Concerned Costco Shareholders Target Land Development Tactics Of Rapidly Expanding Discount Warehouse Chain
Religious Investors Urge "Yes" Vote on Resolution Focused on Problem Situations in U.S., Mexico; Destruction of Historic Site in Cuernavaca, Mexico and Concerns in U.S. Prompt Call for Formal Report
NEW YORK, N.Y.///NEWS ADVISORY///In the face of rising concerns about potential reputational and financial risks for shareholders, Christian Brothers Investment Services, Inc. (CBIS) is urging institutional investors owning shares of the 430-site discount warehouse chain Costco (Nasdaq: COST) to support a proxy resolution calling on the company to report publicly for the first time on its land procurement policies. The CBIS resolution (#3 on the Costco proxy ballot) will be voted on at the company's annual shareholder meeting in Seattle, WA on January 29, 2004.
According to the CBIS resolution, Costco's growth has sometimes come at the expense of local environments and in opposition to community desires. The Christian Brothers Investment Services resolution asks Costco's board of directors for a report on the development of a formal policy for land procurement and use that incorporates social and environmental factors, available to shareholders by July 1, 2004.
Christian Brothers Investment Services Corporate Advocacy Coordinator Julie Tanner said: "When we look at Costco's track record in cases such as the historic hotel site in Cuernavaca, Mexico - where the company was insensitive to community concerns, as well as environmental and cultural issues - it is apparent that the company needs to disclose exactly how it procures and uses sites for its expansion. To date, Costco has not provided any information regarding policies or guidelines related to the manner in which it selects its sites."
Tanner said: "Costco's controversial site procurement practice in Mexico has led to criticism from environmental groups, human rights organizations and even a United Nations human rights commission. Costco's practices also have attracted negative media coverage in the United States. For shareholders, this kind of corporate oversight has to be a major concern. We want to make sure that this situation does not blossom into a financial risk for Costco."
Tanner noted that Costco already has received letters raising concerns from shareholders (including CBIS) that collectively manage $17 billion and hold more than 978,000 shares of Costco stock. Adam Kanzer, general counsel and director of shareholder advocacy for Domini Social Investments (which helped lead attempts, along with Seattle-based Newground Investment Services, to address the land procurement issue with Costco) said: "Companies like Costco must recognize that shareholders are no longer prepared to turn a blind eye to practices that raise ethical concerns and pose genuine reputational and financial risks. This problem is not going to go away unless Costco decides to take positive actions, starting with the land procurement report called for in the CBIS resolution."For a full background document describing issues of concern for institutional investors in Costco, contact Stephanie Kendall at (703) 276-3254 or firstname.lastname@example.org.
Costco has been under scrutiny for some time due to its lack of a stated policy for land procurement and use in such locations as Cuernavaca, Mexico, Cypress, Ca. and other sites in the U.S. In Cuernavaca, local community groups alerted CBIS to a plan by Costco to build a mega-store in a location that was the site of a former hotel called Casino de la Selva. Although it had fallen into disrepair, the hotel was well known for its cultural significance - it was designed by a famous architect and featured murals by some of the country's most significant artists. The site was also home to a settlement of the indigenous Olmec people - excavations conducted before Costco's construction had uncovered a number of figurines and household objects. Despite substantial opposition from local groups and protests attended by thousands of people, the hotel was torn down and now a Costco store and parking lot stands in its place.
Costco is an international chain of membership warehouses, mainly under the "Costco Wholesale" name and many formerly operating as "Price Club" facilities. According to the company's own data, Costco currently maintains an international chain of 430 discount warehouse sites, including 318 in the United States and 23 in Mexico. The average Costco warehouse size is a substantial 136,273 square feet. Costco's five-part mission statement - "A. Obey the Law; B. Take Care of Our Customers; C. Take Care of Our Employees; D. Respect Our Suppliers; and E. Reward Our Shareholders" - makes no mention of recognizing or addressing community-based concerns.
Christian Brothers Investment Services (CBIS) manages approximately $3 billion for Catholic organizations seeking to combine faith and finance through the responsible stewardship of Catholic assets. CBIS' combination of premier institutional asset managers, diversified product offerings, and careful risk-control strategies constitutes a unique investment approach for Catholic institutions and their fiduciaries. CBIS strives to integrate faith-based values into the investment process through a disciplined approach to socially responsible investing that includes principled purchasing (stock screens), active ownership strategies (proxy voting, dialogues, and shareholder resolutions) and community investment. The firm contributes a portion of all profits to support the Church's educational and social ministry.CONTACT: Stephanie Kendall, for CBIS, at (703) 276-3254 or email@example.com.
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