BDS Fight Moves From Campus to Corporate Boardrooms — and Stakes Rise
Stephane Richard skipped the circumspection and told the Egyptian journalist what he really thought about doing business with Israel.
“Believe me,” said the CEO of the French telecom giant, Orange S.A., “our intention is to withdraw from Israel. I would cancel the contract tomorrow if I could.”
“Tomorrow” came a few weeks after that June 4 interview when Orange announced it had renegotiated its contract with its Israeli licensee, Partner Communications. The company insists its decision turned on internal business factors only, but facts are stubborn things: After 17 years in Israel, Orange will cut ties with Partner sometime in the next two years, 10 years short of the terms of the original contract, according to the New York Times.
Richard later flew to Israel and apologized for what Israeli Prime Minister Benjamin Netanyahu branded his “miserable statement,” but it is not clear whether Orange will re-enter the Israeli market.
While most of the news about the boycott, divestment and sanctions (BDS) movement against Israel comes from U.S. college campuses, a quieter, more effective divestment strategy has been gaining momentum elsewhere in the world.
Instead of the classroom, this strategy aims for the boardroom.
Through proxy ballots, shareholder activism and, most worrisome to Israel supporters, embedding anti-Israel doctrine into socially responsible investing (SRI), BDS has made headway.
“BDS has hijacked the SRI field,” said Julie Hammerman, executive director of S.F.-based JLens Investor Network, which engages the Jewish community in investing through a Jewish values lens. “They’ve created a controversy risk for companies doing business with Israel. The strategy is economic warfare against the State of Israel.”
That’s not to say all observers who work in finance and investment believe Israel’s standing in the corporate world has eroded. Far from it. But unlike divestment resolutions passed by college students — none of which have resulted in any university divesting from Israel — some evidence suggests the BDS corporate strategy may in time wear down some companies that do business with Israel, leading to eventual exit.
In a nightmare scenario, this would become a stampede.
As Orange’s Richard said in that same Cairo interview, “If you take the [$6.3 million in annual royalties from Israel] and, on the other side, the time that we spend to explain this, and the consequences that we have to manage, believe me, it’s a very bad deal.”
Orange is not the only European company feeling the heat. Pressured by BDS activists, the United Nations and European Union guidelines (including the proposed labeling of products from West Bank settlements), the British-Dutch multinational Unilever in 2013 moved a snack food plant from Ariel (an Israeli settlement city east of the 1967 border) to Tsfat, within the 1967 borders.
Similarly, a boycott campaign targeting Veolia bore fruit this year when the French energy services and transportation company reduced its financial stake in Israel by more than $200 million, saying in a statement it was “stepping back from Israel as a marketplace.”
Veolia had played a role in the construction of the Jerusalem light rail and some wastewater treatment systems. That triggered years of boycotts and backlash against Veolia, with some European banks and other institutional investors divesting from the transnational company.
Though the impact on the Israeli economy overall has been minimal, observers such as Hammerman believe the Orange, Veolia and Unilever examples suggest a trend, one that if played out could strike an economic blow to Israel.
A 2013 report from Israel’s Foreign Ministry made public last month predicted that a total European Union boycott of Israeli products and an end of foreign investment in Israel could cause more than 35,000 job losses and cost the Israeli economy $10 billion a year.
What about the United States? For years, BDS activists have maintained campaigns against several U.S.-based companies — Caterpillar, Motorola and Hewlett-Packard, most prominently — for what they call “profiting from the occupation.”
To pressure companies to weaken ties with Israel, BDS activists have seized upon the tactic of filing resolutions with the SEC to place proxy ballots before shareholders, something any shareholder has the right to do. Often activist groups purchase shares and do the filing themselves.
Anti-Israel shareholder proxy resolutions invariably invoke human rights as a core issue. According to Hammerman, Israel was targeted more than any other country in human rights–related proxy votes last year. Activists filed resolutions on behalf of shareholders of Boeing, Cisco, Corning, Intel, General Electric and others.
To avoid the appearance of singling out Israel, these resolutions often name multiple countries, but the identities of the individuals or groups that file some of them prove revealing. Jewish Voice for Peace, an Oakland-based group that advocates BDS, along with groups representing various orders of Catholic nuns, co-signed a 2015 resolution with Caterpillar, one of many in recent years targeting the heavy machinery manufacturer.
The resolution opens with “Whereas Caterpillar, a global corporation, faces increasingly complex problems as the international social and cultural context changes” and goes on to note that “Caterpillar itself does business in countries with human rights challenges including China, Colombia, Myanmar (Burma), Syria, and Israel and the occupied Palestinian territories.”
