This story originally appeared in Jacobin. You can view the original article here.

By Katya Schwenk | October 30, 2024

As dark money spending breaks all records this election season, corporate-backed groups are trying to strike down one of the strongest state-level dark money transparency laws in the country in a key swing state.

Last year, voters in Arizona overwhelmingly passed a ballot measure — Prop 211 — that requires dark money groups funding political advertising in the state to reveal the original source of their money. The unprecedented law is now one of the most far-reaching dark money transparency laws in the country.

It has also become a target for corporate interests trying to limit campaign finance laws. Last year, Americans for Prosperity, a nonprofit backed by billionaire Charles Koch and his shadowy dark money network, sued in federal court to overturn Prop 211. Now, the group has appealed the case to the US Court of Appeals for the Ninth Circuit, a move likely designed to get the matter before the Supreme Court.

If successful, the big-money battle against Prop 211 could prevent other states from forcing the donors behind dark money spending into the light.

The unprecedented spending this election season has thrown the importance of laws like Prop 211 into sharp relief. The 2024 election is on track to break spending records. Super PACs and other unaccountable campaign spending groups have already spent over $1 billion this cycle. Both presidential candidates have taken tens of millions in untraceable donations.

Arizona’s law deals only with state campaign finance, not federal election spending. But its backers say the law is a model for other states — and potentially even federal legislation — to combat the dark money that has flooded elections since the 2010 Citizens United Supreme Court decision, which allowed unlimited untraceable donations.

“Arizona’s law is the first and best in the nation to really require tracing [dark money] back to the original source,” said David Kolker, a senior attorney at the Campaign Legal Center who is representing the Arizona group that backed the law.

As a result, dark money groups are threatened, he said. “They’ve taken out their cannons and bazookas because they want to stop this thing in its tracks — because they don’t want anybody else doing the same thing,” said Kolker.

The effort to get a law like Prop 211 passed in Arizona dates back years. Led by Terry Goddard, a former Arizona attorney general and dark money transparency advocate, a coalition called Voters’ Right to Know first tried to get a dark money disclosure measure on the Arizona ballot in 2018.

At the time, Arizona was considered “ground zero” for dark money in politics. The swing state had seen one of the biggest increases in dark money spending of any state after Citizens United, studies showed. Voters’ Right to Know wanted to intervene and unmask the dark money suddenly pouring into state elections.

The first attempts to get the ballot measure before voters were foiled by administrative errors and then the pandemic. But in 2022, the group succeeded in landing Prop 211 on the November ballot. It passed that year with overwhelming support from voters, winning 72 percent of the vote — a rare bipartisan victory in politically divided Arizona.

Prop 211’s success at the ballot box “sends a message to other states that this is politically popular — that in a time of extraordinary division, people agree about transparency,” Goddard said in an interview on the Lever’s weekly podcast, Lever Time, shortly after the measure passed.

Prop 211 also provided a model for other states crafting dark money transparency laws. “There are other states who are watching. You know, ‘That’s an interesting law. Should we do it too?’” said Kolker with Campaign Legal Center.

Any group in Arizona that spends more than $50,000 on advertising in statewide campaigns or $25,000 in local races is subject to new disclosure requirements under Prop 211. The law requires that these groups disclose any donors that contributed over $5,000 to their campaign efforts.

Crucially, the groups must not only disclose their donors, but they must reveal the original source of that money. This requirement prevents political spenders from using shell companies or secretive nonprofits to hide the funding’s provenance.

“Traditional disclosure laws require people who pay for election ads to report their donors or some of their donors,” Kolker explained.

But in the age of dark money, disclosure requirements that only target the most recent source of the money are easily evaded by groups who want to stay anonymous.

“If that direct donor to the spender is just some front group — ‘Americans for Apple Pie’ — it’s meaningless to the voters,” Kolker said. Prop 211 moves beyond these front groups, lifting the curtain on dark money spending.

So far in Arizona, despite some technical difficulties with the rollout, the law has undoubtedly shone a light on state campaign spending. Records from the Arizona Secretary of State show that forty-six different interest groups have filed reports under the law, providing a glimpse into the donors behind powerful lobbying groups like the Arizona Chamber of Commerce, which now must disclose in its advertising materials that its top donors are the gas station chain QuikTrip and a construction company.

The law has also provided additional transparency around the fight to protect abortion rights in the state. A measure on the ballot in Arizona this fall would establish a fundamental right to an abortion, doing away with the state’s current fifteen-week abortion ban. The group leading the opposition to the measure has had to disclose its three top donors — apparently three wealthy businessmen — and the fact that more than 20 percent of its funding comes from out-of-state groups.

Still, the law only extends to state and local races. Arizona’s consequential Senate race, a federal election not subject to the state law, ranks among the top elections for dark money spending, reflecting that secretive interest groups are still operating in the state.

Prop 211 has faced an onslaught of legal challenges from right-wing and corporate-backed groups since it passed in November 2022. Two legal cases attempting to strike down the law are working their way through state court in Arizona — though so far, judges have upheld the statute.

The Goldwater Institute, a right-wing Arizona organization bankrolled by corporate interests, is representing several conservative Arizona organizations in one of the state challenges — arguing that the law harms potential dark money donors, and violates their speech rights. The group claims the law “will open up donors, especially those who support unpopular causes, to violence, harassment, and the risk of ‘cancellation.’”

Meanwhile, the Koch network is trying to strike down Prop 211 in a separate case in federal court — claiming that the law violates the First Amendment rights of political donors.

Americans for Prosperity, which brought the federal case against Prop 211, has long-standing ties to the Koch network; the organization’s foundation was chaired by David Koch before his death in 2019. The group has spent tens of millions of dollars on political causes on behalf of its corporate benefactors over the last two decades.

Americans for Prosperity has been active in trying to strike down disclosure laws across the country. The group recently submitted an amicus brief in a federal challenge to a similar, though less expansive, law in San Francisco.

The fact that corporate-backed interest groups so vehemently oppose laws like those in San Francisco and in Arizona make clear that “the true agenda here is to hide their money,” said Jon Golinger, the democracy advocate for Public Citizen, a progressive policy advocacy group, who coauthored and fought to pass the San Francisco law. “They want to give as much as they can, and they want no one to know what they’ve done.”

“And that raises obvious questions of, ‘What are they so afraid of?’” Golinger said.

In its lawsuit over Prop 211, Americans for Prosperity claimed that the statute “subject[s] countless Americans nationwide to governmental doxxing for doing nothing more than supporting their chosen non-profit organizations and charities,” and “discourage[s] contributions to non-profit organizations,” all of which amounted to a First Amendment violation.

In March, a federal judge was unconvinced by these arguments, ruling against the organization and upholding the law.

Now, Americans for Prosperity has appealed the case to the Ninth Circuit Court of Appeals — just one step away from the Supreme Court. In September, the Institute for Free Speech, a right-wing group that fights against campaign finance reform, submitted an amicus brief in the case, raising similar First Amendment arguments to challenge the law.

While Kolker said he felt “optimistic” about the chances that the transparency law would prevail, he emphasized that the “stakes were high.” For years, the Supreme Court has stripped away limitations on campaign spending. For longtime campaign finance reform advocates like Kolker, disclosure laws are a new strategy to fight back.

“Disclosure is the main piece that we have left in the statutory scheme, in terms of preventing corruption,” he said. “To lose this piece would be quite devastating.”

While no law has gone quite so far as Arizona’s, other recent disclosure laws so far have won their own court battles.

Voters in Alaska passed a similar disclosure initiative in 2020, as part of a package of election reforms. Like the Arizona law, Alaska’s measure requires campaign spenders to reveal the source of their large contributions and also requires disclosures of political ads that are funded with out-of-state money.

Groups representing business interests in Alaska, with support from the Koch-backed Liberty Justice Center, challenged Alaska’s law. While both a federal judge and a panel of Ninth Circuit judges upheld the law, the groups are now asking the US Supreme Court to review the matter.

And another recent victory came when the Supreme Court declined to take up Americans for Prosperity’s challenge to San Francisco’s donor transparency law earlier this month, letting it stand.

Yet for transparency advocates, the corporate challenges — and attempts to evade the new laws — can seem never-ending.

“Dealing with corruption is often like whack-a-mole,” said Golinger with Public Citizen. “You just keep at it, and they keep coming up with ways to hide it. And we keep trying to come up with solutions.”

This story originally appeared in The Hill. You can view the original article here.

By Taylor Giorno | October 7, 2024

The Supreme Court on Monday declined to take up a challenge to San Francisco’s “Sunlight on Dark Money” disclosure law, which would have tested the limits of disclosure and free speech in campaign finance.  San Francisco voters overwhelmingly approved the initiative in 2019, compelling election ads to include a disclaimer naming the top three donors to the group running the ad.

If the donor is another committee, then the committee’s top two donors and the dollar amounts given by both need to be disclosed.  The law is “about having a better-informed electorate and making sure that people who are giving big checks in local politics don’t do it secretly, but do it publicly,” said Jon Golinger, a democracy advocate at Public Citizen who helped draft the San Francisco law.

But plaintiffs called the secondary disclosure requirements overly burdensome and alleged they would “scare away donors,” infringing on their constitutional rights.   They were represented by the First Amendment advocates at the Institute for Free Speech, a conservative nonprofit that regularly opposes political spending and contribution restrictions.   The Institute for Free Speech petitioned the Supreme Court in February to consider two questions: whether the disclosure requirement “advances any important or compelling state interest,” and if the law “violates the First Amendment freedoms of speech and association.”  “San Francisco’s secondary donor on-communication disclosure requirement forces the Committee to either give up its protected First Amendment right to speak about a candidate or proclaim the City’s message as part of its speech,” the original complaint argued.

