DECEMBER 1995 · VOLUME 16 · NUMBER 12

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E C O N O M I C S

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GUATEMALA CITY -- THE H.B. FULLER COMPANY'S employee profit sharing, corporate giving and funding of a University of Minnesota chair in corporate ethics have won it rave reviews from the Socially Responsible Investment (SRI) community and a listing in the book The 100 Best Companies to Work for in America.

South of the Rio Grande, however, this transnational, with 1995 revenues of $1.1 billion, supplies the drug of choice to Latin American street children seeking an escape from poverty, abuse and family disintegration [see "Sticking With Addiction in Latin America," Multinational Monitor, April 1994]. How does a company that makes a product that does neurological damage to the brains of tens of thousands of children earn rave reviews among self-described socially responsible investors?

A September 1995 study by the Washington, D.C.-based Social Investment Forum (SIF)found that $639 billion, or one out of every 11 professionally managed investment dollars, is held in a fund subject to some kind of ethical screen. More than 1,000 members of SIF -- which includes large institutional investors, technical analysts, foundations and individual investors -- pledge to invest responsibly by applying "honest, thorough and diligent methods of research and evaluation" to investment picks. Interviews with SRI firms, many of which are bullish on Fuller stock, suggest that this pledge is easier to take than to practice.

Shoe glue for the shoeless

For more than two decades, Central American plants of St. Paul, Minnesota-based Fuller have produced shoemaker's glue containing toluene, a sweet-smelling hydrocarbon neurotoxin. Millions of Latin American street kids inhale this shoe glue. The kids are often called resistoleros, a reference to Fuller's Resistol glue.

Although shoemakers and leather workers are Resistol's main consumers, a large though unknown quantity ends up under the noses of street kids. The adhesive's fumes go straight to the frontal lobes, the switchboard of the brain, and to brain areas that control emotions. Resistol turns off the brain's connection to reality, neutralizing stress, pain and fear, taking the place of parental affection. Short-term use can produce nosebleeds, rashes and headaches. It can also lead to long-term use because toluene is psychologically addictive. Chronic abuse can cause neurological damage, kidney or liver failure, paralysis and death.

Fuller insists that the glue was designed for shoes, not immature brains, and that the company is not responsible for product abuse. "We don't sell to street children. We sell to legitimate users who are manufacturing a product," says Dick Johnson, Fuller's executive vice president for investor relations. "If people, children or adults, get it illegitimately, that's a concern to us, but you've got to remember that's not our main focus."

Activists counter that glue makers can address the abuse problem in the production process. In 1968, the U.S.-based Testor Corporation became an industry model when it added mustard oil to model airplane glue. At a negligible cost, mustard oil made the glue difficult to inhale, dramatically reducing Testor glue abuse -- and sales.

Faced with rising toluene addiction a decade ago, children's activists in Central America asked manufacturers to follow Testor's lead. Activists did not believe that the additive would eradicate inhalant abuse, since hard-core users could turn to other substances. Rather, they argued that additives could discourage first-time users and eliminate the most available inhalant. Glue makers refused.

In 1989, the Honduran Congress passed a law that required the addition of mustard oil to toluene-based products. Fuller responded with a lobbying blitz. David Calvert, an advocate for street children in the Honduran capital, Tegucigalpa, says Fuller barraged shoemakers with claims that mustard oil would endanger their health, a tactic he called a "campaign of lies." Whatever it was, it worked. A government commission decided that toluene products in Honduras need not contain any mustard oil.

The Honduran controversy drew media attention. In 1992, just days before NBC "Dateline" was to tape a critical Fuller piece, the company pledged to "discontinue its production of solvent adhesives where they are known to be abused." This announcement won praise from corporate ethicists. But when the media spotlight moved on, Fuller quietly resumed toluene-based glue sales in the region. Small cans were removed from some shelves in Honduras and Guatemala. But industrial sales -- the most significant source -- and other retail distribution continued apace.

Fuller spokesperson Bill Belknap says mustard oil, which he says is a toxic chemical, causes harm to mucous membranes and the respiratory system. "It doesn't make sense to add another toxic substance to our products when our goal is to reduce overall toxicity,"he says. Critics reply that mustard oil makes the FDA's "Generally-Regarded-as-Safe" list and is a common additive in foods such as pickles and corned beef. Nasal irritation explains why it's a deterrent.

Citing continued glue abuse in countries where it halted sales of small containers, a prepared Fuller statement says, "Solvent abuse experts consistently confirm that distribution controls, additives and product reformulations are not effective solutions to the problem." One such expert is Catherine MacIntyre, the executive director of the Englewood, Colorado-based International Institute on Inhalant Abuse (IIIA). MacIntyre says that if corporations add a deterrent to one product, there are hundreds more to abuse.

Asked about the Testor decision to add mustard oil to its model airplane glue, a formula change that dramatically deterred abuse, Macintyre says, "They state that maybe 50 percent of their sales of glue went down when they added oil of mustard. Were they only selling to abusers?" MacIntyre suggests that mustard oil should be tested as a deterrent for 30 years in an occupational setting.

