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Bringing Faith To Bear on Firms
For One Nun, the Target Is Executive Pay

By Tomoeh Murakami Tse
Washington Post Staff Writer
Saturday, June 2, 2007

NEW YORK It isn't easy being the conscience for corporate America.

From her apartment in a public housing complex on the eastern edge of Manhattan, Sister Valerie Heinonen, a Catholic nun of the Ursuline Sisters of Tildonk, combs through corporate filings, shoots off carefully worded letters to executives, and holds conference calls with board secretaries and lawyers. Shelf after shelf of annual reports and proxy statements from Fortune 500 companies fill her otherwise sparse living room.

For 30 years, Heinonen has been a familiar sight at shareholder meetings across the country, pressing financial services firms to support affordable housing or defense contractors to limit weapons sales. Now, the 66-year-old activist is seeking social justice through one of the hot-button issues of this spring's annual shareholder meetings: executive compensation.

"There just has been so much attention drawn to the very high amount of executive compensation, the huge pension awards, stock options, everything," said Heinonen, who is a consultant on corporate social responsibility to religious shareholders. "I think we have come to realize that the corporate governance issues are kind of a framework for social and environmental issues that we're concerned about."

Heinonen is not alone. For decades, investment funds of religious orders have taken on "socially responsible" issues, sponsoring shareholder resolutions calling on companies to protect the environment and human rights. But in recent years, more faith-based institutions have joined with pension funds, unions and other traditional shareholder activist groups to seek greater say on the structure of corporate boards, executive pay packages and other corporate governance matters.

So far this shareholder season, the Benedictine Sisters at a Texas monastery pushed for a resolution to give shareholders an advisory vote on executive pay at Coca-Cola. The Marianist Province of the United States, a Catholic order, took a similar proposal to Capital One Financial. The measures received 30 percent and 37 percent respectively.

One of Heinonen's clients, Mercy Investment Program, also submitted the "say-on-pay" proposal at American International Group but withdrew it after the insurance company said it would join a group of shareholders and executives studying the issue.

Other resolutions related to corporate governance that Heinonen has filed or co-filed this year on behalf of her clients include separating of the roles of chief executive and chairman at Caterpillar and increasing reporting and oversight on political contributions at Aetna, WellPoint and Corrections Corp. of America. Aetna and WellPoint agreed to the proposal before their annual meetings.

Heinonen stepped into the world of shareholder activism by chance. It was 1976 and she was a Catholic high school math teacher living on the grounds of a parish church. When a posting for a job at the Interfaith Center on Corporate Responsibility came across her desk, she applied and got the position at the newly formed coalition for religious institutional shareholders.

Her firm but patient schoolteacher temperament, spirit of social service and academic background -- she has an undergraduate degree in business administration and a master's degree in education -- proved to be a good fit. She became the coalition's point person on issues including militarism, global finance and community economic development, and coordinated efforts in those areas for the organization's members.

After 20 years at ICCR, Heinonen left to work for a Manhattan family shelter but returned in 2000 to serve as interim director. In recent years, she has been a consultant on corporate responsibility for Mercy Investment Program, a pooled investment program for the Sisters of Mercy and three other funds of religious orders, including her own, with combined assets of $650 million.

Executives who have faced Heinonen describe her as graceful, respectful, fearless and relentless. They also say her straightforward manner has earned her their trust and makes her an effective negotiator.

"She has shared her concerns with us directly, not by taking them somewhere else and trying to make an embarrassing situation," said Gwendolyn King, a board member at Lockheed Martin at Bethesda. "If she has a disagreement with me, she'll put her velvet elbow in my eye, and she'll still be a friend."

After Lockheed's shareholder meeting in April, King recalled that chief executive Robert J. Stevens was engrossed in a conversation with Heinonen.

"She was making it very clear: 'Okay, I agree with you on that one. But I still want to talk to you about this one,' " King said. "He went over there, and he was taking notes."

Last year, Heinonen teamed up with community groups to file a shareholder resolution at Synagro Technologies of Houston, the parent company of a sewage plant in the Bronx that had long been the target of some residents' ire for its odor. The proposal, sponsored by the Mercy Investment Program, called on the company to report "at reasonable cost and omitting proprietary information, on environmental, health and safety impacts" of the New York Organic Fertilizer Co. plant.

The response was immediate. Synagro flew in top management for a series of discussions with residents over the past year. Alvin L. Thomas II, Synagro's general counsel who attended the meetings, said Heinonen played a critical role as mediator, supporting residents while also explaining the need to run a business.

"She demands a very high level of decorum, and made sure we had a very well thought out agenda prior to the meetings," Thomas said, adding that previous meetings with the sewage plant's managers and residents would sometimes "get a little out of control."

Synagro in April was bought out by Carlyle Group, a private equity firm in the District, and is no longer subject to shareholder resolutions.

"But we told them we want to continue the process," Thomas said. "We think the relations between NYOFCo and the community have never been better."

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