Both the U.S. District Court for the Northern District of California and the U.S. Court of Appeals for the Ninth Circuit rejected their argument.   “In response to the growing prevalence of money in politics, many governments have required groups that run political advertisements to identify their funding sources publicly,” Circuit Court Judge Susan Graber wrote in the opinion.  The disclosure requirement “is substantially related to the governmental interest in informing voters of the source of funding for election-related communications,” Graber concluded, and “does not create an excessive burden on Plaintiffs’ First Amendment rights relative to that interest.”

The Supreme Court declined to hear the appeal in a brief, unsigned order.*

* The Supreme Court denied the petition for review of the case, called No on E v. Chiu, No. 23-926

This story originally appeared in Jacobin. You can view the original article here.

By Freddy Brewster September 26, 2024

This story originally appeared in Bloomberg Law. You can view the original article here.

By Kate Ackley | August 20, 2024

Voters who are invested in the stock market want more transparency of corporate political spending, according to a new poll released as races heat up for the White House and down-ballot offices.

In the survey, from the Zicklin Center for Governance and Business Ethics at the University of Pennsylvania’s Wharton School and the Center for Political Accountability, 87% said public companies should be required to have a code of conduct to set rules for their political spending.

Zicklin and the Center for Political Accountability said the findings boost their efforts to urge companies to adopt their model code of conduct for political spending. They developed the CPA-Zicklin Model Code of Conduct for Corporate Political Spending. CPA said it is in discussions with companies, including from the financial services and utilities sectors, about following it.

Corporations and industry lobbying groups face potential risks associated with their political spending including investments to state races, said Bruce Freed, president of the Center for Political Accountability.

The poll also found that 86% supported the idea of requiring corporations to disclose their political spending on their company website on a semi-annual basis and 75% supported requiring corporations to disclose contributions made to trade associations which are then used for political purposes.

“On the eve of the most important national elections of our time, we are a nation divided. But not with the importance of corporate political accountability,” said William S. Laufer, co-director of the Zicklin Center, in a statement.

To do the survey, Mason-Dixon Polling & Strategy conducted phone interviews with 800 adults between July 22 and August 2. Those polled said they had money in stocks or some type of investment fund.

In addition to the poll, the Center for Political Accountability is releasing a new report about corporate funding of state-focused groups, including the Republican Governors Association and the Democratic Governors Association. The poll and the new report were first shared with Bloomberg Government.

“The report is coming out now to really draw attention, to alert companies that this is a risk that you need to take seriously,” Freed said.

Elevance Health, Altria, CVS Health, and Comcast are among the companies that have donated the most to the governors’ associations, as well as the Republican Attorneys General Association, Democratic Attorneys General Association, Republican State Leadership Committee, and Democratic Legislative Campaign Committee, the Center for Political Accountability found. The companies’ donations to those groups that the center analyzed came from their corporate treasuries, not company political action committees, Freed said.

The companies and the associations did not respond to requests for comment or did not offer comment.

The Center for Political Accountability is a nonprofit advocacy group based in Washington, D.C., that seeks voluntary public disclosures of political spending from corporations.

Jeanne Hanna, the center’s vice president of research, said that corporate funding of down-ballot races typically gets significantly less attention than contributions to federal candidates but said that’s changing. State attorneys general, “are increasingly more partisan in the way they wield their power on a national stage,” she said. That can create “riskier associations” for companies that back such organizations.

Companies frequently donate to groups on both sides of the aisle, but Freed said that doesn’t change their potential risks.

There can be a “bottom line impact,” he said, if investors, employees or customers don’t agree with a company’s spending decisions.

Tori Ellington, senior manager of political engagement for the Public Affairs Council, said the group’s corporate and association members are increasingly “embracing transparency” about their political involvement.

Among companies and industry associations, 59% said they were taking on education and transparency efforts this year around their political action committees and other political activities, in a survey the council did in May, Ellington said.

This press release originally appeared on Public Citizen’s website. You can view the original release here.

Washington, D.C. — At its Annual General Meeting last week, shareholders of railroad company Norfolk Southern voted in significant numbers to back a proposal calling for stronger transparency of the company’s lobbying spending on the federal and state level. The proposal also calls for stronger transparency of lobbying payments to trade associations and “dark money” groups that decline to disclose their donors or detail their lobbying activities.

“This strong vote by Norfolk Southern shareholders shows that investors realize how risky it is for big companies to hide some of their lobbying spending while pretending to be transparent,” said Jon Golinger, democracy advocate for Public Citizen. “Disasters and PR crises have revealed the reputational risks when companies say one thing publicly while lobbying for something different behind closed doors. That kind of misalignment between public positioning and lobbying can damage investor value.”

Official vote totals at the company meeting on May 9, 2024 show that 38.9% of Norfolk Southern voting shares were cast in support of Proposal 4 to require a new “Annual Report on Lobbying Activities, Policies, and Communications,” despite opposition from the Norfolk Southern Board of Directors. According to business research group The Conference Board, shareholder support of 30% or more in favor of a shareholder proposal indicates an “issue meriting board attention.”

The Norfolk Southern lobbying disclosure proposal requests that the company provide an annual report to shareholders disclosing its policies and procedures governing lobbying, payments used for direct or indirect lobbying as well as grassroots lobbying communications, membership in and payments to tax-exempt organizations that write and endorse model legislation, and the board and management’s decision-making process for making those lobbying payments.

The vote comes just over a year since the Norfolk Southern train derailment disaster in East Palestine, Ohio on February 3, 2023. A recent report by Public Citizen revealed that Norfolk Southern spent $2,340,000 lobbying the federal government in 2023 – up 30% from the $1,800,000 it spent the year before. This included money spent lobbying Congress on issues such as railway safety and railroad staffing requirements.

Meanwhile, a campaign led by Public Citizen and the Corporate Reform Coalition seeks to strengthen corporate lobbying disclosure by requiring all U.S. companies to inform investors of their spending on lobbyists. Last November, five U.S. Senators – Senators Sherrod Brown, Elizabeth Warren, John Fetterman, Jon Tester, and Tina Smith – sent a letter to the Securities Exchange Commission urging it “to use its existing authority to issue rules requiring disclosure of corporate lobbyist expenditures to shareholders.”

This piece originally appeared in Inside Health Policy. You can view the original piece here.

As a handful of key Senate Democrats and consumer advocates engage in a broader effort to get companies to disclose lobbying expenses, Public Citizen on Friday (May 3, 2024) blasted drug maker Eli Lilly for not making all its expenditures public in the run-up to its annual meeting next week where shareholders are slated to hold a vote demanding transparency. The shareholders suggest Lilly’s public statements, including that it supports lowering drug prices, may clash with the lobbying data it has not disclosed.

Public Citizen has shared an analysis that shows Lilly has failed to disclose its state lobbying expenditures for half of the nation to shareholders.

Lawmakers have said without strong lobbying disclosure regulations, shareholders are left unaware of the policy initiatives they inadvertently back through their investments. Sens. Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) are among those who have urged the Securities and Exchange Commission (SEC) to mandate companies disclose corporate lobbying expenditures to shareholders.

The Lilly shareholder proposal requests detailed lobbying activity reports, but the company criticized it, claiming that it already publicly discloses such information.

“Lilly already publicly discloses the information requested by the proposal regarding the company’s policies and procedures,” the company says.

Lilly’s shareholders will vote on the proposal on May 6 to increase the company’s lobbying disclosures.

Public Citizen’s analysis revealed that in 52% of the state lobbying disclosure documents provided by Lilly, covering 25 out of 48 states, the company omitted disclosing its expenditures on state lobbyists.

Moreover, in 73% of the lobbying disclosure documents from Lilly, representing 35 out of 48 states, the company failed to disclose the specific issues or bills it lobbied on in those states.

In November 2023, five U.S. senators including Warren and Brown sent a letter to SEC urging it to issue rules requiring full disclosure of corporate lobbying expenditures to shareholders.

The SEC can mandate registered companies publicly file financial statements containing information deemed necessary for shareholder protection and fair dealing in securities.

The proposal from Lilly shareholders is sponsored by the Service Employees International Union (SEIU) Pension Plans Master Trust, urging an annual report that outlines Lilly’s policies and procedures on lobbying; details all payments for direct or indirect lobbying, including, contributions to tax-exempt organizations endorsing model legislation; and elucidates the board and management’s decision-making process regarding lobbying expenditures.

Lilly shareholders say the information is necessary to fully understand whether Lilly’s lobbying aligns with its stated objectives and the interests of its shareholders.

Lilly invested $103,363,850 in federal lobbying from 2010 to 2022. Lilly’s shareholders say this amount excludes state lobbying, which Lilly conducted in all 50 states in 2022. Additionally, Lilly conducts lobbying internationally,

“Lilly fails to disclose its third-party payments to trade associations and social welfare groups (SWGs), or the amounts used for lobbying, to shareholders,” Lilly’s shareholders say. “Lilly belongs to the Chamber of Commerce, Business Roundtable, National Association of Manufacturers, and Pharmaceutical Research and Manufacturers of America (PhRMA), which together have spent over $2.9 billion on federal lobbying since 1998, and supports SWGs that lobby, like the Alliance for Patient Access (AfPA).”

Lilly’s shareholders allege the company’s failure to disclose its lobbying activities poses a risk to its reputation when its lobbying contradicts the company’s public stances.

For instance, while Lilly publicly supports making medicine more affordable, it financially supports organizations like PhRMA and AfPA, which oppose efforts to lower prescription drug prices.

The shareholders also say despite advocating for addressing climate change, Lilly’s affiliations with groups like the Business Roundtable (BRT), which lobbied against the Inflation Reduction Act (IRA), and the Chamber of Commerce, which has reportedly played a significant role in discouraging climate legislation for two decades, raise concerns.