It urges Caterpillar to amend its human rights policies to align with what it calls “U.N. Human Rights norms.”
A resolution presented to Microsoft shareholders last year opens with “Whereas, Microsoft, a global corporation, faces increasingly complex problems as the international, social and cultural context within which Microsoft operates changes” and goes on to say “Microsoft does business in countries with human rights challenges including China, Colombia, Philippines, Russia, and Israel and the Occupied Palestinian Territories.”
The boilerplate wording of these two resolutions — and others, as well — suggests the same activists wrote them.
“What companies hate are these resolutions on proxy ballots,” Hammerman said. “They don’t want a discussion debating the conflict in the Middle East. SRI investors file resolutions that ask companies to end their ties with Israel, or they seek to increase operating hurdles, to force the companies to accept unfair scrutiny or oversight unlike any other country.”
Such resolutions are advisory and nonbinding. Even if they receive well over 50 percent of votes, boards of directors are under no obligation to act.
In the case of the many Caterpillar resolutions, vote tallies never came close to 50 percent, but they did climb, and in some cases significantly. According to Proxy Monitor, Caterpillar shareholders gave anti-Israel proxies 3 percent of the vote in 2004, and 21 percent in 2014.
That led the company to commit to drafting a revised human rights policy, not yet unveiled. These pressure tactics worry Israel supporters in part because the charges against Caterpillar are demonstrably false.
BDS activists claim Caterpillar sells massive armor-plated D9 tractors to the Israeli military, which then uses them to demolish Palestinian homes in the West Bank. They also point to the case of activist Rachel Corrie, who was killed by a D9 bulldozer in Gaza in 2003 while protesting the demolition of Palestinian homes.
According to company spokesman Jim Dugan, Caterpillar sells no D9 bulldozers to Israel. Rather it sells them to the U.S. Defense Department as part of the Foreign Military Sales program, in which more than 150 countries participate. Israel obtains its machinery from the U.S. government, and Israel is solely responsible for installing armor and bullet-resistant glass.
Moreover, U.S. law forbids companies such as Caterpillar from participating in boycotts not sanctioned by the U.S. government. The company couldn’t keep its equipment from Israel even if it wanted to.
Caterpillar’s case was persuasive enough to prompt a judge to dismiss the Corrie family’s lawsuit against the company, to inspire the United Methodist Church to drop a push for Caterpillar divestment in 2012 and to cause the Arab League to dismiss consideration of a boycott.
None of that matters to BDS activists, who continue to press for boycotts of and divestment from Caterpillar.
The website for Global Exchange, a left-wing S.F.-based human rights nonprofit, devotes a web page to the campaign against Caterpillar, claiming the company sells bulldozers to Israel as part of “the Israeli army’s doctrine of urban warfare.” It also links to several divestment efforts against the company.
Roz Rothstein, founder of the pro-Israel nonprofit StandWithUs, attended Caterpillar shareholder meetings in 2004 and 2006. She knew BDS activists would be there to present resolutions, and she wanted to provide balance, though she recalls her side was “outnumbered 10 to 1.”
Noisy protests outside Caterpillar’s 2004 annual meeting included one demonstrator wearing a cardboard box made to look like a bulldozer. Rachel Corrie’s parents attended the 2006 meeting to speak out against Israel. When the time came for shareholders to address the company’s board, many lined up and, according to Rothstein,
“talked about how Israel kills children, and Caterpillar should reevaluate whether to sell bulldozers to Israel.”
She felt the Caterpillar directors “were probably in shock the first time, but not the second time. They were trying to get the meeting moving in a different direction. After the second time this happened, Caterpillar instituted [changes] that gave them better control of their meetings.”
Ethan Felson, senior vice president and general counsel of the New York–based Jewish Council for Public Affairs, follows BDS activism closely, paying particular attention to the boardroom strategies.
He cites the Caterpillar case as an example of BDS-driven symbolism, one that so far has not paid dividends for BDS proponents.
“The idea isn’t necessarily to impact the corporation or its bottom line,” Felson said. “Oftentimes it is to invent a story with an emotional appeal, to tell that story in as many venues as possible, and without a strong connection to truth. Caterpillar isn’t quivering. They know if they start making business decisions based on small groups of activists they’d never get anything done.”
