On May 7, an annual online meeting will take place among the shareholders of one of the largest private prison company in the United States — the GEO group.
The GEO Group did well for its shareholders in 2018: It embarked on an international expansion of their correctional facilities and has seen its stock prices steady after a 107 percent increase in share price in the wake of Donald Trump’s election. Over 10 years, consolidated revenues have risen from $877 million to $2.3 billion. In its most recent annual report, the company stated that "we expect our operating cash flow to be well in excess."
Within GEO facilities in that same year, federal investigators found 15 cells with nooses made of sheets, corresponding high rates of suicide attempts, worrisome levels of violence, the preventable death of a 21-year-old man, and brutality by prison guards.
These findings were detailed in “Proposal 4” on the proxy statement that GEO published ahead of the shareholders meeting. It was co-filed by a coalition of 12 Catholic groups — organized by the Interfaith Center on Corporate Responsibility (ICCR) — and a service employee pension fund in a collective, renewed effort to hold GEO accountable to its human rights policy.
Proposal 4 says: "Shareholders request that GEO report annually on its website to investors, beginning in September 2019, on how it implements the portion of the (human rights) policy that addresses ‘Respect for Our Inmates and Detainees.’”
The Catholic co-filers are longtime shareholders of GEO who amass nearly 3,000 common shares — about $58,000 in stock. Their resolution, to be presented at the shareholder meeting and voted on by shareholders, is the latest installment of a 15-year campaign to make private prison corporations more accountable through what is commonly dubbed as “shareholder activism.”
It works just as it sounds: Stakeholders in a company who share a particular concern pool their stock together and propose a resolution as a group to be voted at a yearly shareholder meeting. Since 2005, groups like Mercy Investment Services and other Catholic money managers have filed seven resolutions with GEO and three with CoreCivic, the only other publicly traded private prison corporation.
The resolutions have varied from requesting the disclosure of lobbying information to asking that “social responsibility” be a criteria for executive compensation. None of them have garnered more than 30 percent of votes from shareholders. And in response to every such resolution filed, the GEO board has come out in public opposition.
But this most recent proposal is different: After initially asking its shareholders to vote against the Catholics’ proposal, the board recanted its opposition and promised to release a report on human rights by the end of the year. This has never happened before; Fr. Bryan Pham, Jesuit leader of the Catholic coalition of investors, isn't sure what to make of it.
"I'm glad GEO said they're going to do this, but the dialogue we've had in the past with GEO hasn't gone fast enough or in the direction that we want," he said.
Shareholder activism
Neither Pham, nor Pat Zerega of Mercy Investment Services are convinced that GEO’s promised report on human rights will be substantial enough, given their history with the corporation. The reasoning behind GEO’s switch in position is unclear — the GEO board stated it changed its mind because of “communications with various shareholders,” but Pham said the ICCR ended dialogue with GEO last year, and talks haven’t resumed since then. Whereas the Catholics’ resolution asks for specific metrics and mechanisms to measure progress in the treatment of its inmates, GEO has not yet promised anything specific in the report.
“The question that we have is, ‘Will it just be flowery language, or will it be meaningful?" Zerega said.
In the past the results of shareholder activism with private prisons have been mixed. A very similar resolution was introduced in 2016; it garnered a mere 24 percent of shareholder votes. But even if the upcoming resolution were to get 50 percent or more of the shareholder votes at the meeting, resolutions are not binding for any private company.
"Even a 99 percent vote doesn't mean the company has to do anything," Zerega said.
The release of the newly promised report will be the indicator of the future relationship between the Catholic shareholder advocates and GEO, and about the strategy of shareholder activism going forward. Questions are now being raised among the ICCR that, after 15 years, if the minor successes in accountability are worth the moral dilemma of owning stock in private prisons.
"In recent years, we haven't felt like this has been successful," Zerega said. "It doesn't appear that the human rights policy is making any difference in terms of how people are treated."
As recent as last summer, there were talks of divestment among some in the ICCR. That there are more than a dozen Catholic groups invested in GEO "looks bad" in the public eye, Pham admitted, even if it's a small amount of money.
