Freeport McMoran pushed to improve human-rights policy

Shareholder Activism - New York City funds push Freeport McMoran to improve human-rights policy

AFX Global Ethics Monitor - Joanna Sabatini

February 14, 2003

New York (AFX-GEM) - New York City's public pension funds have filed a shareholder resolution at Freeport McMoran Corp Copper & Gold Inc which asks the US mining company to improve its international social and human-rights policy.

In particular, the resolution seeks more information about Freeport's relationship with the Indonesian army in Papua, where the company runs one of the world's largest copper and gold mines.

New Orleans-based Freeport is trying to omit the resolution from its proxy statement. The company said in a letter to the US Securities and Exchange Commission (SEC) that it has already supplied much of the sought-after information in previously published economic, social and human rights reports.

The New York City comptroller, who oversees the New York City Employees' Retirement System (NYCERS) and New York City Teachers' Retirement System (NYCTRS), which are filing the resolution, received documents from Freeport in January in response to the resolution.

"The information Freeport has sent us is not satisfactory," Patrick Doherty, administration manager in the bureau of asset management at the New York City Office of the Comptroller, told AFX Global Ethics Monitor late Thursday.

The comptroller will ask the SEC next week to keep the resolution on Freeport's proxy to be voted on during the company's annual shareholder meeting this spring, Doherty said.

The resolution seeks particular policy information about Freeport's "extensive operations" in West Papau in Indonesia. Doherty said shareholders have a right to know more about what US companies are doing overseas.

"We believe that the transnational corporations operating in countries with repressive governments, ethnic conflict, weak rule of law, endemic corruption, or poor labor and environmental standards face serious risks to their reputation and share value if they are seen to be responsible for, or complicit in, human-rights violations," the resolution reads.

Papua is Indonesia's largest and most resource-rich province - a feature that has attracted other western companies to the strife-torn region. Freeport's subsidiary, P.T. Freeport Indonesia, runs one of the world's largest copper and gold mines known as the Grasberg mine in Papua. A three-decade-old old conflict between Papuan rebels seeking independence and Indonesian security forces has claimed thousands, possibly even tens of thousands, of lives.

"There have been numerous reports of human-rights abuses against the indigenous population by the Indonesian military in connection with security operations conducted on behalf of Freeport McMoran," the resolution reads.

"It has been reported that Freeport McMoran has employed security personnel who have been responsible for human rights violations." Further, the resolution cites the killing last August of two American teachers employed by Freeport on a road leading to the Papua mine. An Indonesian colleague was also killed. This incident has drawn investigations and scrutiny from the US FBI.

US news reports a few weeks ago said the FBI has linked the murder of the teachers to Indonesian soldiers.

Some human-rights experts have speculated that the killings were a warning to Freeport not to reduce spending on "security" or bribes to the Indonesian military. But that theory has not yet been proven, the experts stressed.

The resolution asks Freeport to include information about the human-rights impacts of the company's on-going security relationship with the Indonesian military in a Social and Human Rights Policy by November 1.

In its letter to the SEC dated January 3, Freeport said it provides such information in its annual Economic, Social and Environmental report. Freeport's spokesman William Collier told AFX Global Ethics Monitor Friday that Freeport did provide additional unpublished information to the New York comptroller regarding the Indonesian military.

"We have provided additional information to the filers about expenditures for security on a confidential basis," Collier said. Collier said this information will be included in a new section of the company's annual sustainable report and a filing with the SEC, both due in March.

Freeport's most recent report, "2001 Working Toward Sustainable Development," did not include information about money given to the Indonesian army, Collier said.

In its letter to the SEC, Freeport also responds to other resolution requests. The resolution, for instance, asks Freeport to amend its social and human-rights policy to protect employees who report human-rights violations.

In response, Freeport quotes from its human-rights policy to support its claim that it has already complied with the resolution's request. "The Policy states: 'The company and its affiliates will...protect all employees who report suspected human rights violations," Freeport writes.

The resolution also asks Freeport to set up an "independent monitoring of its compliance to its social and human-rights policy."

Freeport responded that under its current policy, "all staff, security and community development employees are annually required to fill out and submit a Human Rights Assurance Letter stating they understand the Policy and certifying that they have neither taken part in any activities that would violate human rights nor have they witnessed any such activities."

Freeport said its Human Rights Corporate Compliance Officer reports the results of this certification process to the Public Policy Committee of Freeport's board of directors.