business Environment
Florida International University, Miami, Florida
Ken Leiserson, Engineer, Environmental Defense Fund
Charles Levenstein, Ph. D., M.Sc., Professor of Work Environment Policy, U of Mass. Lowell
James McRitchie, California
David N. Pellow, Ph.D, Board of Directors, Citizens for a Better Environment in the MidWest
Devorah Rosenberg, Worcester, MA
Robert Rutkowski, Esq, Topeka, KS
Mary Schmidt, Fort Wayne, Indiana
Wade Sikorski, Ph.D. Willard, MT
Steven Thalheimer, Silver Spring, MD
Rand Wilson, Massachusetts Teachers Association
Steve Viederman, President, Jessie Smith Noyes Foundation
Jeff Wiggin, Troy, NY

*First Affirmative Financial Network, a division of Walnut Street Advisors, Inc. (WSA). WSA, a subsidiary of Walnut Street Securities, member NASA and SIPC, is an investment adviser registered with the SEC.

To add your endorsement to this letter
and to keep posted on this issue,
please contact Michelle Chan-Fishel,
Friends of the Earth at
Tel: 202 783 7400 x242; Fax: 202 783 0444;

An up-to-date version of this letter with additional endorsers
will be maintained at


Advancing Investor Protection and Promoting the Public Interest
The Time is Ripe for Increased Disclosure
on Social and Environment Issues

Comments of the Corporate Sunshine Working Group

A growing portion of the investment community is demanding social and environmental information on corporations. The socially responsible investing community, for example, is one of the largest growing segments of the investment sector, and demands this kind of data to inform their investment decisions. In addition, pension funds (particularly public pension funds), which hold about 26% of all listed corporate stock in the United States, are becoming increasingly interested in corporate responsibility and good governance issues.

Corporate disclosure requirements can create better incentives for environmental performance and protection. By bringing clearer calculations of long-term costs into view, it may be possible to strengthen the incentives for enhancing environmental management practices. In 1997, the National Academy of Sciences (National Research Council), espoused this view in analyzing how improvements in groundwater quality could be achieved. The National Research Council recommended that "the Securities and Exchange Commission establish and strictly enforce a requirement that all publicly traded U.S. corporations fully disclose their environmental liabilities" (remarks of Suresh C. Rao, National Research Council Public Briefing, Innovations in Groundwater and Soil Cleanup, 11 June 97.)

From a financial standpoint, environmental disclosure provides indicia of the bottom line, not only environmental liabilities, but also indicia of good corporate management demonstrated by positive environmental performance. Many studies have linked environmental and financial performance, including a 1996 report produced by ICF Kaiser. This study surveyed more than 300 Standard and Poor 500 companies and found that adopting a forward looking environmental stance had a "significant and favorable impact" on a firm's value in the marketplace, as it reduced the perceived risk of investing in the company and thus its costs of capital. (1)

Examples of the Current Problem
The principal SEC regulations we are concerned with govern disclosure of liabilities and legal proceedings in annual 10-K reports and quarterly reports (10-Q's). We are concerned with the adequacy of enforcement of these regulations as well as enforcement of SEC Rule 10(b)-5, which governs materially false or misleading statements made with intent to deceive investors, or with reckless disregard of the truth. These rules are especially poorly enforced with respect to a multinational corporation's non- US operations. In fact, the Investment Responsibility Research Center recently conducted a study of over 100 Standard & Poor 500 companies and found that approximately 75 percent of the companies with foreign operations do not include any data in their publicly-available documents on their environmental track records abroad.(2)

Numerous companies cross the line on these disclosure matters. Others provide artful legal "cover" which avoids meeting the spirit and letter of the law. Rules created for shareholder protection have been construed by some corporations to make environmental reporting an art form of obfuscation, not of shareholder enlightenment. Companies often minimize environmental disclosures through careful placement of a boilerplate of uninformative caveats about a plethora of uncertainties and unknowns. When some liability is known to exist, some companies low-ball potential losses instead of weighing the probabilities and making a reasonable projection, as directed by FASB Interpretation 14. Even if a groundswell of public concern and action swirls around a corporation's operations, there seems to be no assurance that the corporation will tell its shareholders, since interpretations of "materiality" under some regulations make it almost discretionary whether they will chose to report or not.

