SiliconBeat

One of the three proxy advisory services recommended today that Cisco System stock owners vote in favor of a shareholder proposal that the company’s board of directors opposes.

The proposal, put forward by Boston Common Asset Management, requests that “the board publish a report to shareholders, within six  months, providing a summarized listing and assessment of concrete steps the company could reasonably take to reduce the likelihood  that its business practices might enable or encourage the violation of human rights, including freedom of expression and privacy,  or otherwise encourage or enable fragmentation of the (i)nternet,” according to a summary prepared by PROXY Governance of the proposal, which was published in Cisco’s proxy released last month in advance of its annual shareholder meeting to be held Nov. 13.

The proponent is concerned that the company’s products maybe used by foreign  governments in such a way as to censor Internet use by their citizens. Cisco was one of several  Internet companies called to testify in February 2006 before the Committee on International Relations of the U.S. House of Representatives  about alleged complicity in human rights
violations in China.”

Cisco’s board says that the company has already “implemented policies and practices relating to human rights which are publicly available to shareholders, and are continually in the process of further developing and implementing such measures,” so that the generation of another report is “unnecessary”.

In its analysis supporting its recommendation to support the shareholder proposal, PROXY Governance frames the issue as a liability issue:

“Our general position on human rights-related resolutions is that  a company should provide shareholders with reasonable assurance that it has appropriate policies and management practices in  place to safeguard long-term shareholder value from potentially material risks, including reputational or legal liabilities, related  to the social impact of its operations.” The firm’s analysis goes on to caution that, “considering the  level of legislative interest in the matter, and the recent legal action against Yahoo, we are also mindful of the potential legal and  liability risks potentially involved.”

The firm’s argument concludes that,

“while we are sympathetic to the position that companies have little choice in structuring  their dealings with Chinese authorities, we believe companies should have policies in place, including for example human rights  commitments, which demonstrate that the company’s values and reputation are taken into consideration when conducting business with, or  otherwise assisting, governments known to censor the Internet.”