Some groups have urged the company to sever ties with the American Legislative Exchange Council (ALEC), citing its involvement in voter restriction efforts. Lilly opposed voter restriction efforts in Indiana, where it is headquartered.

The shareholders say Lilly is represented at ALEC through its trade associations, with both the Chamber and PhRMA serving on its Private Enterprise Advisory Council.

But Lilly argues that it does not finance efforts to oppose reducing prescription drug prices.

The company also says it actively supported certain provisions of the IRA that are expected to benefit patients and foster innovation, such as implementing a $35 out-of-pocket cap on insulin costs for Medicare beneficiaries and eliminating the coverage gap in Medicare Part D plans, but opposed other aspects of the IRA that the company believes could hinder innovation without directly benefiting patients, such as Medicare price setting under the guise of negotiation.

Lilly claims a separate report on its lobbying information would place an undue administrative burden on the company and would not provide meaningful additional information to shareholders.

“Requiring Lilly to prepare a separate report with this information would place an undue administrative burden on the company and would not provide meaningful additional information to shareholders,” it says.

The Public Citizen analysis reviewed Lilly’s state lobbying activity disclosed on its website in a document titled “State Lobbyist Activity and Monitoring, 2023,” which includes links to mandatory state lobbying disclosure forms that Lilly seems to have complied with.

In many instances, these state disclosure requirements lacked details on lobbying expenditures, or the issues lobbied on, according to the drug price control group.

In only 23% of the documents provided by Lilly, for 11 out of 48 states, did the company disclose both its spending on state lobbyists and the issues or bills it lobbied on, according to Public Citizen’s analysis.

“While Lilly talks a big game on its lobbying transparency, a closer look at what they’re actually disclosing reveals that investors and the public are in the dark when it comes to Lilly’s state lobbying,” Jon Golinger, democracy advocate at Public Citizen says in a statement about the group’s analysis. “Misalignment between a company’s statements in public and its lobbying activities behind closed doors can create reputational risks that may damage investor value. The best protection against those risks is full disclosure of a company’s lobbying activities.”

— Maaisha Osman

This piece originally appeared in The Deal. You can view the original piece here.

Investor measures continue to seek disclosure about political lobbying spending, as shareholders continue to push for transparency and accountability.

By Jean Haggerty

April 12, 2024

U.S. corporations entered April with almost as many political lobbying shareholder proposal submissions as all of last year.

In 2023, shareholders voted on 46 political lobbying-themed investor proposals, while there have already been 42 such measures, including some anti-ESG resolutions, submitted so far in 2024, according to proxy solicitor Georgeson LLC. And there are still a few more months of the proxy season left, for 2024 proposals to catch up, or surpass, last year’s numbers.

In some ways that’s not surprising, given that it’s an election year, explained Georgeson managing director and U.S. head of ESG Kilian Moote. However, incidents last year, including Silicon Valley Bank’s March 2023 collapse and Norfolk Southern Corp.’s (NSC) Feb. 3, 2023, derailment in East Palestine, Ohio, may also be factors, other market participants said. These incidents, particularly SVB’s collapse, can be seen as indicative of shareholder value destruction related to lobbying.

This year, prolific shareholder proposal filer John Chevedden, submitted or co-filed near identical lobbying disclosure-themed shareholder proposals at Bank of New York Mellon Corp. (BK), Goldman Sachs Group Inc. (GS), and embattled railroad company Norfolk Southern.

Chevedden’s lobbying-themed investor measures ask for increased disclosure of federal, state and “grassroots,” or general public, lobbying expenses, policies and procedures. The proposals also ask for details about a target company’s membership in and payments to tax-exempt organizations involved in creating so-called model legislation as well as a description of the management and board’s decision-making processes around lobbying. Special interest groups sometimes draft “model legislation” that they lobby lawmakers to consider.

Lobbying proposals have averaged 32% support in 2023, about the same as in 2022, according to a proxy preview report issued mid-March by ESG groups As You Sow, the Sustainable Investment Institute and Proxy Impact. At an annual meeting Tuesday, Chevedden’s lobbying proposal at BNY Mellon received support from about 31% of voting shares.

Proxy advisers can also help drive votes for lobbying-themed shareholder proposals. Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC both urged shareholders to vote for the proposal, and they backed a near identical lobbying resolution up for a vote at Goldman Sachs’ April 24 annual meeting. Last year, ISS also backed a similar proposal that called for a report on Goldman’s lobbying payments and policy — it received about 35% support.

In an April 3 ISS report obtained by The Deal, the proxy adviser noted that Goldman produces transparent disclosure of its lobbying oversight and policy priorities, but doesn’t provide sufficient information for shareholders to assess its direct or indirect lobbying payments, including to trade associations. As the bank mentioned that a comprehensive report of its trade association memberships is reviewed by certain members of management and the board’s public responsibilities committee annually, it’s reasonable to believe that preparing the information for disclosure to shareholders wouldn’t be burdensome, the adviser added.

In its April 2 report on BNY Mellon, ISS took a similar stance, noting that additional disclosure of the financial institution’s state level lobbying, indirect lobbying expenditures and board oversight mechanisms would help shareholders better assess risks and benefits associated with its participation in the public policy process.

Likewise, Glass Lewis, in a March 12 BNY Mellon report, said that although the company is relatively aligned with its peers on political contribution disclosures, it lags in respect to lobbying and trade associations disclosures. To make its point, Glass Lewis noted that while State Street Corp. (STT) provides information about all trade associations to which it has paid more than $50,000, BNY Mellon only provides a listing of its “principal trade associations.”

Addressing a Trust Gap  

The Lobbying Disclosure Act requires that federal lobbying data must be disclosed. But, according to a Sustainable Investment Institute December report, 98% of S&P 500 companies don’t disclose state-specific lobbying totals to shareholders. The report also noted that, since 2010, investors have filed nearly 600 shareholder resolutions asking companies to provide more information about how they oversee lobbying activities directed at federal, state and local government, and how much they spend.

Generally, filers of lobbying shareholder proposals seem to take the view that if a company believes that an issue is material enough to spend corporate funds on, it is material enough to disclose to investors. Additionally, they contend that if a company is lobbying on a contentious issue that is aligned with its broader strategy, as any lobbying should be, then the lobbying itself highlights a risk in the company’s strategy that shareholders have a right to know about.

For companies, if it comes to light that lobbying spending is not aligned with its vision or strategy or with the risks listed in its regulatory filings, reputational risk can arise.

“In addition to dark money risks, lobbying misalignments remain a concern for investors when company lobbying contradicts company public positions,” wrote John Keenan, corporate governance analyst at AFSCME Capital in a proxy preview report released mid-March. This year’s shareholder proposals highlight lobbying misalignments on issues including climate, workers’ rights, rail safety, drug pricing, corporate taxation, antitrust, public health and voting rights — and banks, manufacturing, pharmaceutical, tech, telecom and utilities have been among the industries receiving proposals this season, he noted.

A handful of lobbying-themed proposals have passed in recent years. Notably, in 2021, the same year that the then ESG activist fund Engine No. 1 surprised the market by installing three dissident directors onto Exxon Mobil Corp.‘s (XOM) board, 55.6% of voting shares supported a lobbying proposal submitted at the oil major. Exxon now produces annual federal and state lobbying reports as well as an annual climate lobbying report.

Corporate lobbying disclosure has also come under scrutiny on Capitol Hill. In a Nov. 15 letter, five Democrats on the Senate Banking Committee urged the Securities and Exchange Commission to use its existing authority to issue rules requiring companies to disclose more details on their corporate lobbying expenditures and strategy to shareholders.

The Wrong Track?

Prior to its collapse, SVB lobbied for legislation, approved in 2018, to increase an asset size threshold that allowed it to potentially escape more stringent regulation. Similarly, Norfolk Southern reportedly lobbied against stricter safety regulations before last year’s derailment disaster in East Palestine, Ohio.

In addition to prompting an evacuation and multiple lawsuits, the railroad operator’s toxic spill near the Ohio-Pennsylvania border attracted the attention of Cleveland-based activist investor Ancora Holdings Group LLC.

The insurgent fund on Feb. 20 launched a change of control director contest and C-suite shakeup campaign aimed at installing eight board nominees and two executives onto Norfolk’s board. In its investor presentation on the proxy contest, Ancora asserted that Norfolk’s board failed to oversee management and operational risks that led to tremendous environmental damage, financial losses and value destruction for shareholders. It added that Norfolk’s insufficient response to the derailment that spilled hazardous materials represented a “microcosm” of the railroad’s “failed strategy, insufficient accountability and lack of oversight of leadership.”

In the decade before the Ohio derailment, Norfolk Southern spent more than $20 million on lobbying in Washington to influence Congress, the White House, and federal agencies, Jon Golinger, democracy advocate at non-profit advocacy group Public Citizen, pointed out in a January report. In the year after the derailment, Norfolk’s federal lobbying spending not only continued, but significantly increased, with the train operator reporting $2.3 million in federal lobbying in 2023, he added.

On Tuesday, Norfolk Southern announced that it reached a $600 million agreement in principle to resolve a consolidated class action lawsuit relating to the East Palestine derailment. If approved by the court, the agreement will resolve all class action claims within a 20-mile radius from the derailment and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment.

As investor support for shareholder proposals is indicative of whether they think a particular risk can impact a company’s value and reputation, this year’s votes on lobbying disclosure proposals may be telling.

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https://pipeline.thedeal.com/article/0000018e-cd53-db8a-a3fe-fffba9d90000/deal-news/features-and-commentary/lobbying-shareholder-proposals-proliferate-suggesting-trust-gap

Click Here to add your name to the petition to show Wells Fargo shareholders that there’s overwhelming support for their corporate lobbying transparency proposal.