It may be helpful to identify some specific examples that can be scrutinized to understand this issue. Please find attached information on Freeport McMoRan Copper & Gold, Inc.; Phelps Dodge, Inc.; Viacom, Inc.; and USA Waste, which specific non-governmental organizations (NGOs) uncovered. The NGOs monitoring these cases maintain that these companies may have failed to adequately disclose environmental liabilities and proceedings, and may be failing to inform shareholders adequately on issues such as adoption of state of the art approaches that could help them avoid such liabilities as well as civic conflicts.

The NGOs who have tracked these matters suggest and believe that Freeport McMoRan Cooper & Gold has provided false and misleading information regarding its environmental impacts, that Phelps Dodge has underestimated or omitted key information on clean-up and reclamation costs, that Viacom has left important Superfund liabilties undisclosed, and that USA Waste has failed to disclose whether it is adopting certain practices that should be of concern to investors.

A lack of enforcement by the SEC in this area has contributed to the inadequate reporting by these corporations. Ambiguous policies of the SEC are also contributing to these poor practices. We believe the time has come for change.

Areas Ripe for Reform
Two of the areas you targeted in your "The Numbers Game" speech are definitions of "materiality" and "liability". Our hope is that your interest in this issue will provide openings for environmental and social justice groups to provide input, and that the SEC will pursue initiatives to improve corporate reporting from our perspective. You stated with regard to materiality that:

I reject the notion that the concept of materiality can be used to excuse deliberate misstatements of performance. ... I have asked the SEC staff to focus on this problem and publish guidance that emphasizes the need to consider qualitative, not just quantitative factors of earnings. Materiality is not a bright line cutoff of three or five percent. It requires consideration of all relevant factors that could impact an investor's decision.

We agree and hope you will effectuate policies that put this view into practice on social and environmental matters.

Another issue is the arena of reporting of liabilities. You stated in the same speech that you are asking private sector standard setters to bring "greater clarity to the definition of a liability." But our experience and the overwhelming evidence is that the private sector alone cannot be expected to take the bold initiative needed in this arena. Indeed, you acknowledged this problem in the accounting sector when you noted that the auditors and consultants are already having a hard time policing themselves. Responsible and responsive government action will be needed.

The Challenge: A Far Reaching Vision
We have come together in unity with a vision of what the SEC shareholder reporting requirements could become, a vision we dub the Corporate Sunshine approach. We believe there is a growing proportion of investors who is considering the social and environmental implications of their investments, both as an ethical matter and as a material factor in financial analysis. For example, shareholders want to know from both an environmental and financial standpoint whether their corporations are investing in state of the art technologies and management methods; or whether, alternatively, they will face a continuing spiral of regulatory costs by staying behind the curve.

Already, hundreds of corporations publish annual environmental reports. In addition, independent standards organizations have arisen to ensure the quality of such reports. Most notably, the Coalition for Environmentally Responsible Economies (CERES) has created a standard environmental reporting format. Forty-six companies and organizations produce CERES reports, including large companies such as Sun Oil, Bethlehem Steel, General Motors, H.B. Fuller and Polaroid. In a context in which some companies publish such reports but others do not, and in which the reporting is not standardized, this information is not nearly as useful to shareholders and the public as it could be. The time is ripe to move toward standardized, corporation-wide environmental reporting.

A broader approach to corporate accountability is proposed by a new national organization, the Stakeholder Alliance (SA). They have published the standards for a corporate sunshine report to stakeholders, which would cover multiple social issues in addition to environmental matters, and which should be integrated to a public policy approach to this issue. Their model builds on disclosure guidelines previously advanced by environmental, labor, consumer, and other groups. We endorse the approach taken by the Stakeholders Alliance, and will pursue aggressive advocacy to see it adopted in some form by the SEC.

Four Steps Toward an Investor Right to Know Program

Step One: Take Enforcement Against Identified Violators
At the end of this document, we identify a group of companies that exemplify the shortcomings of environmental reporting in particular. We urge you to take a much harder look these companies as a good starting point for evaluation and enforcement of shareholder reporting requirements.

