Proposed Dow Chemical Shareholder Resolutions Highlight Investment Problems in India for Dow

Dow Chemical Bhopal
Photo: courtesy (c) Greenpeace/ Raghu Rai

Shareholder Resolutions Proposed by Calvert Investments & Others

Calvert Investments have attempted to place Bhopal-related resolutions upon Dow’s proxy materials for the last two AGMs but Dow has chosen to exclude both resolutions. Arguments raised in support of the resolutions suggest that, under Mr Liveris, Dow has faced significant financial, operational and reputational damage thanks to its inability, or refusal, to address Bhopal Disaster legacy issues,  and that none of this information has been shared with the wider community of investors and stockholders in the company. To summarise:

1. Investors have been flagging up omissions and misrepresentations within Dow submissions to the US Securities and Exchange Commission (SEC) on the issue of Bhopal for at least ten years. This has resulted in two direct requests to the SEC for investigations, and a formal complaint, none of which – as far as we are aware – have been acted upon.

2. The first request, in 2004, focused upon Dow management’s denial of remaining legal liabilities in Bhopal. See: Trillium Asset Management report. The investors’ contentions of 2004 – that Dow was misleading shareholders – are amply borne out in the fact that Dow is today a named party in civil, criminal, and environmental litigation in India: Dow Chemical Bhopal-related legal Liabilities

3. The second request, in 2007, highlighted that internal Dow communications suggested Bhopal to be a material impediment upon Dow’s investment in India and this fact was not being disclosed to investors by Dow. See: Letter from Attorney on Behalf: co-filers New York City Pension Fund & Amnesty International. The request drew a response from Dow: Reply from Dow Chemical and a counter-response from Amnesty International: Amnesty International reply . The concerns raised in 2007 – that Dow faced impediments to investing in a strategically important market due to Bhopal – are again borne out in failed recent investments and an abandoned plan to invest $5 billion by 2015.

4. An investors’ complaint, in 2008, pointed out that pending liability cases (criminal and environmental) could be impeding Dow investments in India, and that Dow had not disclosed this to investors. See Dow reply to complaint against the company with the SEC . The complaint is vindicated by materials submitted to the SEC in early 2014 by resolution co-filers, demonstrating that investment failures have been clearly associated with pending liability cases, not least the criminal case requiring Dow Chemical to attend court in Bhopal.

5. Submissions to the SEC by shareholders in March 2014 amply demonstrated substantial material omissions in Dow’s assertion of no financial, operational or reputational impact due to Bhopal. Shareholders have provided irrefutable proof that three significant business deals and a broader $5 billion investment plan have been impeded in India due to Bhopal. They also demonstrated that the reputational impact upon Dow has been global and has had increasing effects, leading to a major fall in brand rating and putting Dow in the top 20 corporations targeted by activists globally. Co-filers issued press statements about the exclusion of the resolution before Dow’s 2014 AGM: Press Statement, Calvert Investments & Dow Blocks Amnesty International Calls To Face Up to the Toxic Legacy of Bhopal & Dow Shields Shareholders From Toxic Truth in Bhopal

The latest resolution filed by Calvert, in November 2014, focused on the role of Liveris in presiding over the negative outcome’s of Dow’s policy concerning Bhopal. The resolution was only able to tell a small part of the story and Securities & Exchange Commission filings related to the campaign can be found by searching for ‘Dow’ here: SEC Filings


“Beyond Belief”

Evidence suggest that, under Liveris, Dow has misrepresented itself in a variety of ways in order to prevent historical Bhopal-derived legal liabilities – criminal, civil and environmental – attaching to it.  The following points are supported by a considerable amount of documentation:

a. From originally representing the 2001 takeover of Union Carbide as a classic merger – involving the total integration of Carbide divisions into Dow departments – Dow now claims, in public and in the courts, that the two businesses are entirely independent and separate. Yet at the time of the merger, current CEO Liveris headed Dow’s Specialty Chemicals Dept, into which 40% of existing Carbide businesses were absorbed – by far the largest single swallow of Carbide across the entire company.

In 2001: Andrew Liveris is very excited about strengthening his position considerably once the Union Carbide acquisition is complete. The Carbide acquisition is ‘front and centre in my mind’, he says. Liveris has big plans for the merged business. ‘Putting together Dow’s performance chemicals business and Carbide’s speciality chemicals business was very attractive [once the merger was first mooted],’ he says.
He cites emulsion polymers as one area of synergies. Here Carbide is strong in emulsions for household applications and Dow in emulsions for latexes. Combining the portfolios in this way will take Dow’s speciality chemicals sales up to $6bn. This will give his business ‘critical mass and strong integration into raw materials’. Liveris says that this will be complemented by ‘back integration into Dow’s manufacturing, research and development functions’.

b. An antitrust lawsuit in Connecticut (2002-2008) reveals that, following the Feb 2001 merger, Dow sought to smuggle contraband Union Carbide goods into India under its own label to avoid possible criminal sanction. See Times of India. Though Liveris was not CEO at the time, his role in Dow was considered sufficiently influential for the courts to allow his subpoena to go forward. At this decision, Dow promptly settled out of court (after fighting for almost six years of hearings).

c. On being challenged in Indian courts, Dow legally represented (2011) that any Union Carbide goods are “bought in fair-value transactions” outside of India and are therefore owned by other Dow subsidiaries before entering the country. Yet SEC submissions reveal that, under Liveris and at the time the claim was being made, “effective controls were not maintained to ensure the accuracy of the prices used to record related-company sales”, meaning that any claim concerning ‘fair value transactions’ is effectively unverifiable. Some 97% of Union Carbide’s total business sales – approx. $4-5 billion – are direct to Dow Chemical, according to SEC filings.

d. Under Liveris Dow represents to Indian courts that Union Carbide is a business largely operating out of Texas. But filings with the New York Comptroller – under which jurisdiction Carbide has been registered since the 1920’s – give Carbide’s address as Midland, Michigan. Union Carbide tax filings in Texas reveal that from 2002, all UCC directors have been simultaneously Dow managers, including the CEO, and most have been based 1000 miles away in Michigan.

e. The Union Carbide secretary signing court filings in India to this day is one John MacDonald, who was originally summoned to India’s courts for criminal hearings when holding the same position in 1987 (he has never attended). MacDonald had been listed in Texan tax filings as Carbide’s Secretary, until at least the early part of 2014, with his address given as Carbide’s ex-headquarters – 39 Old Ridgebury Road- and Dow was still listing this address as one of its offices for Carbide. However, neither Carbide nor Dow have had any kind of presence at this address for years, as a phone call (to what is now the Matrix Business Center) will confirm.

f. Liveris himself has attempted to intervene directly in lawful processes in India by directing Indian officials to bring extra-judicial influence to bear on court proceedings involving Dow and to pursue a government-wide policy of not pursuing liability against Dow for Bhopal. See pages 61-64 of the report by Amnesty International entitled “Injustice Incorporated” CLICK HERE

In 2012: Dow Chemical Co. Chief Executive Officer Andrew Liveris said opposition to his company’s sponsorship of the 2012 London Olympics was “beyond belief” because Dow wasn’t involved with the 1984 toxic gas leak in Bhopal that killed thousands of people. “It was not us,” Liveris said in a Feb. 28 interview at Bloomberg’s headquarters in New York. “The fact that you can speak back with science and fact rather than emotion and hysteria is your only defense.”

Girl with candle Bhopal

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