Minneapolis, Minnesota-based activist Bonnie Hayskar says the IIIA's objectivity is clouded by Fuller funding of IIIA. MacIntyre claims the IIIA has been only a "pass-through" for Fuller funds for three inhalant-abuse conferences in Central America, channeling money for meals, travel and hotel expenses for speakers, including IIIA speakers.

Hayskar notes, however, that on a March 1994 application to the federal government, the IIIA lists H.B. Fuller under the heading, "Major sources of funds for your center." IIIA submitted the successful application to the U.S. Department of Health and Human Services (HHS) in order for IIIA to become a national clearinghouse -- known as a RADAR site -- for information on inhalant abuse.

Just don't inhale

A fter failing to keep their heralded promise to withdraw abused adhesives, Fuller officials portrayed inhalant abuse as society's problem -- not theirs.

On the ground in Central America, activists -- some of whom have received Fuller funding -- say Fuller executives could curb inhalant abuse if they did not have such a nose for profit. "They've been very stubborn," says Covenant House Latin American Director Bruce Harris, who says that adding mustard oil to Resistol would cost just seven cents a gallon. Fuller has not funded Covenant's programs for street kids -- including resident programs to help kids break their glue addictions -- since the charity criticized company policies.

"It's fair to say that when someone we're funding begins speaking critically of us, we're less inclined to continue funding,"says Fuller's Bill Belknap. Fuller still funds other outreach programs "that share our viewpoint of the complexity of the issue," he says.

"Of the 40 to 50 million street children in Latin America, more than half sniff glue," Harris says. "Hard-core users go through about a gallon a week. That's up to 20 million gallons a week. Do they [Fuller] really want to lose that market?"

There is no consensus on the number of street kids in Latin America who sniff glue. In 1994, however, the region represented 15 percent of company sales and 27 percent of its earnings. Glue makers in Latin America are still under pressure from activists, the media, legislators and the courts.

Guatemalan Congressional Deputy Rafael Barrios Flores, for example, is pushing a mustard oil bill despite death threats that he says he has received since he called on glue makers to take responsibility for product abuse.

In January 1995, attorneys filed a wrongful death suit against Fuller in U.S. District Court in Dallas, Texas. Scott Hendler of Austin, Texas, and Michael Brickman of Charleston, South Carolina, filed the suit on behalf of Julia Polanco, the mother of a 14-year-old Guatemalan, Joel Linares, who died of kidney failure in 1993. The suit alleges that Fuller contributed to Linares' death by "designing, manufacturing, and marketing a product that was an attractive nuisance to children," Hendler says. "They knew that and they continued to sell it without taking any steps to prevent it from falling into the hands of children."

The suit was filed in Texas to stop the statute-of-limitations clock on the Linares case as plaintiff lawyers sought to arrange for Minnesota-based co-counsel to file the suit there. Having done so, the plaintiff has voluntarily withdrawn the Texas suit. Hendler planned to visit Guatemala in mid-December 1995 to confirm preliminary evidence. The plaintiff has until January 1996 to refile in Minnesota. "The potential for damages is staggering," says Hendler, noting the potential for a class-action suit.

"If in fact there is a lawsuit, we would discuss any element of that in court and only in court," Belknap says.

With such a hostile environment for companies making toxic glues, German manufacturer Henkel -- under pressure from German children's group -- announced in September 1994 that it was discontinuing all sales of solvent-based glues in the region. In February 1995, Henkel released a water-based cement for industrial and retail customers.

A Fuller statement, however, says, "Solvent-based adhesives exist because they provide specific performance characteristics required by their legitimate users -- including material penetration, rapid set-up, strength and flexibility," qualities which it says water-based glues do not offer.

Although Fuller still sells toluene-based glue in other parts of Latin America, last year it began to replace toluene with cyclohexane in retail glues sold in Central America, something Henkel tried in 1994. Fuller argued that cyclohexane would solve the abuse problem because it is not attractive to inhale. Several regional producers continue to make toluene-based glue, though this practice is likely to be constrained by laws or regulations now under consideration in every Central American country.

Critics say the cyclohexane measure is inadequate. Toxicologist Tim Rohrig, a former Oklahoma City medical examiner, says, "Kids don't get high as quickly" with cyclohexane as with toluene, but they do get high. Milton Tenenbein, a professor of pediatrics and head of Children's Hospital Poison Center at the University of Manitoba in Canada, says cyclohexane can cause sudden sniffing death. Cyclohexane is on the U.S. Environmental Protection Agency's Superfund list of hazardous toxins. "The difference between toluene and cyclohexane is like the difference between a .44 magnum and a .357 magnum," Rohrig says.

Inhalant abuse experts are not always aware of such subtleties. Self-described abuse expert Mark Connolly is the chair of Childhope USA's board and once participated in a H.B. Fuller-funded Honduras junket. Connolly says he was not aware that Fuller and Henkel had switched to cyclohexane.