Step Two: Revise SEC Rules To Clarify Reporting Duties
In addition to immediate enforcement, SEC reporting requirements and guidelines should also be clarified to ensure greater enforceability. Examples of clarifications that could improve corporate reporting include the following:

1) Explicitly define the "material" interests of shareholders to include social and environmental matters, so that it is understood that a prudent investor may wish to consider a company's strategic management of issues affecting environment and society, as well as the company's profitability. Fiduciary responsibility compels money managers to think about the longer-term implications of their investments. Corporate reporting should be required to reflect this.

2) Require companies to report a list of sites which may be reasonably expected to generate liabilities, together with a range of potential liability estimates (high and low) for each site, along with probability-weighted expected liabilities.

3) Require reporting of major environmental cases or controversies, regardless of the existence of specific proceedings or government involvement or initiation. Corporations should also be required to disclose pending or needed discretionary government waivers with more than $100,000 in impact.

4) Corporations should be required to report their environmental policies, and the extent of concrete management structures in place to implement those policies.

Step Three: New Securities Legislation Should Include Comprehensive Environmental and Social Reporting Duties
In October 1998 the Securities and Exchange Commission announced its intent to advance amendments to the Securities Act. This presents an opportune moment for the SEC to establish a more detailed reporting scheme that is of benefit both to investors and the public. The legislation should mandate the issuance of standardized annual environmental and social reports by corporations, for use by investors as well as other stakeholders. Financial reports should be expanded and adjusted to address the financial dimensions of the issues disclosed in the environmental and social reports. Neighbors, workers and investors will all find more of the information that they need to know. In addition, end user consumers, as well as intermediate users (e.g., the electronics industry as a major user of copper) will be able to make better-informed purchasing decisions.

Step Four: Improve and formalize information sharing with the EPA
Under SEC Commissioner Roberts, a draft Memorandum of Understanding was established between the SEC and the Environmental Protection Agency to share information between the two agencies. Information exchanges between the two agencies encouraged the SEC's Division of Corporate Finance to notify companies when they did not adequately report environmental liabilities and federal actions. Since Commissioner Roberts left the SEC, such important collaboration has waned; we urge the SEC to revive this Memorandum of Understanding with the EPA.


Specific Examples of Possible Shortcomings in Disclosure

The United Steelworkers of America recently conducted an analysis of the shareholder disclosures of Phelps Dodge. The union found that the corporation generally either underestimates liabilities for reclamation and cleanup or dismisses them with numerous caveats. For example, in the 1997 Phelps Dodge Annual Report the company reports it was ordered by a court to resume ownership of a Maspeth, New York, contamination site and that the corporation has reserved $10 million for cleanup of that site. The annual report neglects to mention that the court estimated potential cleanup costs for thorough cleanup of the site that could add up to $285 million. Similarly the Phelps Dodge Annual report notes that a sum of $122.4 million is reserved for reclamation. It neglects to mention that the company's reserve level is apparently based on its quest for waivers of legal requirements. For instance, the company is seeking a waiver of the New Mexico legal requirement to restore the Chino Mines open pit to a self-sustaining ecosystem.

Since the Steelworkers issued their report, an even more egregious example of Phelps Dodge violations of SEC reporting has emerged. On October 21, Phelps Dodge announced the layoff of 300 workers at the Chino Mines in New Mexico, and noted that there were a number of permitting issues at the Chino Mines that could be determinative of whether and when the mines could reopen. The company stated that it would be "monitoring the business context" at the site to make these decisions. In May of this year, a coalition filed an appeal of the mining permit at the Chino Mines. Apparently, this is an example of the issue that the company is referring to when it mentions "permitting issues." But in what now seems a clearcut violation of SEC rules requiring reporting of legal proceedings may involve "material" impacts on the business, the company has never reported this in its quarterly reports, even though there have been two quarterly reports published since the appeal was filed. In November 1998, the USWA filed a complaint regarding Phelps Dodge's disclosures with the Securities and Exchange Commission.(3)

At Freeport McMoRan Copper & Gold, Inc's 1998 annual meeting, a Friends of the Earth analyst queried Freeport and its auditor, Arthur Anderson, about Freeport's 1996 10-K. The 10-K stated, "Management also believes that its current operations have not had, and that its expanded operation will not have, a significant adverse impact on the environment." However, in 1995 the Overseas Private Investment Corporation terminated Freeport's political risk insurance because the company's mining project "has caused substantial adverse environmental impacts" and "has created and continues to pose unreasonable or major environmental, health and safety hazards" to the environment and people. The 10-K dismisses OPIC's findings by describing them as without factual basis.

