The Pride Foundation, a philanthropic group formed by Seattle-area gays and lesbians, is using its $2.5 million stock portfolio for political as well as financial gain, pressing companies including McDonald's and General Electric to adopt policies protecting gay employees from discrimination.

McDonald's, one of the largest employers in the country with about 280,000 workers, recently agreed to revise its hiring policies after Pride filed a proposal that would have gone before shareholders for a vote at the company's annual meeting next month.

The agreement gives Pride, which owns $55,000 worth of McDonald's stock, an important victory as it goes to work on G.E., a corporation of 293,000 workers that is opposing a similar resolution. The proposal will come before shareholders at the company's annual meeting April 21 in Cleveland.

Ted Lord, Pride's executive director, said the 12-year-old group's stock investments have helped to finance more than $1.6 million in grants and scholarships. The investments were made with donations that have made Pride's endowment the largest of any gay and lesbian foundation in the country, according to the group's leaders.

"People were saying why can't we make this money work for us in other ways, too?" Lord said. "This is huge institutional change."

Pride board member Ric Weiland, who was one of Microsoft's first employees (now retired) and a Lakeside School classmate of Paul Allen's, said shareholder activism adds a new twist to traditional foundation work.

"It's changing the social character of different aspects of our lives," said Weiland, who will introduce the resolution at G.E.'s meeting and return to the company in mid-May to meet with personnel managers.

"We can give money to nonprofit organizations, but we also have interests in companies that are for-profit organizations, and this is one way we feel we can make a change."

Pride's newest form of activism underscores one thing: Money talks.

To put a motion before shareholders, a group or individual must have held at least $2,000 worth of stock for one year or more. In recent years, an increasing number of social-activist groups have used the tactic to get the attention of corporate executives.

Big money-management firms have proposed cutting executive-pay packages or tying them to corporate performance. In addition, several environmental and religious groups have gained attention for raising environmental and human-rights issues through shareholder votes.

Shareholder activist Shelley Alpern said her socially responsible investment group, Boston-based Trillium Asset Management, has asked companies before to add protections addressing sexual orientation to no avail - until someone who owns stock files a shareholder resolution forcing a public vote.

She cited negotiations with New Jersey-based Johnson & Johnson, which she said stalled for a few months until Trillium filed a resolution. The company then agreed to change policies covering its 93,000 employees, Alpern said.

Trillium is co-sponsoring the G.E. resolution with Pride. Similarly, Pride is helping Trillium gather support for a resolution before Exxon shareholders in May.

Although sexual orientation is not a legally protected category under federal law, General Electric says its policies are broad enough to protect gays and lesbians. The company's hiring policy directs managers to "use merit, qualifications and other job-related criteria as the sole bases for all employment-related decisions affecting employees." It states explicitly that decisions should be made "without regard to race, color, religion, national origin, sex, age, disability, veteran status or other characteristic protected by law."

In an employee question-answer sheet, G.E. acknowledges that nonprotected categories are omitted from its policy but states, "The personal characteristics listed in the question (sexual orientation, marital status, familial status) are not considered relevant to employment decisions."

But Weiland said he had seen other G.E. materials that said managers should consider a prospective employee's reputation as a factor in hiring.

"We felt that could leave it very wide open for a manager who felt that being gay or lesbian is (equal to having) a bad reputation," he said.

"I admire the company. However, if I were looking for a job right now, I'd be concerned," said Weiland, who is gay and personally owns more than $223,000 worth of G.E. stock.

A ruling last year by the Securities and Exchange Commission cleared the way for shareholder proposals that deal with employment-related issues. Before, it was unclear whether those were considered part of the "ordinary business" of a corporation and, therefore, off-limits in the same way investors are prohibited from telling executives they can't sell Cherry Coke or shouldn't paint their stores green.

The McDonald's shift is the first since the SEC ruling.

Within two months of Pride filing its proposal in December, McDonald's agreed to change its policy, adding sexual orientation as a protected class in its nondiscrimination and sexual-harassment statements. It is rewriting employee handbooks and will hang new anti-discrimination posters in its restaurants.

"We were already heading in that direction," spokesman Bill Whitman said of the change.

Pride is targeting the largest, most visible companies it can, members said, hoping to attract attention to its cause. But it says more than half of Fortune 500 companies already include sexual orientation in their nondiscrimination policies.

And most of the companies Pride invests in already offer protections, because the organization tries to aim its investments toward progressive companies. Local examples include Microsoft, Boeing and Starbucks.

Pride's leaders say they don't really hope to win the necessary votes to overturn G.E.'s policy this year. But they do hope to get enough to force another vote next year, a prospect that could help motivate the company to negotiate with the group.

After this season of corporate annual meetings, Pride's members plan to decide which companies to approach next fall, when shareholder proposals must be filed for consideration in 2000. Prospects include MCI WorldCom and PepsiCo, two companies whose stock Pride owns and which don't have formal policies banning discrimination based on sexual orientation.

Michele Matassa Flores: 206-464-8343. E-mail: mmflores@seattletimes.com