This text is an excerpt from a Voluntary Submission to Wells Fargo Company Shareholders urging them to vote FOR Item 12 at the Shareholder Meeting on April 30, 2024:  (read the full original shareholder notice here)

To Wells Fargo Shareholders:

I urge shareholders to vote FOR Item 12 at the shareholder meeting.

The proposal asks Wells Fargo to prepare an annual report on its lobbying.

The proposal is part of an ongoing investor campaign for greater corporate political spending and lobbying disclosure. Transparency and accountability in corporate spending to influence public policy are in the best interests of Wells Fargo shareholders. Without a clear system ensuring accountability, corporate assets can be used to promote public policy objectives which can pose risks to Wells Fargo’s reputation and shareholder value.

Wells Fargo should commit to corporate political responsibility by increasing its transparency by disclosing all of its third-party spending to influence public policy. In this letter, I will show support for this proposal is warranted because:

1. Reputation is an important component of shareholder value;
2. Wells Fargo’s current disclosures are inadequate;
3. Dark money spending through trade associations and social welfare groups presents unknown risks; and
4. Wells Fargo could easily provide details of its lobbying in an annual report to investors.

Read the full original shareholder notice here

Click Here to add your name to the petition to show Wells Fargo shareholders that there’s overwhelming support for their corporate lobbying transparency proposal.

This piece originally appeared on the Proxy Preview website. You can view the original piece here.

by Heidi Welsh & Robin Young

This piece originally appeared on the Proxy Preview website. You can view the original piece here.

by John Keenan

For 2024, more than 30 shareholder proposals have been filed asking for lobbying disclosure reports that include federal and state lobbying amounts, payments to trade associations and 501(c)(4) social welfare groups used for lobbying and payments to tax-exempt organizations that write and endorse model legislation.

State Lobbying Disclosure “Black Hole”

A new study found almost no major U.S. companies provide their investors with state lobbying disclosure, with 98 percent of the S&P 500 failing to disclose state-specific lobbying totals to shareholders. While federal lobbying data are easy to find, company disclosure of state lobbying remains a key need for investors as the data are scattered among a byzantine system of different disclosure regimes.

Senators Ask SEC to Mandate Lobbying Disclosure

The investor demand for lobbying disclosure recently attracted political support, with Senate Banking Committee Democrats writing a letter to the SEC urging it to issue a rulemaking to require companies to disclose their lobbying to shareholders. The senators noted that investors are largely kept in the dark regarding the policy campaigns they are indirectly funding.

Unlimited Undisclosed Spending Presents Risk

In addition to state spending, investors often face a blind regarding third-party lobbying. Undisclosed, unlimited company payments to trade associations and social welfare groups present risks, including reputational damage for lobbying that contradicts company positions and financial fines and regulatory sanctions for illegal payments. FirstEnergy was fined $230 million for funneling $60 million through a social welfare group in an Ohio bribery scandal that also resulted in indictments of company executives.

Train Safety under the Microscope

Norfolk Southern’s lobbying in Ohio has come under scrutiny after the train accident in East Palestine. A recent report found its federal lobbying spending increased 30 percent in the year since the accident. Investors are left wondering whether lobbying against safety rules has been in the company’s best interest.

Ongoing Demand for Tech Companies to Disclose

Investors refiled proposals at Alphabet, Amazon and Meta, which together list more than 1,000 trade associations, social welfare groups and non-profits receiving support but fail to disclose their payments and amounts used for lobbying to controversial groups like the Federalist Society attacking environmental, social and governance investing, the climate denialist think tank Competitive Enterprise Institute and the “anti-trans fear mongering” Independent Women’s Forum.

2024 Lobbying Disclosure Campaign – Misalignments Abound

In addition to dark money risks, lobbying misalignments remain a concern for investors when company lobbying contradicts company public positions. The 2024 proposals highlight lobbying misalignments on issues including climate, workers’ rights, rail safety, drug pricing, corporate taxation, antitrust, public health and voting rights. Banks, manufacturing, pharmaceutical, tech, telecom and utilities are among the industries receiving proposals.

John Keenan
Corporate Governance Analyst, AFSCME Capital Strategies

This piece originally appeared on Public Citizen’s website. You can view the original piece here.

This story originally appeared in Bloomberg Law. You can view the original article here.

By Clara Hudson | December 22, 2023

Labor rights, pay equity and political contributions are poised to take center stage at corporate annual meetings in 2024.

Shareholder proposals on workers’ rights are building on the momentum of a burgeoning labor movement, while proposals on political spending will see renewed attention as the presidential race gathers speed. The drive is especially notable considering that support for environmental, social and governance proposals took a hit overall this year, with an average of about 22% support down from 33% in 2021, according to a post-proxy season analysis from the Sustainable Investments Institute.

Following a labor-related win at Starbucks’ annual meeting in March, proposals voicing concerns about companies’ commitments to workers’ rights to organize are gearing up for their second year on the corporate ballot at annual investor meetings. And after Kroger investors passed a pay equity proposal in June, expect more companies to be urged to disclose additional details about how they pay women and minorities.

The shareholder momentum concerning how companies treat their employees coincides with highly publicized allegations of labor violations at companies including Starbucks, as well as worker pushback on pay transparency alongside a wave of state salary transparency laws.

“I think it’s undeniable at this exact moment that the labor rights issues are salient to almost every company,” said Kyle Seeley, head of stewardship at the New York State Common Retirement Fund.

The New York State and New York City Comptroller’s offices, which oversee public employee pension funds, this year secured results including 36% of investor support on a proposal asking Netflix to adopt a policy on its commitment to freedom of association and collective bargaining, a high level of backing for a shareholder bid. The proponents have refiled the Netflix proposal, which could go to another vote next year. Netflix declined to comment for this article.

Another batch of proposals to watch is those seeking more corporate transparency on political spending—particularly over how corporate donations line up with the values the companies tout. Those bids are likely to get heightened attention because of the upcoming presidential election.

The comptroller’s office also focused this year on political spending bids at companies like Warner Bros. Discovery Inc., which agreed to publicly disclose its political spending in May. When Seeley speaks to businesses about their donations, his “main point” now is that the presidential election will increase transparency pressure, he said.

“This is a highly politicized action no matter who you make donations to,” he said.

Many of these proposals highlight how corporate donations are supporting candidates or groups that have worked to restrict abortion access. Investor interest in asking companies to report risk concerning abortion restrictions has slipped sharply since the Dobbs v. Jackson Women’s Health Organization decision.

The dozen or so abortion proposals that went to a vote at companies including UPS, PepsiCo and Coca-Cola, averaged 11.8% shareholder support during this year’s proxy season, cut in half from 25.1% the year before. Those proposals were garnering far more support before the Supreme Court overturned Roe v. Wade. Some proxy experts have theorized that the slump in support for ESG proposals overall, which coincides with the Republican backlash over the concept, is to blame.

Unions and Pay Equity

This past year there were about a half-dozen union-related investor proposals that went to a vote as workers went on strike from Hollywood to Detroit and public scrutiny flared up over allegations of union-busting.

Meanwhile, the New York City comptroller’s office last month announced a new international investor network calling on companies to respect workers’ rights. The network includes members like the UK-based Local Authority Pension Fund Forum.

The New York city and state comptroller’s offices have their eye on more companies: they recently took aim at online marketplace eBay Inc., asking the company to restore language to its website spelling out its support for employee union rights.

This year, companies including Activision Blizzard, Amazon and CVS faced investor votes on labor rights at their annual meetings. Those proposals, seeking either a freedom of association policy or a labor practice assessment, secured a steady amount of investor support, typically in the 30-36% range, except for CVS which garnered 26% support.

Seeley said the comptroller’s office has refiled the CVS proposal, which could go to another vote next year. In its proxy statement, CVS said it publicly discloses compliance with its human rights policy and its approach to protecting workers in its supply chain. CVS said it is “committed to workers’ freedom and collective bargaining rights worldwide and our policies reflect that commitment.”

In an email, CVS added: “We have good relationships with the unions that represent our colleagues and have ratified over 15 agreements in the past three years, with no work disruption. We have no pattern or practice of anti-union behavior, and in fact, have business lines that are actively dedicated to serving the needs of public and labor clients and members.”

A proposal calling for a labor practice assessment at Starbucks, which has been enmeshed in a highly public controversy over alleged labor violations, also stood out this year for winning majority investor support with 52%. Prompted by the proposal’s win, Starbucks released an independent report in December that found the company could improve its communication and management training on labor issues.

Starbucks said the report shows it “is not opposed to bargaining and continues to engage in meaningful negotiations with other unions elected to represent our partners.”

A shareholder proposal at Kroger to increase pay equity transparency was another of the standout bids this year that won. The Kroger proposal may have passed the 50% mark in part because of articles about Kroger workers who were homeless or on foodstamps.

The proxy push coincides with new laws adopted in states such as California and New York that mandate transparent pay information and are intended to give workers more bargaining power to fight pay discrimination.

Similar proposals to the bid at Kroger targeted companies including Nike, Apple and Amazon, typically securing about 30% shareholder support this year.

The charge was led by impact investment firm Arjuna Capital, which has brought bids that could go to another vote next year at Amazon, for example. Amazon declined to comment.

“It’s not enough to say we care about our employees, you have to prove to your employees that you are treating them equitably,” said Julia Cedarholm, senior associate of ESG research and shareholder engagement at Arjuna Capital.

Amazon said in its proxy statement this year that it already “provides extensive statistical reporting on our workforce diversity and pay equity… We do not believe that the additional report on vaguely-described ‘median pay gaps across race and gender’ requested by this proposal would enhance understanding of or accountability for our diversity efforts.”