However, Freeport's operations clearly have significant environmental impact. The company operates the world's largest open-pit copper and gold mine, and its operations have taken 400 feet off of the top of a mountain. Freeport directly discharges over 200,000 tons of mining slurry (tailings) per day into the local (Ajkwa) river system,(4) a practice that is prohibited in the United States and other developed countries. According to Freeport's 1996 environmental audit, "the most visible and most significant impact upon the environment is and will continue to be the disposal of tailings"(5), and in 1990, when the tailings-bearing Ajkwa river overflowed its banks, "lowland rainforest vegetation was severely impacted over an area covering some 30 km2" (6)

Friends of the Earth believes that Freeport's assertion that "Management also believes that its current operations have not had, and that its expanded operation will not have, a significant adverse impact on the environment" is misleading to shareholders and the public.

An enormous consolidation is underway in the waste business. The merger of USA Waste and Waste Management has implications for our communities, the environment and shareholders. According to the Good Neighbor Project of the Tides Center, and the Organization of Waterfront Neighborhoods, a coalition of 26 community based environmental and civic groups in New York City working to address the common threat of waste transfer stations, Waste Management and USA Waste have reported in vague terms to shareholders that environmental liability and enforcement actions may accrue to the companies in pollution and toxic waste cleanup duties, fines, and environmental litigation, and that local regulation and siting matters may adversely affect the corporations' interests. For instance, USA Waste noted that the company "expects that it may in the future from time to time receive citations or notices from governmental authorities that its operations are not in compliance with its permits or certain applicable environmental or land use laws or regulations," and that there can be no assurance that "such future citations or notices will not have a materially adverse effect on the company's financial position, results of operations or cash flows."

Further, civil rights issues raised by the clustering of waste facilities and other hazardous facilities in communities of color and low income neighborhoods is receiving increasing public scrutiny and likely to affect the business of this new mega-company. There are advanced approaches and technologies such as the use of non-diesel vehicles and the employment of appropriate buffer distance to residential neighborhoods can reduce potential liabilities and siting related conflicts. Indeed, Waste Management Technologies Inc. reported to shareholders that its mission was "to be the acknowledged worldwide leader in providing... services of the highest quality to industry, government and consumers using state-of-the-art systems ...." Despite the serious concerns regarding liability and enforcement potential, the waste company is not providing very much information to investors about the degree to which it is actually pursuing advanced approaches that could avoid these liabilities. The corporations' statements about liability for enforcement, and about use of state of the art approaches, can be understood as self-contradictory.

In February 1997, Friends of the Earth, Sierra Club and Citizen Action wrote to the SEC to urge the Commission to investigate Viacom, a company that the groups believed had inadequately reported its Superfund liabilities. Based on clean-up costs at just six toxic waste sites where Viacom was a sole or major PRP (potentially responsible party), the groups estimated that Viacom's Superfund liabilities would cost at least $270 million - more than Viacom's entire profit for 1995 ($162 million). But in the company's 1995 10-K report, Viacom maintained that its environmental liabilities would not have a material adverse impact on its financial position. To this day, Friends of the Earth and the other groups have not received a substantive response from the SEC on this matter.


  1. 1Stanley J. Feldman et al, Does Improving a Firm's Environmental Management System and Environmental Performance Result in a Higher Stock Price? (Fairfax VA: ICF Kaiser International, Inc. Nov. 1996) Cited in Hilary F. French Investing in the Future; Harnessing Private Capital Flows for Environmentally Sustainable Development, Worldwatch Feb.1998.

2. 2 Cassidy, Alison. Disclosure of Environmental Information about S&P 500 Companies' Non-US Operations (Washington DC: Investment Responsibility Research Center, 1998).

3. The complaint is posted at

4. 4 Murphy, Paul (Senior Vice President of Freeport McMoRan). Washington, DC: 30 October 1998 meeting with Freeport McMoRan Copper & Gold.

5. 5 Dames & Moore. PT-FI Environmental Audit Report, Executive Summary, 1996, p 3.

6. 6 Ibid p 13.