Daniel Frankenstein, a principal with Janvest Capital Partners, a Bay Area–based venture firm specializing in Israel’s tech sector, echoes the sentiment. He loves Israel and loathes the BDS movement, but does not believe BDS has influenced hard-nosed business leaders or boards of directors.
He said activist shareholders speaking up or protesting at annual meetings is nothing new. Speakers representing a host of social and environmental issues routinely use such a meeting to get up on their soapbox.
“Most have little to no effect on the business because they don’t own enough shares,” Frankenstein noted. “It’s an inconvenient fact for most shareholder activists that their voice is only proportional to their representation. If you own a fraction of a percent of a company, your voice is only that fraction. This is why annual meetings are not a place where you see a lot of change in policy.”
Moreover, BDS corporate activism occasionally backfires.
In 2011, Jewish Voice for Peace launched a campaign to get the $866 billion pension fund giant, TIAA-CREF, to divest from Caterpillar, Veolia and other companies deemed to have profited from Israel’s presence in the West Bank.
Avi Posnick, the East Coast regional director of StandWithUs, followed the campaign, attended annual meetings and met with company executives in an attempt to educate TIAA-CREF about BDS.
“We helped them understand what BDS was about,” he recalled. “We helped them see how many of these targeted companies were not committing human rights abuses. It also helped that TIAA-CREF has its own system to evaluate companies based on human rights and environmental factors.”
In July 2013, yet another divestment proposal submitted by a coalition of BDS groups came before the TIAA-CREF board, cloaked as usual in the language of human rights.
“The human rights angle is one of the main ways they get people to follow [BDS],” Posnick said. “Who doesn’t care about human rights? Very often they equate what they’re doing to apartheid South Africa and genocides all over the world. All the more reason it was important for us to be there to make sure people in the audience understood how this was a distorted view of what’s going on” vis-à-vis Israel.
Posnick’s lobbying paid off. TIAA-CREF asked the Securities and Exchange Commission, which has some jurisdiction over proxy ballot regulations, for permission to omit the divestment proposal. The SEC signed off, and the fund continues to invest in Caterpillar.
Posnick not only claims this as a win for the pro-Israel side, but he also downplays the economic impact of BDS, viewing companies that buckle under pressure as outliers.
Despite the Orange, Veolia and Unilever examples, Posnick says he has not seen “any economic impact BDS has had on Israel to date,” he said. “Most companies [BDS activists] target say, ‘We don’t care; we’re still doing business with Israel.”
If, as Frankenstein asserts, small investors owning few shares have minimal influence on corporate policy, what happens when the quantity of shares goes up? What happens when investment firms care as much about social impact as they do about making a profit?
Welcome to realm of SRI, or socially responsible investing, a niche in the investment universe that has grown dramatically since the 1980s.
According to 2014 report from the Forum for Sustainable and Responsible Investment, U.S.-domiciled assets under management using SRI strategies grew from $3.74 trillion in 2012 to $6.57 trillion in 2014, a 76 percent increase.
That same study showed that of environmental, social and governance factors (also known as ESG), social issues such as human rights in conflict zones were ranked most important by a majority of SRI investors.
Those investors care about climate change, which is why they won’t put a penny into fossil fuel stocks. Neither will they invest in tobacco companies, firearms manufacturers or defense contractors. And they care about human rights, which is why SRI investors look at labor and supply-chain issues.
It is also why they support boycotting rogue nations such as Myanmar and Sudan. Might Israel someday find itself universally blacklisted?
It could if more SRI investors ultimately buy into the BDS human rights arguments and draw on certain U.N. documents, which influence the SRI ecosystem like the moon on the tides. SRI investors and financial advisers are not necessarily anti-Israel. But BDS activists have positioned themselves as claiming the moral high ground, expecting the SRI world to follow along.
Sonia Kowal is president/director of socially responsible investing at Zevin Asset Management, a Boston-based SRI investment firm that considers ESG (environment, social, governance) factors in investment decisions.
When it comes to the Israeli-Palestinian conflict, Kowal says her firm adheres to the U.N.’s Guiding Principles on Business and Human Rights, a set of standards approved by the U.N. Human Rights Council in 2011. She calls it “a good framework for evaluating how a company is behaving.”
A clause in the principles mandates that businesses “avoid causing or contributing to adverse human rights impacts through their own activities.” That calculus led Kowal to conclude that Caterpillar has exhibited a “systematic disregard for human rights.” The company is excluded from the Zevin portfolio.