Political Spending

With heightened political friction emerging because of the presidential election, companies are wrestling with more pressure over which candidates or third parties they’re funding.

A report published this month from the Sustainable Investments Institute (commissioned by non-profit consumer advocacy group Public Citizen) drew attention to the lack of clarity companies give on lobbying: the report said 98% of S&P 500 firms don’t disclose lobbying totals for specific states.

Companies including Coca-Cola, Home Depot and Eli Lilly faced a range of political spending-related proposals this past year. The proposals asked Coca-Cola and Home Depot if their donations match their corporate values, and sought a policy at Eli Lilly requiring that third parties to which it donates, including trade associations, reveal where the money goes.

A proposal at Disney asking the entertainment giant to unveil details about how its political donations match its values secured 36% of investor support at its annual meeting in April. The vote came around the time that Disney publicly clashed with Florida Governor and presidential hopeful Ron DeSantis (R) over its response to the state’s “Don’t Say Gay” law, which limits classroom discussion of sexual orientation.

At the time, Disney said in its proxy statement that the proponent “is seeking to micromanage the company’s political engagement to advance a limited, particular agenda rather than recommend an action to enhance shareholder value.”

One proposal at Caesars Entertainment Inc. secured a strong showing of shareholder support with 42% voting for a proposal asking the company for more information about its political spending.

And there were some corporate compromises that led the New York State comptroller to withdraw its proposals: a string of companies including Warner Bros., Match Group Inc., Paramount Global, PENN Entertainment Inc., Zillow Group Inc. and Zoom Video Communications Inc. said this year that they will publicly report monetary and nonmonetary contributions to any campaign for or against a candidate, or to influence public opinion on an election or referendum.

Companies should take notice that transparency and accountability “is very important in terms of their image but also in terms of protecting themselves,” said Bruce Freed, co-founder and president of the Center for Political Accountability, which has written model proposals for shareholders seeking more political spending transparency.

“They realize today how they can be impacted by what their spending enables and what it associates them with,” he said. “Especially going into an election that has such consequences.”

This piece originally appeared on Public Citizen’s website. You can view the original piece here.

Washington, D.C. – A new report from Sustainable Investments Institute commissioned by Public Citizen reveals the extent to which corporate lobbying at the state level – on everything from environmental regulations to tax policy – goes undisclosed, despite strong investor desire for more transparency.

The report, “The Corporate State Lobbying Black Hole,” examined companies in the S&P 500 between 2015 and 2021 and found that, while state lawmakers and regulators nationwide have faced influence efforts backed by billions of dollars of expenditures, almost no major U.S. companies provide their investors with information about how much they spent to lobby state governments: 98 percent of S&P 500 firms do not disclose state-specific lobbying totals, while 97 percent of the same companies do not report a combined or aggregate spending total for state lobbying.

The report also found that investors have shown strong, sustained support for more disclosure about corporate lobbying expenditures. Since 2010, investors have filed nearly 600 shareholder resolutions asking companies to provide more information about how they oversee lobbying activities directed at federal, state and local government, and how much they spend.

“Shareholders and the public deserve to know how and where corporations are using company funds to influence politicians and impact government actions,” said Jon Golinger, Democracy Advocate at Public Citizen. “As weak as federal corporate lobbying disclosure is, this report reveals that state-level corporate lobbying disclosure is even worse. This lack of transparency means that investors may be deprived of critical information about a company’s behind-closed-doors lobbying activities that could run contrary to a company’s publicly stated positions and create reputational harm or pose other investment risks.”

Yet current legal mandates are a black hole. The report looked at requirements affecting companies in a subset of states—the 15 that have passed anti-ESG legislation as of June 2023–and found a patchwork of information regarding how corporations and issues are identified and classified, making it difficult to collect lobbying information in a format that enables researchers to aggregate and analyze it.

“Companies have taken some baby steps to beef up lobbying oversight but we still just don’t know what they spend,” said Heidi Welsh, Sustainable Investments Institute’s executive director. “It’s a giant ‘known unknown.”

A key group of influential U.S. Senators have asked the Securities and Exchange Commission (SEC) to mandate fuller disclosure of corporate issuers’ approach to political influence by way of lobbying. Senate Banking Committee Chair Sherrod Brown (D-Ohio) and Senators Elizabeth Warren (D-Mass.), John Fetterman (D-Pa.), Tina Smith (D-Minn.), and Jon Tester (D-Mont.) sent a letter to SEC Chair Gary Gensler on November 15 urging the SEC to use its authority to require reporting to investors on issuers’ lobbying strategy, how much they spend on lobbying, and any material risks related to lobbying strategy and spending. “In the absence of strong lobbying disclosure rules,” wrote the senators, “investors are largely kept in the dark regarding the policy campaigns they are indirectly funding.”

In fact, since just before Christmas in 2015, a corporate-funded cabal of Republican Congressmembers have successfully blocked all federal regulatory action to enact a corporate political spending disclosure rule.  Year after year, they’ve been able to use backroom maneuvers to attach a poison pill policy “rider” to the annual funding bill for the Securities Exchange Commission (SEC), the agency charged with enacting sensible corporate disclosure rules.

Yet again in 2023, House Republicans have succeeded in slapping another secret money poison pill rider onto the SEC appropriations bill that would block corporate political spending disclosure for another year.  But a bright ray of hope was offered by Representative Jason Crow, Democrat from Colorado, and Representative Seth Magaziner, Democrat from Rhode Island. Both of them stepped up to sponsor amendments to strip the SEC spending bill of this secret money rider and finally let the corporate political spending disclosure rule move forward.

“Our democracy is not for sale – we need more transparency, not less,” said Representative Jason Crow.  “Sunshine is the best disinfectant.  My amendment would help put an end to corrupt influence, increase transparency, and restore public trust in government.”

“Voters deserve full transparency about who is spending money to try to influence elections,” said Representative Seth Magaziner. “We must ensure the American people know where their money is going and whether it is fueling political activities including election denialism, environment degradation, or draconian abortion restrictions.”

House Republican leaders refused to even let either of these sunlight amendments be voted on.

While, year-after-year, some Congressmembers keep rewriting the rules to block that common-sense disclosure, we will continue to organize, advocate, and shine light on the need to strike the secret money policy riders and bring corporate political spending out of the shadows.

With 80% of Americans overwhelmingly on the side of sunlight, this is a cause worth fighting for.  A fight that, with enough persistence and follow-through, we will – eventually – win.

Jon Golinger is the Democracy Advocate with Public Citizen

This piece originally appeared on Public Citizen’s website. You can view the original piece here.

By Jon Golinger

Following the Supreme Court’s disastrous 2010 decision in Citizens United, overturning a century of law and giving corporations free rein to spend unlimited amounts on elections, Public Citizen helped form the Corporate Reform Coalition to bring together a broad collection of investors, academics, securities experts, labor, and national and state-based public interest groups to address the overwhelming influence of corporations on elections. Public Citizen plays a leading role in the Corporate Reform Coalition’s work, providing key staffing and organizational support. Since Citizens United, the coalition’s focus on the need for corporate political disclosure and the demand from shareholders for this information has provided an effective framework within the Court’s legal constraints to work to mitigate the massive damage caused by the flood of secret money corporations are spending to shape American politics.

A recently released report by a right-wing think tank affiliated with indicted former Trump Chief of Staff Mark Meadows signals just how effective corporate lobbyists themselves think our work has been. Naming and Shaming, a report by the right-wing American Accountability Foundation, listed the Corporate Reform Coalition and Public Citizen first in a list of groups that have successfully championed transparency and backed corporate shareholder resolutions to persuade companies to disclose their political and lobbying spending to their investors. The report asserts that the movement to get companies to disclose their political and lobbying spending to investors is “a real, tangible threat” that could even put corporate lobbyists “out of business.” Tax filings show that the group behind this report is closely related to Mark Meadows’ Conservative Partnership Institute in Washington, D.C.

If the point of this report is to show that Public Citizen and our allies are working hard every day to shine a spotlight on the massive amount of secret money corporations spend to bend American politics and policy to serve their agendas instead of the public interest – we completely agree. In fact, our work to push for regulations and legislation to require political spending transparency for investors has made a significant impact in the fight for corporate accountability.

It’s a badge of honor to be labeled enemy #1 of secret money influence spending by corporations, one we will wear with pride.

In the critical months ahead for our fragile democracy, the Corporate Reform Coalition and Public Citizen will continue to champion regulatory, legislative, and corporate governance solutions to strengthen the voices of shareholders and provide them the information they deserve about how their investments are used to influence American politics and policy.

As former Supreme Court Justice Louis Brandeis famously wrote: “Sunlight is said to be the best of disinfectants.” Now, more than ever, we need to let the sun shine in on corporate secret money and influence spending.

Jon Golinger is the Democracy Advocate with Public Citizen

As 2021 Lobbying Proposals Are on an Early Roll, BlackRock and Vanguard Hold the Key to Dark Money Transparency at Walt Disney

In the wake of the January 6 riot, shareholder proposals for lobbying disclosure have received increased support in 2021. The first proposal at Tyson Foods filed by the Teamsters and cofiler Oxfam received over 80% support of outside shareholders. For the first time at Tyson, Blackrock and Vanguard both supported the proposal. Additionally, the proposal at AECOM filed by John Chevedden passed with 54.6% support.

On March 9, the third lobbying disclosure shareholder proposal for 2021 will be going to vote at Disney. Last year, the same proposal seeking lobbying disclosure received 33.7% support of shareholders. But if Vanguard and BlackRock had voted their combined 198,686,536 shares for the proposal instead of voting against, it would have received a majority of votes for and against. Multiple studies have shown if these two managers vote for lobbying disclosure proposals, it is likely many of these proposals will pass.

