Shareholders have filed 50 corporate lobbying disclosure resolutions this proxy season in a campaign coordinated by labour fund AFSCME and Walden Asset Management. The coalition of shareholders behind the campaign involves 74 institutional and individual investors, including public pension funds, labour funds, asset managers, individual investors, international investors, foundations and religious investors. The 50 companies – from AbbVie to Walt Disney – are those that spend the most to lobby and do not disclose their trade association involvement.
Many of these resolutions are being challenged by companies using the SEC’s new stance on whether a proposal relates to a significant portion of its assets or profits. Some have already been withdrawn because of this argument; for example at Travelers. Challenges at Citigroup, Eli Lilly, Goldman Sachs and Alliant Energy, are awaiting the SEC’s decision. A change in attitude by the SEC, which has routinely allowed such proposals in the past, would be a major policy shift. The SEC’s decision to allow such proposals in the past may perhaps have been out of guilt because it had not implemented its own rules to require such disclosures across the board. It still hasn’t implemented them, but maybe this SEC doesn’t feel guilt. Other proposals have been withdrawn because opposing proposals from right wing groups have been filed and the company has gone with that one. For example, the National Center for Public Policy Research filed a resolution that argues in favour of lobbying benefits at Duke Energy. The same group is also canvasing Disney shareholders on the lobbying resolution. In a particularly rabidly written press release, the group’s general counsel Justin Danhof, said: “Zevin Asset Management is part of a well-funded, well-organized campaign of liberal activist investors who abuse the shareholder resolution process to try anddefund pro-business and conservative organizations.” The group argues that making the disclosures contravenes freespeech! At Disney’s meeting on 8 March, which saw the company lose its Say on Pay vote, the resolution was supported by 37% of shareholders. According to Proxy Preview, an even higher percentage, almost two-fifths, supported a resolution at Emerson Electric.
The proposals call for disclosures of federal and state lobbying payments, payments to trade associations used for lobbying and payments to any tax-exempt organization that writes and endorses model legislation. While there are fewer companies being targeted than in previous years, proponents say this is a reflection of action taken by companies to increase disclosures rather than any lack of interest by proponents. In addition, proponents are far less likely to withdraw their proposals than in the past, so the number of resolutions going to a vote is holding pretty steady.
As Proxy Preview notes in its new report, companies are “more willing to discuss their election spending than lobbying, yet expenditures on lobbying dwarf what goes to elections”. And disclosures about payments to trade associations, social welfare organizations and other charitable groups that “skirt political activity prohibitions” are even rarer. Other organisations focused on the issue include the Center for Political Accountability (CPA), whose CPA-Zicklin Index grades companies on their disclosure and the Conference Board’s committee on political spending.
But why are investors interested and why is it so important? Writing in Proxy Preview, AFSCME’s John Keenan said: “A major focus for investors is undisclosed trade association lobbying which essentially allows for companies to say one thing and do another. Climate change, drug pricing and tobacco present clear examples of the values incongruity.” Keenan points out
that companies that support climate change are often also members of the US Chamber of Commerce and ALEC, the American Legislative Exchange Council, which consistently oppose climate regulations. Or they could be members of the Business Roundtable which is campaigning against shareholder rights. “Investors believe lobbying may pose reputational risks when it contradicts a company’s public positions, resulting in a values incongruity,” added Keenan. And there’s a lot of money being spent, though since there is so little disclosure, these estimates may be underestimates. The press release states that more than “$3.3 billion was spent on federal lobbying in 2017 and companies spend more than $1 billion annually at the state level” and, since state lobbying is even less well-disclosed that second figure is likely to be much higher.
Keenan notes that the campaign has had some success, as more than 60 companies have agreed to providegreater disclosure, another reason for slightly fewer companies being targeted. Proxy Preview provides a complete list of the proposals filed thus far. ICCR’s proxy voting guide notes that lobbying proposals are the third most common among its members, after climate change and diversity. “Investors sought to highlight corporate lobbying on a multitude of issues, including anti-smoking laws, benzene pollution, fracking bans, net neutrality, coal ash rules, the Clean Water Act, workers’ comp, initiatives to lower drug prices, and membership in the Chamber of Commerce and ALEC,” the guide said. The current political climate in the US makes these disclosures even more pertinent, as companies see an administration that is already rolling back regulations and smell blood. It is likely that they will see lobbying as way of directing Trump’s destructive attentions to the next set of protections.
Related article: Paul Hodgson: Staff Legal Bulletin No. 14i strikes again!