Paulist Center Endowment: Letter to Cummins, Inc.October 11, 2007 Mr. Theodore M. (Tim) Solso Dear Mr. Solso, Boston Common Asset Management, LLC (Boston Common) is an asset manager serving investors concerned about the social impact as well as financial return of their investments. We write today on behalf of the undersigned shareowners, which own in total 215,485 shares of Cummins, Inc. common stock. Of those shares, Boston Common’s clients own 18,765 shares of Cummins, Inc. stock. As shareowners in Cummins, we have become increasingly concerned by the escalating labor union conflict between the International Brotherhood of Teamsters (Teamsters) and Cummins’s distribution segment companies. We believe Cummins has a responsibility to address the situation. We consider the persistent anti-union allegations against Cummins’s distribution segment companies to be a threat to Cummins’s reputation and shareowner value. Some of the undersigned shareowners participated in the September 5, 2007 Cummins conference call sponsored by the Social Investment Research Analysts Network (SIRAN) but believe Cummins responses on that call to these allegations to be unsatisfactory. A new report by Professor Lance Compa details numerous instances of possible violations of labor rights by Cummins companies. In Every Abuse 1 Prof. Compa claims: “Disregarding international human rights standards, Cummins has undertaken what appears to be a multi-year, multi-faceted, coordinated plan to eliminate collective bargaining in more than twenty regional distribution and service locations over the past 15 years.” His key charges include the following: “Cummins engages in the following anti-union, anti-worker-rights activity: Furthermore, as you know, the National Labor Relations Board (NLRB) has issued numerous complaints actions against Cummins’s distribution companies. For example, regarding Cummins Northwest, the NLRB has issued complaints in several Unfair Labor Practice cases filed by Cummins Northwest unions in the 2006-2007 period for a variety of serious infractions of U.S. labor law by the Company and its representatives. A new case was filed on August 6, 2007 by Teamsters Local 690, and is under investigation. The charge is under NLRA section 8(a)(5) Refusal to Bargain (Initial Contract). This is a new contract negotiation only insofar as Cummins representatives voided the former contract when Cummins Northwest Inc. was reincorporated in 2006 as Cummins Northwest LLC, as described at length in Prof. Compa’s report cited above. The numerous complaints issued by the NLRB against Cummins Northwest, a joint venture of Cummins Inc., for the period from November 29, 2006 to May 31, 2007 are summarized in an attachment to this letter. Irrespective of the legal outcome, the problems with Cummins’s distribution segment continue to escalate and will harm Cummins’s reputation and long term shareholder value. As shareowners we believe that Cummins’s actions are inconsistent with the good corporate workplace human rights policies otherwise endorsed or adopted by Cummins. Cummins has a code of conduct, applicable to all its subsidiaries and joint ventures, requiring respect for the right of employees to freely associate in labor unions for the purpose of collective bargaining. While some of Cummins’s actions may be legal under U.S. law, they clearly appear incompatible with the company’s own internal codes of conduct and unnecessarily tarnish the good image and reputation Cummins otherwise enjoys internationally. Human Rights Watch report on Wal-Mart’s labor rights practices, Discounting Rights: Wal-Mart’s Violation of US Workers’ Right to Freedom of Association, concluded that many of its anti-union tactics are lawful in the United States, though they combine to undermine workers’ rights. By breaking existing collective bargaining agreements through corporate reorganizations, while facility management stays the same, it certainly appears that Cummins’s intention is to break the union representation of its workers. We are also concerned by reports of safety problems due to inexperienced replacement workers at some Cummins facilities. In addition, we are concerned that Cummins’s actions may not comply with international standards for workplace human rights codified in the United Nations Universal Declaration of Human Rights, United Nations Global Compact (Principle 3), Conventions of the International Labour Organization (ILO), and the OECD Guidelines for Multinational Enterprises (Employment and Industrial Relations Chapters). The most basic workplace human right is that all workers have the right to form and join trade unions for the purpose of collective bargaining, in order to protect and further their interests, without interference in regards to these activities or the exercise of the functions connected to trade union activity (ILO Conventions 87 and 98). Neutrality is explicit in ILO Convention 98. A key principle of United Nations Universal Declaration of Human Rights is the right to form and join a trade union for the protection of an individual’s interests (Article 23-4). We believe that it would be in the best interests of Cummins to uphold these conventions and other international standards for workplace human rights, in addition to respecting all local laws with regard to freedom of association. We recommend that Cummins take the following steps:
As a result of the escalating situation and our ongoing concerns, we request a meeting and dialogue with Cummins to discuss the following:
Please respond to our shareowner concerns by October 30, 2007. Please contact Steven Heim, Boston Common Asset Management, 84 State Street, Suite 1000, Boston, MA 02109, by telephone: 617-720-5557 or 802-223-4627, fax: 617-720-5665, or email: sheim@bostoncommonasset.com. Sincerely, Steven Heim Nevin Dulabaum Susan Vickers, RSM Endowment Investment Committee of the Carole Lombard, SSJ Adam M. Kanzer Sr. Kathleen Coll Stephen Abrecht Jack Ucciferri Valerie Heinonen, o.s.u. cc: Dean Cantrell, Director Investor Relations 1 Lance Compa, Every Abuse - Violations of International Labor Standards by Cummins: The Manipulation of Corporate Governance to De-Unionize its American Workforce, July 2007 |