In an email to J., Kowal acknowledged that Caterpillar “may be selling equipment through the [U.S.] Foreign Military Sales program,” but noted “that does not absolve them of the responsibility of their representatives in Israel retrofitting the tools or the way in which the equipment is used. Ignoring the issue by sticking their head in the sand is not an excuse.”
She also told J. that Zevin does not automatically discount investing in Israeli companies or companies that operate in Israel. The guidelines her company follows apply equally around the world, she said.
The United Nations has several other documents that help guide, among other things, investment decisions, such as its Declaration on the Rights of Indigenous Peoples and its Principles for Responsible Investment.
But while these and similar documents enshrine noble concepts, they have become source material for some who condemn the Jewish state. The condemnations have rippled outward to the shores of SRI investing.
In 1981, the United Nations published a study titled “The International Status of the Palestinian People.” The document downplays millennia of Jewish connection to the Holy Land and seven times proclaims the Arabs as the “indigenous people” of the region.
In 2007, the U.N. released its Declaration on the Rights of Indigenous Peoples, which asserted that indigenous people (such as the Palestinians) “have suffered from historic injustices as a result of, inter alia, their colonization and dispossession of their lands, territories and resources” and that “military activities shall not take place in the lands or territories of indigenous peoples unless … freely agreed with by the indigenous peoples concerned.”
According to the U.N. Principles for Responsible Investment, businesses must “incorporate ESG issues” into their policies. As the rights of “indigenous” Palestinians become an increasingly prominent social issue, the 1,390 companies (worth $59 trillion) that signed on to the PRI may come to view Israel as nothing more than a hostile occupier, and respond by divesting from or boycotting companies tied to the country.
Meanwhile, the U.N.’s Guiding Principles on Business and Human Rights mandates that businesses should “seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.”
Together these documents may be interpreted in ways that hold Israel to an impossibly high standard given current realities in the West Bank. Supporters of Israel have long argued that Israel’s presence in the West Bank is complicated, that most Israelis and Palestinians want a two-state solution, that it’s the ongoing terror infrastructure that compels Israel to sustain its vigilance and that BDS is not the way to bring the parties to a negotiated peace.
Regardless, the human rights framing of the issue compels SRI-based investors to act. And unlike symbolic divestment resolutions passed by student councils at colleges and universities, corporate divestment has consequences.
John Harrington is a pioneer in the SRI field, having begun his career in the 1970s as an anti-apartheid activist. He went on to cofound Working Assets Management Company and, later, the Napa-based Harrington Investments, which boasts more than $189 million in assets under management.
An investment adviser registered with the SEC, Harrington uses SRI and ESG screens — among other considerations — when looking at companies for investment. ESG factors, he said, “cannot be separated out from a company’s reputational risk, a company’s valuation, how people feel about a company and its products, and whether to invest in the stock or bond of a company.”
His firm has spearheaded several shareholder resolutions in recent years. One urged Monsanto to accept accountability when it came to the risks of genetically modified organisms in the food supply. Another urged Apple to establish a committee to look into the company’s labor record in China.
A 2013 resolution focused on Hewlett-Packard supplying materials to the Syrian, Chinese and Israeli governments. Israel purchased HP computers and biometric systems that Harrington’s resolution claims are used by Israel to monitor the movements of Palestinians.
In a June 2014 letter to Presbyterian Church (USA) officials, who were then preparing to divest from the company, a Hewlett-Packard executive defended his company, saying HP was “not in a position to influence the location of the [separation] barrier” between Israel and the West Bank, and that its systems were aimed “at reducing friction between Palestinians and Israeli soldiers” at checkpoints by “expediting the passage process.”
Harrington Investments’ resolution, which urged HP to establish a committee on human rights, was submitted to shareholders, but only 3 percent voted in favor. With such a low tally, it could not be reintroduced the following year.
Harrington has kept the resolution on his website, along with supporting materials written by Dalit Baum, an Israeli and strident BDS supporter who co-founded Who Profits from the Occupation. Baum supports the Palestinian right of return, which places her at the far left of the BDS movement. She speaks frequently on these topics, including a recent talk at Rossmoor in Walnut Creek.
On the Harrington Investments website, Baum says Israeli prisons are “renowned for torture [of Palestinians] and the illegal detention of [Palestinian] children” and upholds Richard Falk’s 2012 report to the U.N. Human Rights Council that focused on Israel’s treatment of Palestinian prisoners. She offers this support even though Falk, who served a six-year term as a U.N. special rapporteur on human rights in the Palestinian territories, has been excoriated for anti-Semitic statements and his positions on Israel and the Sept. 11 attacks.