As shareholders vote on the 2021 proposal, Vanguard and BlackRock again appear to hold the balance of proxy voting power, with 246,843,283 shares and 13.6% of outstanding shares. Will they repeat their support for lobbying disclosure?

Blackrock and Vanguard Have Business Ties with Disney

One issue noted in Disney’s 2021 proxy statement is the fact that Vanguard and Blackrock both manage funds on behalf of Disney for defined contribution plans. Blackrock also manages investment portfolios for the company’s pension funds. Vanguard and Blackrock received fees of approximately $1 million and $15 million. Multiple studies have shown that business ties significantly influence pro-management voting and that pension- related business ties influence fund families to vote with management at all firms. As Jack Bogle, founder of Vanguard, explained: “Votes against management may jeopardize the retention of clients of 401(k) and pension accounts.”

Investors Need Dark Money Lobbying Disclosure

Lobbying is important to Disney. An exempt solicitation by lead filer Mercy Investment Services is filled with numerous examples for why investors should support the proposal, including:

• Disney’s federal lobbying efforts have been described as “so effective that the United States changed its copyright law twice, in 1976 and in 1998.” Disney’s lobbying in Florida has been described as “the 800-pound mouse protecting its cheese in the backrooms of city hall and state government.”
• Shareholders face a dark money blind spot on Disney’s contributions to third-party groups that use that money to influence policy. Disney fails to disclose a closed top limit for its trade association payments and fails to disclose its contributions to social welfare organizations (501(c)(4) organizations), which can also lobby. For example, the Rule of Law Defense Fund is a social welfare group that helped organize the protest before the Jan. 6th riots and is an arm of the Republican Attorneys General Association. Yet, shareholders have no way to know if Disney made contributions to the Rule of Law Defense Fund.
• Disney’s involvement in trade associations like the Chamber of Commerce, which undermined the Paris climate accord, could pose reputational risks. Groups like Change the Chamber are calling on Chamber members like Disney to change the Chamber’s position against science-based climate legislation.
• Disney’s major trade associations, the National Association of Broadcasters (NCTA), the  Internet & Television Association, and the Motion Picture Association; support controversial groups like the Competitive Enterprise Institute , a 501(c)(4) social welfare group. CEI is controversial for promoting climate denial.

Additionally, a Public Citizen analysis found that “Disney backed 96% of the Republican lawmakers in Florida who, in a pair of party-line votes, passed legislation to sabotage a popular voting rights ballot initiative that restored former felons’ voting rights.”

Proxy Advisor Support

Institutional Shareholder Services has recommended in support for the proposal, in part noting that Disney fails to:

• specify management or board oversight related to the company’s trade association memberships or indirect lobbying activities;
• discuss how it reconciles reputational risks when its trade associations’ lobbying activities contradict the company’s public positions;
• provide the exact amount of payments to trade associations and therefore the portions used for lobbying activities are not clear; and
• provide its federal and state level direct lobbying expenditures on its website, where it can be easily accessed.[1]

If you own shares directly in Disney, you should vote in favor of Proposal 4, which asks the company to prepare an annual report on its lobbying activity so that shareholders- the true owners of the company- can assess the associated risk.

If you don’t own stock directly in Disney –or any other company where these shareholder resolutions are filed this year — but are worried about undisclosed political spending by corporations that is being used to influence our democracy, chances are you can have an impact through your 401(k) instead.

If you invest your retirement with Vanguard, BlackRock, Fidelity, or State Street, tell them to change the way they vote so that progress on disclosure can move forward.

[1] ISS 2021 Walt Disney Proxy Analysis, February 17, 2021, p. 29.

This post was updated on March 9th, 2021 to include the Public Citizen analysis of Disney’s spending in Florida.

Even in a pandemic, shareholders are laser focused on shining a light on corporations engaging in politics

By: Zachary Brown

Federal response to the COVID-19 crisis has been temperamental to say the least (read: any piece of news in the last three months). While millions of Americans have lost their jobs during the pandemic, Congress has continued to use taxpayer funds to bailout the largest corporations in America. Adding more fuel to the fire, these no strings attached federal bailouts allow companies to not only profit from the pandemic, but also to engage in all of their same favorite pre-COVID behaviors: allowing corporations across America to escape economic failure but continue ethical bankruptcy.

Since the Supreme Court’s decision in Citizens United, companies have been able to influence our politics behind the scenes without any real substantial check on their activities. With corporations being given unchecked access to our political system, it should come as no surprise that it’s become even more difficult to hold government officials accountable. Businesses have effectively paid off the babysitter and eat as much candy as they want—operating free from restraint or meaningful oversight. Even worse, corporations are not even required to disclose their political activity to their own shareholders. And somehow even worse than that, the Securities and Exchange Commission has recently put forth measures to make it more difficult for investors to increase the political activity disclosure of their companies, silencing people from exercising any type of progressive influence over the corporations they choose to invest in. Not exactly a seat at the table, right?

However, new recent trends of shareholder engagement have provided hope for the future. Every year, shareholders submit resolutions for a vote at a corporation’s annual shareholder meeting, signaling that shareholders want to have an active role in the reformation of a corporation’s policies, actions, and structure to be more equitable and transparent. If the vote tally on a shareholder resolution reaches majority, a corporation is more likely to reform their policies and procedures to appease their shareholders (yes, these corporations have to be told to do the right thing).

Even in the midst of a news cycle that seemingly won’t stop, 2020 was quite the year for shareholder meetings. While the interests expressed in shareholder resolutions can run the wide gambit from executive compensation all the way to human rights and climate issues, it is highly encouraging that disclosure of corporate political activity was one of the most frequently filed shareholder proposals this year, with over 80 proposals filed. And the results are even better! This year, there were majority votes on election spending and lobbying disclosure proposals at Alaska Air, Chevron, Centene, Illumina, JB Hunt Transport Services, and Western Union. While corporations would love to keep their political spending a tight-lipped secret, they cannot ignore the growing calls from investors to change their actions.  These shareholder votes show that the people are ready to act on this issue and want to see more transparency from our corporations, turning a bright light on some of the dark activities that companies have been engaged in for decades.

The tension between what some corporate managers want to keep hidden and the honesty shareholders seek reaches a new stress point when considering the clear hypocrisy a corporation’s actions can reveal during the COVID-19 crisis. Let’s use our imaginations. Picture Company X, skipping gleefully along with their fresh corporate bailout funds. Company X says all the right things about “coming together during these unprecedented times” and “building a new America together as a family” — all with a grin able to be seen from space. But where is Company X bouncing towards with their treasure chest of taxpayer dollars? The U.S. Chamber of Commerce. While you may not have many specific gripes with your local Chamber of Commerce, the U.S. Chamber of Commerce is far more openly toxic — actively pushing an agenda that is dangerous for workers, consumers, and the environment. That’s right everyone, Company X is actively supporting the very same organization that lobbies against hazard pay and wants to make it impossible to sue your employer if you contract COVID on the job (ridiculous!) Allowing corporations to smile in our faces one second while stabbing us in the back with their political spending the next is inexcusable whether we are dealing with a national pandemic or not.

While the progress made through this last proxy voting season has been significant, in order to truly alleviate this issue, the Securities and Exchange Commission must create and enforce a new disclosure model that requires companies to inform their investors of the full extent of their spending—a change the Corporate Reform Coalition will continue to tirelessly advocate for. If publicly traded companies want to sell pieces of ownership in their company, true ownership should mean true transparency is non-negotiable. In 2020, shareholders and investors did their part to create transformational change across the corporate landscape, it’s time for our federal government to do their part as well.

Zachary Brown is Administrative Assistant for Public Citizen’s Congress Watch division. 

Contradicting responses to the Coronavirus come as companies face questions at their annual meetings about their lobbying through trade associations

As the COVID-19 pandemic exposes critical medical equipment shortages within our health system, the American Hospital Association, the American Medical Association and the American Nurses Association have called for the White House to immediately use of the Defense Production Act (DPA) to produce and distribute much needed Personal Protection Equipment (PPE) and ventilators. Yet the U.S. Chamber of Commerce, the largest lobbying spender in the country and trade association of many leading companies, has inexplicably lobbied the White House against the administration’s use of the DPA, which would enable the government to quickly accelerate the production of necessary medical equipment.

In response to the current COVID-19 pandemic, many companies are taking actions to meet these dangerous equipment shortages. Yet, many of these same companies belong to the Chamber and give it millions in payments that the Chamber then uses to lobby, as it has done here, against actively and comprehensively utilizing the DPA. Investors are asking many of these companies for expanded lobbying disclosure and highlighting reputational risks when the lobbying of trade associations contradicts company public positions at upcoming shareholder meetings, including Abbott Laboratories, AbbVie, Boeing, Citigroup, Honeywell and Pfizer.

The Chamber’s recent actions have received negative press scrutiny:

Trump is bending to big business during a pandemic, and Americans are worse off for it.
– Now This

Trump has refused to invoke the act because big business doesn’t want him to.
– New York Magazine

If enough member companies spoke out against the Chamber’s lobbying, it would have to stop… Google is also an active member of the Chamber, and the Chamber is blocking action that could marshal the resources of numerous companies to produce this equipment. If Google spoke out against the Chamber’s lobbying, it would create enormous pressure on the Chamber to shift course.
– Popular Information

Senators have called for “the Chamber to cease their lobbying efforts against measures to address the COVID-19 pandemic and place the economic and public health needs of hundreds of millions of American families above its members.” Additionally, major unions have condemned the Chamber’s actions. Finally, a report released by unions and advocacy groups calls on companies that are members of the Chamber to publicly call for the full use of the Defense Production Act.