Sticking together

When it comes to H.B. Fuller, the position of the SRI community appears to be one of seeing, hearing and speaking no evil. Minnesota-based children's rights advocate Annie Baker says that when she and some colleagues tried to distribute information about Fuller at a 1993 SRI gathering of the Social Investment Forum (SIF), forum officials tried to eject them from the meeting. "Fuller is seen as a darling of the SRI industry," Baker said, "and some ethical investment firms apparently don't check sources outside of Fuller. SIF did not return Multinational Monitor calls.

Also in 1993, the New York City-based Council on Economic Priorities (CEP), a public service research organization that prods corporations toward better social and environmental policies, nominated Fuller for the "Community Involvement -- Youth"category of its annual "Corporate Conscience" awards. Fuller "has given 5 percent of its U.S. pretax profits to charity since 1976,"says an April 1993 CEP newsletter. "Examples of Fuller's commitment to communities near its overseas facilities include a program that feeds 20,000 needy children a day in Peru, and its withdrawal of the glue Resistol from the market in Central America."

"At that time, most people in the SRI field were still under the impression that Fuller had in fact removed the product," CEP Research Director Steve Dyott wrote Multinational Monitor in response to questions. "When we nominated Fuller, the press was still reporting its policy as being as stated." Dyott says CEP is now reevaluating Fuller as part of a chemical industry report to be issued in April 1996.

Many SRI firms do not independently confirm information from Fuller. Writing to a concerned shareholder in March 1995, Jerome Dodson, president of the San Francisco-based Parnassus Fund, defended Parnassus's holding of 225,000 Fuller shares. "Fuller's glues are not sold on a retail basis in those countries where abuse is a problem," the letter said. Dodson apparently overlooked Nicaragua, where Resistol is sold openly in small cans that say the product should not be sold to minors. A United Nations Children's Fund official in Managua says inhalant abuse has burgeoned there and that Resistol is the glue of choice. Even Fuller's Johnson says that the warning labels are ineffective. "I don't think they have a lot to do with stopping the use," he says.

Writing to another shareholder, Parnassus Research Director David Pogran argued that "cyclohexane won't give inhalers a 'high' and it is much less toxic than toluene." When asked where he got his facts, Pogran says, "I don't remember specifically." Pogran's letter reported "direct industrial customers must open their books to Fuller to show that their production justifies their purchases of rubber cement." When asked if he had an independent source for this information, Pogran says, "I have not been able to independently corroborate that."

Parnassus is not the only SRIfund that appears to rely too heavily on Fuller for information on the company. In a February 1995 issue of the newsletter Insight, which Boston-based Franklin Research and Development sends to 3,000 ethical investors, Franklin accused Henkel of taking advantage of Fuller's partial withdrawal from the markets of Guatemala and Honduras by selling "a copycat product with similar packaging." While Henkel's retail sales did rise in Honduras, Henkel did not change its packaging or product, which was toluene-based at the time. Asked about Insight's claim, Simon Billenness, a senior Franklin analyst, says, "We got that information from Fuller."

Insight gave Fuller high marks for its policies regarding glue. "Fuller has acted responsibly in addressing the complex issue of solvent abuse by Latin American street children and has clearly done more than any other glue company in Honduras and Guatemala," the newsletter said. Asked how Franklin reached this conclusion, given Henkel's move to water-based glue last year, Billenness responded, "You can't expect the SRI community to police corporate America."

Amy Domini, founder of the Domini Social Index, describes Franklin officials -- who manage part of Fuller's retirement fund -- as "great H.B. Fuller lovers." Billenness says Franklin manages a small portion of Fuller's retirement portfolio.

"We rate them highly on employment practices and charitable donations," he says. "On this issue, they've got problems," which summarizes Domini's views of Fuller. Billenness says that SRI firms have limited staffs that "don't have time to stay on top of every issue on every company," forcing them to rely on media reports. "I probably spent more time on Fuller than on most,"he adds, saying he stands by the thrust of Insight's Fuller evaluation.

At least one SRI firm rejects Fuller stock. Despite "numerous positive aspects to the company in terms of its social responsibility, we just felt this was not the type of company we wanted to be invested in," says Ben Corson, social research manager at Working Assets. Unlike many SRI firms, Corson says, Working Assets "doesn't balance issues against each other. If a company flunks any one criterion, no matter how good it is in other areas, we won't invest in it." Resistol, he says, got stuck in Working Assets' ethical screen.

Resistol is not the only Fuller product that could gum up an ethical screen. Activists charge that Fuller's production of cigarette glue and its marketing of lead paints and pentachlorophenol pesticides in Central America further besmirch the company's carefully cultivated SRI reputation.

For five years, Michael Crosby, a Capuchin priest and board member of the New York City-based Interfaith Center on Corporate Responsibility, has spearheaded an institutional investor campaign against tobacco industry suppliers, including paper maker Kimberly-Clark and advertisers Gannett and Knight-Ridder, with some success.

But cigarette glue blows through most SRI screens, including those at Domini and Parnassus. Pogran at Parnassus says Fuller officials have said their glues just are used in cigarette packaging. Yet Fuller's own listing in the 1995 Thomas Register of American Manufacturers says it makes cigarette "adhesives for filter rod seaming, tow anchor, cigarette side seaming, cigarette tipping, [and] soft packing."