Harrington dismisses criticism of Baum as going after the messenger rather than the message.
Despite working with Baum, who in the past had aligned herself with the radical Students for Justice in Palestine, Harrington says he is not anti-Israel. He said he would consider buying stock in Israeli companies and he supports a two-state solution.
And rather than stress divestment, he believes in buying stock in companies such as Hewlett-Packard in order to have a measure of influence on the company.
“We’re not blindly stuck on Israeli military policy or political philosophy,” he said, “but we do believe Israel has a right to exist and the Palestinians have a right to exist in some sort of sovereign framework.”
Still, the SRI scales appear to have tipped against Israel.
EIRIS, a respected U.K.-based SRI analysis firm, has a Conflict Risk Network, which creates reports for investors and financial service providers. It previously compiled reports on the conflict zones of Myanmar and Sudan.
In July it published “Investment in Occupied Lands: Crimea and Palestine,” a database listing all publicly traded companies in what it calls “Occupied Palestine” (Gaza, the West Bank and East Jerusalem), and whether those companies are located in Jewish settlements or what it calls “non-settlements,” that is, autonomous Palestinian areas.
Citing international law, EIRIS considers any occupied territory a “conflict zone,” thus the West Bank is in the same category as Sudan, a country that doesn’t exactly top the list of attractive investment opportunities.
The Palestine report makes no distinctions between West Bank areas under Israeli military control and those under control of the Palestinian Authority, citing a 2004 International Court of Justice declaration that “all of the West Bank is considered to be occupied.”
Thus the database points out that Yum! Brands operates a Pizza Hut in Ma’ale Adumim. The Jewish city of 40,000 is geographically in the West Bank, but it’s just outside Jerusalem and is widely presumed to be incorporated into Israel proper under the terms of a final peace agreement.
The EIRIS website says the report gives businesses, civil society, media and the investor community “access to objective and comprehensive information about corporate operations in two illegally-administered territories” and “empowers investors [with knowledge] about investment in occupied territories.”
Hammerman feels the Jewish community and pro-Israel activists has been asleep at the switch when it comes to fighting BDS in the boardroom. She urges community leaders to pay greater attention to the matter, but she’s not waiting around for it. “Without a platform to represent investment interests in Israel, there’s nothing we can do,” she said. “We can’t fix this with philanthropy or with political lobbying. We can only address this in the corporate world if we engage as investors.”
As part of her creed of positive impact investing, Hammerman is establishing the Jewish values-based JLens Advocacy Fund, a mutual fund that would buy into S&P 500 companies — Caterpillar and Hewlett-Packards among them. Thus, a strong pro-Israel voice will be brought into the conversation.
She said a fund administrator has been chosen and talks are underway with Jewish institutions and philanthropists to seed the fund. Hammerman hopes to solicit $100 million to get the JLens Advocacy Fund off the ground by the end of the year.
“We have a portfolio focused on owning companies and engaging with them to repair the world,” Hammerman said. “It’s a platform for advocacy.”
JCPA’s Felson applauded her move, noting, “You need to have something that is going to enable the pro-Israel community to have a deeper voice in these shareholder resolution debates. That doesn’t come from the NGO side of the ledger.”
Frankenstein said BDS is “completely a nonfactor” in the venture capital and startup world he inhabits. He said his colleagues in North America, China, Europe, India and Russia are “looking for great products and they don’t care where your R&D [research and development] center is. They want to do business.”
He says Israel hotels are filled with Chinese and Indian businesspeople these days, an indicator of increased business ties.
“They look at the BDS materials that single out Israel and they can’t stop laughing,” he added. “They see the absurd nature of calling out Israel, a tiny but vibrant democracy that has its challenges, but is working on those challenges.”
Posnick, the StandWithUs director carefully following BDS, isn’t taking any chances. He and his organization will keep fighting back against BDS inroads in the corporate world.
In addition to believing he is on the morally correct side of the debate, he thinks companies will not abandon Israel as long as the startup nation remains an investor’s promised land.
“I haven’t seen too many companies pulling out of Israel or stopping business with Israel because of BDS,” Posnick said. “People at Caterpillar are smart. They want to have a good return on investment for their clients and don’t want to get involved with Middle East politics. So when you have groups saying Israel is a good investment and BDS is wrong, it helps these companies say ‘We’re going to stay.’ ”
(This story from J., the Jewish news weekly of Northern California, is part of its multi-part series examining the boycott, divestment and sanctions movement in California: how it operates, how it is being opposed and what it represents.)