GE Urged to Stop Opposing Shareholder Resolution on Global Warming Science

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Free Enterprise Action Fund Supports Shareholder Resolution Requesting that GE Justify Its Global Warming Policy

Action Fund Management LLC (AFM), investment adviser to the Free Enterprise Action Fund (http://www.FreeEnterpriseActionFund.com), called on the General Electric Company (NYSE: GE) to cease its opposition to a shareholder resolution requesting the company to justify its global warming policy.

Filed by Thomas Borelli, a principal of AFM, the proposed shareholder resolution requests that GE “report to shareholders on the scientific and economic analyses relevant to GE’s climate change policy [that was announced in May 2005].” (1)

On December 9, 2005, GE asked the U.S. Securities and Exchange Commission (SEC) for permission to exclude Mr. Borelli’s shareholder proposal from its 2006 proxy statement, in part, on the grounds that while GE has a climate change “strategy,” it does not have a climate change “policy.”(2)

“GE seems to hope that it can avoid justifying its global warming activity to its shareholders by use of a technical defense that relies on re-branding its actions as a ‘strategy’ rather than a ‘policy,’” said Borelli.(3)

“We are surprised that GE would attempt such a tenuous argument given that the company: acknowledges taking public policy positions on environmental issues like global warming; has called for worldwide reductions in greenhouse gas emissions; works with environmental activist groups that support global warming regulation and has lobbied the federal government for global warming regulations,” said AFM’s Steve Milloy. (4)

Just this week, GE capitulated to pressure from environmental activist shareholders and issued a report to shareholders about the amount of money GE spent during the last 15 years defending itself in the controversy involving the company’s historical releases of PCBs into the Hudson River. (5)

“GE’s surrender on the PCB report along with the company’s siding with environmental activists in the global warming debate raises in our minds serious questions about current management’s the ability and interest in addressing environmental controversies in the best interests of shareholders,” commented Borelli.

The Free Enterprise Action Fund (FEAF) is a mutual fund seeking to provide investors with financial returns while defending and advocating for the American system of free enterprise. The FEAF owns less than one percent of the outstanding shares of GE.

The Free Enterprise Action Fund seeks long-term capital appreciation through investment and advocacy that promote the American system of free enterprise. An investor should consider the fund's investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the Free Enterprise Action Fund can be found in the fund's prospectus. To obtain a prospectus, please call 1-800-766-3960 or visit http://www.FreeEnterpriseActionFund.com. Please read the prospectus carefully before investing.

Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. The Free Enterprise Action Fund is a new fund with limited investment history and there is no guarantee that it will achieve its investment objectives.

The Free Enterprise Action Fund is advised by Action Fund Management, LLC., which receives a fee for its services, and is distributed by BISYS Fund Services Limited Partnership, which is not affiliated with Action Fund Management, LLC.

References:

1. The proposed shareholder resolution filed with GE on October 31, 205 by Mr. Thomas J. Borelli states:

“Global Warming Science

Whereas:

GE’s main responsibility is to create shareholder value. Company policy should be based on sound scientific and economic analyses and not appeasement of external activist groups. Policy based on faulty analyses or external pressure may reduce shareholder value. [See http://www.FreeEnterpriseActionFund.com.]

Whereas:

Calls to mitigate alleged man made climate change rely on suppositions that man made greenhouse gas (GHG) emissions significantly impact global climate; that such climate change will necessarily be undesirable; and that cost-effective action can mitigate undesirable climate change.

Whereas:

The GE 2005 Citizenship Report states that GE strives to base its public policy positions on sound facts, detailed analysis and consideration of competing values, and that GHG emissions need to be reduced around the world.

“GE’s Ecomagination initiative is partly based on the supposition that human activity harms global climate and that GHG emissions reductions will mitigate harm.

“Ecomagination’s public roll-out included the Word Resources Institute, an environmental organization supporting GHG emission reductions.

Resolved: That, by the 2006 annual shareholder meeting, the Board of Directors report to shareholders on the scientific and economic analyses relevant to GE’s climate change policy, omitting proprietary information and at reasonable cost.

This report should discuss the:

1.    Specific scientific data and studies relied on to formulate GE’s climate change policy.

2.    Extent to which GE believes human activity will significantly alter global climate, whether such change is necessarily undesirable and whether a cost-effective strategy for mitigating any undesirable change is practical.

3.    Estimates of costs and benefits to GE of its climate change policy.

Supporting Statement:

Climate varies significantly because of natural causes. [National Academy of Sciences (NAS), Natural Climate Variability on Decade-to-Century Time Scales, 1995.] Twentieth century temperature trends do not correlate well with concurrent trends in man made GHG emissions. [Sallie Baliunas, Lecture #758, Heritage Foundation, http://www.heritage.org/Research/EnergyandEnvironment/HL758.cfm.]

The mathematical models that attempt to predict future climate change resulting from man made GHG emissions have not been validated against historical climate data [NAS, Reconciling Observations of Global Temperature Change, 2000.] No existing model predicts future global climate with certainty [NAS, Radiative Forcing of Climate Change: Expanding the Concept and Addressing Uncertainties, 2005.]

Warm periods are historically associated with human development and prosperity. The Vikings thrived in Greenland until the 14th century cold period known as the “Little Ice Age,” when they abandoned settlements because of encroaching sea ice. The Little Ice Age persisted until the 19th Century and immediately preceded the current warming trend. [NAS 1995.]

The required GHG emission reductions of the Kyoto Protocol may “avoid” just a few hundredths of one degree Centigrade of warming through 2050 at an estimated cost of 0.2% to 2% of GDP per year. [United Nations, Third Assessment Report, 2001.]

The U.S. Senate has rejected mandatory limits on man made GHG emissions as being too costly relative to uncertain benefits.”

2. Letter from Gibson, Dunn & Crutcher LLP to U.S. Securities and Exchange Commission, Division of Corporation Finance (December 9, 2005).

3. The SEC stated in Exchange Act Release No. 40018 (May 21, 1998) that proposals that relate to ordinary business matters but that focus on “sufficiently significant social policy issues . . . would not be considered to be excludable because the proposals would transcend the day-to-day business matters.”

4. Letter from Steven J. Milloy to U.S. Securities and Exchange Commission, Division of Corporation Finance (December 20, 2005).

5. Available at http://www.tricri.org/documents/GEReportonPCB.pdf.

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Steven Milloy