Swedish national pension fund Första AP-fonden and Norwegian financial services group DnB NOR played a leading role when Nordic and US investors recently succeeded in making hotel chain Marriott International address problems with child sex tourism that arose at the company’s premises in Costa Rica in the late 90s. This was revealed today when the participants made the inside story official.
In 2002, Marriott was associated to a violation of international norms on human rights and child labour when the Costa Rican Supreme Court found an individual guilty of aggravated pimping of minors based on testimonies describing how Marriott was used as a vehicle in the process. Since then, the company has been excluded by many investors applying environmental, social and governance criteria. For years, some of them have been approaching Marriott to make the company recognise the risks or being associated to child exploitation and to implement preventive measures. In November 2006, the company agreed to the requests by the investor community by publishing a comprehensive policy committing them to fight child prostitution.
Behind the scenes of Marriott’s turn-around acted a shareholder group comprised of Första AP-fonden, DnB NOR Asset Management, analysis provider GES Investment Services and US investors Boston Common Asset Management and Interfaith Center on Corporate Responsibility (ICCR). It was formed after the first break-through in late 2005, when Första AP-fonden filed a shareholder resolution asking the company to adopt a human rights policy including protection of children from exploitation and Marriott asked for the withdrawal of the resolution on the condition that they would work on the issue during 2006.
“According to our ownership policy, we have a clear mandate to ensure that fundamental human rights are respected. We believe that a company associated with incidents of child sex tourism could suffer substantial negative impact in terms of reputation and adverse publicity. Thus we believe that addressing these matters is material to Marriott International, and in line with best practice, which is why we filed a resolution in the first place. However, when Marriott opened up for a constructive dialogue with the shareholder group and showed its commitment through the creation of a senior management task force we had no problem with withdrawing the resolution, on the contrary. It is our firm belief that a collaborative approach is a much better way of addressing this kind of issues than a confrontational one”, said William af Sandeberg, CEO and President of Första AP-fonden.
“In addition to managing numerous mandates with specific environmental, social and governance criteria, DnB NOR Asset Management works actively with a minimum standard for all our investments. This is clearly stated both in our Guidelines for Socially Responsible Investments as well as in our ownership policy. We encourage constructive dialogue with firms and the Marriott case is a good example of that. In our view, the outcome is clearly a win-win situation benefiting the fight against child sex tourism as well as the reputation and attractiveness of Marriott as a long term investment object”, said Torkild Varran, Chief Investment Officer of DnB NOR Asset Management.
Over the course of the last nine months, the shareholder group has met three times with members of Marriott’s Human Rights Task Force comprised of senior officials in the organisation across the areas of human resources, compliance, public affairs and international lodging operations. The Task Force was specifically formed to address this issue throughout Marriott’s global operations. In October the group met with the company in New York to discuss a draft of their revised Human Rights policy, including a new section on the Protection of Children, which later was approved by the board and published on their website.
“Marriott also informed us that they had already begun employee awareness and training on this new policy at all levels of the organisation from the most senior level down to the front line personnel. In addition, the company is also taking a leadership role in the International Business Leaders Forum that is working on an industry-wide initiative to prevent child sex tourism, said Carina Silberg, Research Analyst of GES Investment Services, who co-lead the shareholder group together with Lauren Compere of Boston Common Asset Management.
GES now deems Marriott’s actions adequate enough to qualify for a revision and therefore recommends its clients to re-include the company in their investment universe.
“This case story contains many of the key ingredients we believe are vital for a successful active engagement with companies: powerful partnerships, constructive dialogue and smooth cooperation. This is a major achievement for all our clients on whose mandate we are acting”, said Magnus Furugård, President of GES Investment Services, which provides analysis and advise to numerous well-known pension funds, banks and other investors managing assets of approximately €130 billion.
“We will continue to push Marriott on expanding their efforts in this area and monitor the implementation of their policy but we feel that Marriott has taken a huge step in adopting appropriate policies and procedures to address the exploitation of children within their sphere of influence”, said Lauren Compere, Director of Shareholder Advocacy at Boston Common Asset Management in a joint statement from the shareholder group that was published today.
”This is such a critical issue for ICCR members that we will be expanding our efforts to address this with other hotel chains, travel agencies and airlines over the next few years”, said David Schilling, Director Global Corporate Accountability Program of ICCR.