Why is the Chamber, one of the most powerful lobbyists in Washington D.C., lobbying against the use of an act that gives broad authority to increase the manufacturing output of lifesaving equipment in a national emergency? While we wait for a definitive answer on their lobbying against the DPA, the Chamber has a long track record of lobbying against the broader interests of many of its corporate members.

For example, many of the Chambers corporate members individually support efforts to combat climate change and the Paris Climate Accord, yet the Chamber, on behalf of its members, has consistently lobbied against effective climate change regulations. A similar schism occurs on the issue of tobacco and public health, where many Chamber companies are committed to advancing patient health and well-being, yet the Chamber has worked to block global anti-smoking laws. On the issue of a minimum wage the Chamber appears to be out of sync with its members again. The Chamber claims to represent the interests of more than 3 million businesses and yet, while 80 percent of small business support raising the minimum wage, the Chamber is opposed to raising it.

These are just three examples where the Chamber has pushed for a harmful, deregulatory corporate agenda that goes against the public positions of many of its members and appears to be aligned only with the small number of companies that are its largest contributors. Do Chamber member companies really oppose the use of a law that is needed to address the acute shortage of personal protection equipment and ventilators that hospitals and front-line workers are facing? With the impact of the pandemic reaching every corner of America and across the globe, it’s incomprehensible that anyone — including corporate lobbyists for the Chamber — would block the use of employing every tool available to fight the disease and save as many lives as possible.

Investors Seek Disclosure of Lobbying at Citigroup, Pfizer, Abbott, Honeywell, Boeing and AbbVie, Highlighting Chamber Pandemic Lobbying Misalignment

Amidst this focus on the Chamber’s ongoing opposition to the DPA, shareholder proposals asking for lobbying disclosure will be going to vote at upcoming shareholder meetings at many companies that belong to the Chamber or sit on its board. These proposals at Citigroup, Pfizer, Abbott, Honeywell, Boeing and AbbVie ask the companies to disclose board oversight for lobbying and all federal and state lobbying expenditures, including disclosing all payments used by the Chamber for lobbying.

A major concern for investors is when indirect company lobbying through a company’s trade associations directly contradicts the company’s public positions.

On the one hand, these companies are working to speed production of ventilators and respirators to respond to COVID-19. Yet on the other, their trade association is blocking effective use of the DPA that is sorely needed to address the pandemic.

Exempt solicitations filed in support of the resolutions specifically highlight this contradiction and the reputational risk for companies from these types of trade association lobbying misalignments.

April 21 – Citigroup

Citigroup is providing $15 million in COVID-19 related relief efforts and supports “efforts to act swiftly, proactively and aggressively to mitigate the impacts of this situation.” The shareholder proposal filed by the New Economy Project notes that Citigroup supported the Paris Agreement on climate change, but the Chamber has worked to undermine it. The exempt solicitation states that “by funding a trade association’s lobbying, Citigroup is effectively endorsing its lobbying positions,” while also highlighting the pandemic as “another disturbing example of the conflict between Citigroup’s stated commitments and the U.S. Chamber of Commerce’s lobbying.”

April 23 – Pfizer

Pfizer is calling on the biopharmaceutical industry to join it in committing to unprecedented collaboration to combat COVID-19. The shareholder proposal filed by Oxfam notes that Pfizer sits on the boards of both the Chamber and the Pharmaceutical Research and Manufacturers of America (PhRMA), which together have spent over $1.9 billion on lobbying since 1998, yet fails to disclose how much of its Chamber and PhRMA payments are used for lobbying. Oxfam’s exempt solicitation notes that Pfizer believes in addressing climate change, but the Chamber undermined the Paris climate accord, thereby creating important misalignments on one of the defining issues of our time. It further notes a similar misalignment in the Chamber’s responses to the COVID-19 pandemic.

April 24 – Abbott Laboratories

Abbott is producing and distributing rapid point-of-care COVID-19 tests and “working 24/7 to make as many tests as we can and create the next round of needed tests.” However, it also serves on the Chamber board of directors. The shareholder proposal filed by the Unitarian Universalist Association (UUA) notes that Abbott believes in addressing climate change and supports good health, yet the Chamber undermined the Paris climate accord and has worked to block global antismoking laws. UUA’s exempt solicitation also notes that Abbott signed the Business Roundtable Statement (BRT) on the Purpose of the Corporation to be socially responsible, yet the BRT is lobbying to limit the right of shareholders to file resolutions.

April 27 – Honeywell

Honeywell has committed to increasing production of N95 respirators and other personal protection equipment in response to the current COVID-19 pandemic, yet also serves on the Chamber board of directors. The shareholder proposal filed by Mercy Investment Services notes that Honeywell is committed to reducing global greenhouse gases and signed an agreement to work with United Nations Environment to combat climate change, yet the Chamber undermined the Paris climate accord. Mercy’s exempt solicitation highlights the Chamber COVID-19 misalignment and points out that shareholders “face a trade association blind spot as Honeywell fails to disclose its trade association memberships.”

April 27 – Boeing

Boeing is assisting COVID-19 recovery and relief efforts, including manufacturing much needed face shields, yet is a member of the Chamber. The shareholder proposal filed by the Province of Saint Joseph of the Capuchin Order notes that “in the wake of the two 737 Max jet crashes, questions have been raised whether Boeing’s lobbying led to relaxed Federal Aviation Administration oversight, including ‘long-standing concerns about industry capture of the FAA, from lobbying by the aerospace industry—Boeing spends millions lobbying Congress and federal agencies each year—to the revolving door between the FAA and Boeing and other companies and lobbying groups in the industry.’” The exempt shareholder solicitation states that “Boeing needs to repair its tarnished reputation and can show its commitment to rehabilitating its image and culture by more fully disclosing its lobbying activities.”

May 8 – AbbVie

AbbVie is “collaborating with select health authorities and institutions globally on clinical research” and is donating $25 million to help support underserved communities and healthcare systems. The shareholder proposal filed by Zevin Asset Management notes that AbbVie is a member of the Chamber of Commerce, which has spent over $1.5 billion on lobbying since 1998, and sits on the board of the Pharmaceutical Research and Manufacturers of America (PhRMA), which spends millions lobbying against drug pricing measures. The exempt shareholder solicitation states that “AbbVie’s disclosure lags many of its peer group members which disclose the portion of trade association payments that are used for lobbying.”

Tell Corporate America to end the hypocrisy 

If you own shares directly in these companies, you should vote in favor of these proposals, which asks the company to prepare an annual report on its lobbying activity so that shareholders- the true owners of the company- can assess the associated risk.

If you don’t own stock directly in these companies –or any other company where these shareholder resolutions are filed this year — but are worried about undisclosed political spending by corporations that is being used to influence our democracy, chances are you can have an impact through your 401(k) instead.

If you invest your retirement through BlackRock, State Street, Dimensional, Fidelity or Vanguard, you can vote with your dollars and tell the funds to support disclosure.

Image credit: Elizabeth Thomsen/Flickr

This post was updated on 4/20/20 to include the report Unmasked: Report shows major corporations back campaign to block federally coordinated medical supplies.

BlackRock and Vanguard Hold the Keys to the Magic Kingdom

On March 11, Disney shareholders will vote on a proposal asking the company to provide a report on its board oversight procedures for lobbying and its federal and state lobbying expenditures, including indirect funding of lobbying through trade associations.

Last year, the same proposal seeking lobbying disclosure received more than 39% support from shareholders. Analysis shows that the two largest holders of Disney, Vanguard and BlackRock, together held the power to give the proposal majority support, but that each voted against the proposal. As shareholders vote on the 2020 proposal, Vanguard and BlackRock again hold the balance of proxy voting power.

Lobbying is important to Disney. Its federal lobbying efforts have been described as “so effective that the United States changed its copyright law twice, in 1976 and in 1998.” Reputation is also very important for Disney, which ranked 4th in reputation of the 100 most visible companies in the United States for 2019, and notes in its filings with the Securities and Exchange Commission (SEC) that damage to its reputation may negatively impact its business. Companies with a high reputation rank perform better financially than lower ranked companies, and executives find it is much harder to recover from a reputational failure than to build and maintain reputation.[1]

Since 2010, Disney has spent over $38.6 million on federal lobbying on issues like intellectual property, copyright, corporate tax reform, digital taxes, NAFTA and the Trans-Pacific Partnership Agreement. At the state level it’s much harder to know exactly how much Disney spends because state disclosure requirements are uneven and data is hard to digest. Disney’s state-level lobbying spending is likely significant. For example, Disney spent over $3.6 million on lobbying in California from 2010 – 2019, and Disney’s lobbying in Florida has been described as “the 800-pound mouse protecting its cheese in the backrooms of city hall and state government.” Disney also lobbies abroad, reportedly spending between €700,000 – €799,000 on lobbying in Europe for 2019.

Disney shareholders also face a trade association lobbying blind spot, as Disney fails to fully disclose its trade association payments used for lobbying. Disney serves on the board of the National Association of Broadcasters, which spent $14.2 million on federal lobbying in 2018, and is a member of NCTA – The Internet & Television Association, which spent $13.2 million on federal lobbying in 2018. Disney also belongs to the Chamber of Commerce which has spent nearly $1.6 billion on lobbying since 1998.

Investors believe Disney’s trade association payments used for lobbying could pose reputational risks. Trade associations often actively lobby for issues that are contrary to a company’s public statements and values or take controversial public stands. For example, Disney signed an agreement to work with United Nations Environment to combat and raise awareness around climate change, yet the Chamber undermined the Paris climate accord. A 2018 report looking at political engagement transparency rated Disney an “F” on responsible lobbying.

