Bhopal dragged from Dow's closet: major report reaches investors

Innovest Strategic Value Advisors Inc., the global leader in analyzing “non-traditional” drivers of investment risk, has delivered a searing and exacting assessment of Dow’s “under the radar” liabilities for the global investment community – with Bhopal the centre-piece of the report. “Bhopal is not just a synonym for industrial disaster, it is a leading test case for what is alleged to be wrong with the lack of corporate social accountability in the globalized economy. The actions of Union Carbide, and now Dow, are perceived worldwide as those of foreign investors more concerned about damage control than about the hundreds of thousands of human lives their operations have destroyed.”

The report forms the most withering examination yet of Dow’s double-speaking Bhopal policy. “The company has stated that it cannot take additional action on Bhopal because of “potentially significant legal risks” but yet states that it does not have any responsibility or liability,” remarks one section of the report incredulously. “This contradiction bears greater scrutiny by investors…”

Included in the report is an overview of each area of liability in Bhopal – social, economic, environmental, legal – that Dow has hauled its unwitting shareholders into, blindfolded, while Stavropoulos et al warbled their song of implausible denial. “The management’s reporting of the Bhopal case presents a number of apparent omissions, inaccuracies and contradictions that are misleading to investors,” the report goes on. Reinforcing the point while wholly missing the irony, Dow droned out this response: “The report contains no substantially new information regarding issues.” Dow’s shareholders, scales peeled from their eyes, will henceforth be the judges of that, beginning with the shareholder’s resolution on Bhopal being voted on at the Dow AGM, May 13, 2004.

You can download the entire Innovest Report here.

Dow called risky investment

Kathie Marchlewski , Midland Daily News 04/24/2004

A New-York-based investment firm has labeled The Dow Chemical Company’s stock a risky investment, based on what it says are mounting potential liabilities.

Innovest Strategic Value Advisors Inc. released a report this week that claims Dow is underreporting to the Security Exchange Commission – and to its shareholders – just how much expenses related to asbestos, Agent Orange and a variety of environmental contamination issues will affect its bottom line.

“While most chemical companies carry ample environmental liability burdens, Dow appears to have many large scale challenges converging all at once in this area.” said Innovest Senior Analyst Marc Brammer, who authored the report.

Dow officials say the 100-page document lacks objectivity and was prepared for the sake of issues advocacy.

“The report contains no substantially new information regarding issues. Contrary to Innovest’s assessment, Dow has provided information to investors regarding environmental matters in its SEC filings in compliance with legal requirements,” said Dow spokeswoman Leslie Hatfield.

The groups that requested the Innovest study – the Ecology Center, Sisters of the Holy Cross, Sisters of Mercy of the Americas, Boston Common Asset Management, Brethren Benefit Trust, Inc., and Trillium Asset Management – have publicly commented in the past that Dow has shirked some social responsibilities, particularly in Bhopal, India.

A shareholder resolution on the matter, submitted by three shareholders and detailed in the annual proxy statement, is up for a vote at the company’s annual meeting on May 13. The resolution asks that company officials be directed to address health, environmental and social concerns of the survivors of the Bhopal incident. Proponents want a report that assesses the impacts the matter could pose to the company, its reputation, its finances and expansion in Asia and elsewhere.

Dow has said repeatedly it did not inherit responsibility for the incident when it acquired Union Carbide, the Indian plant’s parent company, in 2001. Dow’s board of directors is recommending the proposal be rejected.

But Innovest, which points to Bhopal as one of the most potentially expensive liabilities, argues that shareholders and potential investors should be made aware of any known trends and or uncertainties that could have an impact on the company’s overall financial performance.

The firm claims Dow in its financial statements also minimizes the scope of other liabilities, including costs to remediate dioxin contamination in the Tittabawassee River, the Saginaw River and in Midland soils.

Dow notes an accrual of $54 million of liability for environmental remediation and investigation associated with the Midland site and lists 2003 expenditures at $8 million.

Innovest suspects the costs will be much greater based on the 1990s cleanup of the Hudson River, which required more than $500 million.

Innovest also says Dow in its statements omits mention of the potential class action lawsuit by Tittabawassee River flood plain property owners pending in Saginaw County Circuit Court.

The firm said environmental matters could black list the company for investors who value social responsibility.

But Dow Chemical President and Chief Operating Officer Andrew Liveris told Midland community and business leaders at a meeting Friday that Dow has been a “pretty good place to invest.” It has financially outperformed both the Standard & Poor’s 500 and S&P Chemicals Index for the last five years. In 2003 the stock rose by 40 percent.

Dow is named as a client of Innovest, but Hatfield said the relationship ended five years ago after the one-time purchase of a report.

©Midland Daily News 2004
“We consider the Bhopal matter closed.” Oops, who forgot to lock the door?
“We consider the Bhopal matter closed.” Oops, who forgot to lock the door?

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