Dow Chemical: Risks for Investors

1,67

MB

103

stron

3532

ID

Innovest Strategic Value Advisors, Inc.

2004

rok

Table of Contents

1. EXECUTIVE SUMMARY ..6

2. THE RISKS OF DOW’S ORGANOCHLORINE STRATEGY.. 11

The Chlorine Phase-out Debate..13

ORGANOCHLORINES, DIOXINS AND HUMAN HEALTH15

DOW & DIOXIN 17

Dioxin and Related Compounds .17

Dow’s Dioxin Reduction Activities 18

Waste Incineration and the Dow Plastics Portfolio20

Bio-monitoring. 22

Public Exposure Risks 24

Public Perceptions of Persistent Toxic Chemicals 25

3. DOW ENVIRONMENTAL LIABILITY OVERVIEW.28

DOW AND BHOPAL, INDIA..28

The Meaning of Bhopal for Investors.28

The Bhopal Disaster 31

History of the Bhopal Case 32

Long Term Public Health Effects 34

After the Dow Chemical Acquisition of Union Carbide.. 35

Toxic Wastes and Contaminated Groundwater 36

Impact on Dow Chemical’s Reputation .38

DIOXIN AND DOW IN MIDLAND MICHIGAN.40

The Tittabawassee River.40

The Saginaw River and Saginaw Bay.. 42

Disclosure 42

AGENT ORANGE.45

Agent Orange Overview & the 1984 Settlement.45

Agent Orange Concerns Beyond U.S. Vietnam Veterans 47

UNION CARBIDE AND SEMICONDUCTOR LIABILITY.48

4. OTHER RISKS FOR DOW SHAREHOLDERS 51

DOW AND GENETIC MODIFICATION ..51

Catastrophic Failure Risks51

GLOBAL WARMING..54

REVIEW OF OTHER LIABILITIES..56

5. BEST PRACTICE FOR ENVIRONMENTAL DISCLOSURE..58

Remediation, Insurance & Legal Costs ..58

SEC Regulations ..59

Sarbanes Oxley.60

AICPA Statement of Position 96-1 61

FAS 143. 62

ASTM Guidelines. 62

Summary.64

6. CONCLUSIONS: WHAT IS THE FUTURE FOR DOW CHEMICAL? ..66

Questions for Management. 67

APPENDIX A – ABOUT INNOVEST..69

APPENDIX B - LEADING-EDGE INVESTMENT RESEARCH:“NON-TRADITIONAL” RISK FACTORS

71

APPENDIX C - INNOVEST RATING METHODOLOGIES 78

APPENDIX D: QUESTIONS SUBMITTED TO DOW BY INNOVEST..84

APPENDIX E: AGENT ORANGE EXPOSURE RELATED DISEASES87

APPENDIX F: REFERENCES.... 88