Last fall, though, the ICCR pushed back its talks of divestment in lieu of filing the resolution after dialogue with GEO executives tapered, with hopes that it will bring about a more thorough sense of accountability and renewed talks between the parties. In the aftermath of the shareholders meeting and the release of the upcoming report on human rights, decisions will be made on the effectiveness of this brand of activism amidst a heightened environment of scrutiny for private prisons.
"Really, there are no guarantees of progress," Zegera said.
Zero tolerance
Among the principles of sustainable financial investing for the United States Conference of Catholic Bishops, there are industries of which are to be given "zero tolerance." Those companies which support abortion, have been shown to discriminate by race or gender, or manufacture firearms are blacklisted.
It is unclear if — when the Jesuit provinces and the Sisters of Mercy first purchased GEO in the late 1990s — it was for shareholder advocacy purposes; at the time, private prisons were not the institutions they are today.
“They weren't quite penny stocks, but they weren't really big stocks," Pat said.
The GEO group went public 1994; it was a lesser-known company which had not yet collected a repertoire of human rights violations, and the industry had potential for large financial gain.
Why are faith groups involved?
In the past five years, shareholder advocacy has become a more popularized response to human rights violations in large, public companies. More than any other group, faith-based groups engage with it, according to a 2018 report by the Forum for Sustainable and Responsible Investment. From 2016-2018, more than a third of all shareholder resolutions were filed by faith-based groups, and more than 150 of those resolutions were filed on human rights issues.
"Shareholder advocacy is important particularly because one of the many problems in private prisons is a lack of transparency," said David Fathi, director of the ACLU's National Prison Project.
Unlike state-run prisons, private prisons are exempt from public records searches. Fathi said that this is a systematic problem that can be addressed well through shareholder advocacy.
In June last year, Pham took the lead among the Catholic corporate advocates in talks with GEO. Almost immediately, Pham found himself amidst a contentious dialogue with GEO representatives. Ever since a 2012 resolution from ICCR shareholders pushed GEO to draft its first-ever human rights policy, attempts at narrowing the vague language of the document have failed.
In light of the weaknesses shareholder advocacy has on private prisons — especially in regards of human rights violations — Fathi said some alternatives have shown to be more effective.
"Private prisons only respond when they have to. By litigation, by contracting agency. This is not surprising. No corporation exists to do good in the world. They exist to make a profit," he said.
Fathi pointed to litigation as the most effective means of putting pressure on a corporation, albeit usually appropriate only as a last resort. Persuading public officials to step in can be another effective step. In 2015, Sr. Kathleen Erickson of the Sisters of Mercy testified on Capitol Hill of the trauma she saw among the incarcerated individuals she encountered as an interim chaplain for an immigration detention center in Texas operated by CoreCivic, of which the Sisters of Mercy hold common shares. Other denominations, including the United Methodist Church and the Evangelical Lutheran Church in America, have responded to the allegations of corruption in private prisons by placing screens against their investment.
To make shareholder advocacy any more effective, a greater number of GEO shares could be purchased, but neither Pham nor Zerega were receptive to the notion.
"We could never buy enough to make a significant difference. Even 1 percent of the company, you're talking major bucks.”
And for the most part, other GEO shareholders are not willing to co-file on resolutions to improve human rights. By the numbers, resolutions on human rights tend to be among the most unpopular.
Whether or not the ICCR keeps its relationship with GEO hinges on the thoroughness of the future report and a commitment to human rights, which both Pham and Zerega noted would be a new turn of events for the private prisons industry. Pham was not ignorant to the systematic failures of the industry, but he said the resolution is a sign that he is not ready to give up any chance of tangible reform.
Pham has chosen to stay cautiously optimistic and attributes his Catholic faith to whatever hope he still has.
"Christian Catholics are generally hopeful people," he said.
On the odds of the resolution getting anywhere close to 50 percent — what would be the most support for any such resolution — Zerega isn't so sure.
"It would be stretch," she admitted. "But we've done our homework."
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