With approximately 11% of the voting power at Disney, the large mutual fund companies Vanguard and BlackRock are in a position to determine whether the shareholder proposal passes or fails. As the largest managers of retirement savings, mutual funds control significant voting shares in America’s most powerful companies. According to the 2020 Disney proxy statement, Vanguard beneficially owned 105,895,590 shares (5.9%), and BlackRock owned 92,760,946 shares (5.1%). Yet, Vanguard and BlackRock consistently vote against shareholder proposals that attempt to bring corporate political activity into the light.

Last Year’s Proposal Would Have Passed with Blackrock and Vanguard Support

In 2019, BlackRock and Vanguard each voted against the shareholder proposal asking Disney to disclose its lobbying to shareholders. If these two mutual funds had instead voted their combined 194,593,987 shares in favor of the 2019 proposal, it would have received a clear majority out of the votes cast for and against.[2]

A recent report by Morningstar found that Vanguard voted against every lobbying proposal in 2019, while BlackRock supported one out of 24. The report also found that the vote by one large asset manager could often tip a resolution’s outcome to a majority. For instance, lobbying disclosure at Exxon Mobil, which earned 37% support, would have passed if both BlackRock and Vanguard had supported it.

Proxy advisor Institutional Shareholder Services has recommended that shareholders vote for the proposal, noting that Disney does not disclose how it reconciles reputational risks when its trade associations’ lobbying activities contradict the company’s public positions and the portions of Disney’s trade association payments used for lobbying are not clear.[3]

Disney is required to report its state lobbying and already has this information, so it could easily provide this information to shareholders, as investors are asking for in the shareholder resolution up for vote. Deficiencies in the law means that Disney is not required to disclose its trade association payments, but if the company is internally tracking those payments- as responsible corporate governance would assume- then the company should have no problem sharing those details with investors.

The proposal is part of an ongoing ten-year investor campaign for greater corporate lobbying disclosure, which has seen investors increasingly supporting this type of disclosure.

Take Action

If you own shares directly in Disney, you should vote in favor of Item 5, which asks the company to prepare an annual report on its lobbying activity so that shareholders- the true owners of the company- can assess the associated risk.

If you don’t own stock directly in Disney –or any other company where these shareholder resolutions are filed this year — but are worried about undisclosed political spending by corporations that is being used to influence our democracy, chances are you can have an impact through your 401(k) instead.

If you invest your retirement through Vanguard, tell the company to change the way it votes so that progress on disclosure can move forward. If you invest through BlackRock, State Street, Dimensional, Fidelity or Vanguard, you can vote with your dollars and tell the funds to support disclosure.

Check out the shareholder advisory from Seventh Generation Interfaith Inc., on behalf of the lobbying disclosure resolution filed by the Congregation of Sisters of St. Agnes and co-filers Walden Asset Management, Mercy Investment Services, Congregation of St. Joseph, Daughters of Charity, Fresh Pond Capital, Missionary Oblates of Mary Immaculate, Greater Manchester Pension Fund and Franciscan Sisters of Perpetual Adoration.

[1] “Reputation Risk,” The Conference Board, 2007, p. 6.

[2] The 2019 shareholder proposal for lobbying disclosure received 404,451,360 votes for, 625,294,989 votes against and 8,326,501 votes that were abstentions.

[3] ISS 2020 Walt Disney Proxy Analysis, February 14, 2020, p. 32.

By: Ciara Torres-Spelliscy

The people running SoulCycle and Equinox’s gym franchises woke up to a serious headache in early August when the owner of their parent company Stephen Ross decided to throw a $250,000 a person fundraiser for President Trump’s re-election in the Hamptons. Ross also owns the Miami Dolphins football team. As soon as the public noticed this fundraiser, many on social media started calling for boycotts of SoulCycle and Equinox. Calls to boycott Dolphins were decidedly more rare, but there were some like one from Fred Guttenberg, a father of young woman killed at Parkland, Florida in 2018.

Celebrities like Chrissy Teigen announced that they had cancelled their gym memberships since there are other over-priced gyms one could join that don’t financially support Trump or his agenda. For example, TV legal commentator Maya Wiley tweeted she was quitting Soul Cycle writing, “I love #SoulCycle. I support #SteveRoss #Trump fundraiser. I support his right to his views. Since he uses his $ to support child separation, hatred, division & animosity for the rule of law, he can’t have anymore of mine. My butt won’t be on his bike.” And as comedian Billy Eichner tweeted, “Never thought I’d have to ask this but …. Do Nazis own Crunch?”

American boycotts to reject something politically abhorrent has a long and proud history. As I detailed in my new book Political Brands, many founding fathers and mothers led political boycotts, especially against British tea. The Boston Tea Party was a more destructive manifestation of the same anger that led women from Massachusetts to the Carolinas to refuse to steep tea from the British East India Company, and turn to home grown tea as an alternative. This practice is sometimes known as a “buycott.” As disgruntled gym members learned in real time last week, as they boycotted “Equinox,” they could buycott “Crunch” or other gyms.

SoulCycle and Equinox put out a statement trying to distance themselves from Ross and the political fundraiser controversy since Ross’s company Related Companies only “passively” invests in them and other brands like Pure Yoga, &pizza, Bluestone Lane Coffee and Momofuku. You can listen to the women who started SoulCycle on NPR’s “How I Built This” explaining how they sold it to Equinox. And to be fair, I seriously doubt the original women who founded SoulCycle (Elizabeth Cutler and Julie Rice) would touch a Trump fundraiser with a ten foot poll. But right about now, I bet there are a lot of SoulCycle gym members who wish they still owned SoulCycle instead of Ross and Related Companies.

Mr. Ross, if press reports were accurate, was “freaked out” over the commercial boycotts of his money-making gym brands, but President Trump convinced him that the furor would blow over. The pro-Trump fundraiser happened as planned. Ross has financial investments in Trump beyond this fundraiser including interest in Trump Tower in Manhattan.

Since the boycott didn’t stop the Trump fundraiser, the question can be fairly asked: do boycotts ever work? So this all depends on how one defines “working.” If the point of a boycott is getting a particular action done by a corporation, then they often fail. Corporations often are as hardheaded as people. When pushed, they will often dig in. But boycotts can change corporate behavior from the price of goods (when the price was what boycotters hated) to ending racial segregation—just think of the super effective Montgomery bus boycott.

Sometimes what boycotting prompts isn’t the exact demand boycotters requested, but a related reform is adopted. For example when Target was boycotted for its political spending in 2010 in support of a homophobic Republican candidate, it did not stop politicking, but it did institute more internal controls for its political spending. And then there’s the ripple effect on other businesses, since no one who sells directly to the public wants a boycott, or to be targeted like Target was, other businesses can learn from Target’s experiences and be more thoughtful about their political stances.

If you want to know more about the politics behind the brands you buy, there is an app for that: Goods Unite Us. What will be interesting to see is whether the rejection of the SoulCycle and Equinox brands blows over as Trump predicted or whether this one of times when there is lasting negative halo on SoulCycle and Equinox throughout the 2020 election. And it will be captivating to watch how other companies navigate this political season, especially the publicly traded ones like Target, which also has shareholders they could alienate as well.

Ciara Torres-Spelliscy is a professor at Stetson Law, a fellow at the Brennan Center and the author of Political Brands.

Contributions by guests represent their opinions and not necessarily those of all coalition members.

Image courtesy of tedeytan/ Flickr (CC BY-SA 2.0)

By Lane Hagar

This piece originally appeared on Public Citizen’s website. You can view the original piece here. 

Following the United States Supreme Court decision in Citizens United v. FEC, unprecedented amounts of corporate money flooded the political landscape. Political spending, both campaign and lobby spending, poses a risk for companies because they may attach themselves to a candidate or an issue that is generally unpopular and that might cause consumers to stop purchasing their products. In fact, it has been shown that a company’s reputation with the public correlates directly with its financial success.

Because of the risk to companies’ bottom lines from supporting hot-button issues, investors have a real interest in knowing who and what companies are supporting with their political spending. That’s why investors for years have been bringing shareholder resolutions calling for access to lobbying and campaign expenditures from companies, to guarantee they have the information they need to make wise investments.

When it comes to political spending shareholder resolutions, mutual fund companies are problematic because they tend to own a large portion of the common stock in major corporations and they have generally voted against or abstained from voting for shareholder resolutions calling for this increased transparency. These votes make a big difference. A recent study from fiscal year 2016 showed that “64% of political spending disclosure resolutions at companies where mutual funds owned more than 5% of the stock would have garnered a majority had these companies voted their shares in support of the resolutions.”

BlackRock is the largest mutual fund company in the world holding north of $6.4 trillion in assets. In its company investment guidelines, BlackRock states it does not generally believe it is the “role of shareholders to suggest or approve corporate political activities.” Based on the size of BlackRock and its company investment guidelines, it naturally follows that BlackRock plays a large role in whether these shareholder resolutions succeed or fail.

On May 23, 2019, BlackRock had its own shareholder resolution from investors who want to know more about what their money is funding when it comes to risky political spending. The resolution called for an annual report disclosing the company’s trade association and lobbying expenditures. The proposed annual report would also elaborate on BlackRock’s procedures and guidelines for determining lobbying communications and payments. The exact language of the resolution can be found here.

Though the resolution lost, garnering 21.7 percent of shareholder votes, it was the highest level of support the proposal has received at the company, rising from 20.8 percent in 2018, and less than 20 percent in 2017. While a support level of almost 22 percent might seem low, these numbers can be deceptive. Notably, a significant amount of BlackRock’s voting shares are held by company insiders and large stockholders like the national bank, PNC. It’s often the case that these large stockholders vote with management on shareholder proposals and therefore make it appear as if outside shareholders don’t care about an issue like lobbying disclosure. In reality, 21.7 percent support is quite strong.

While the resolution may have technically failed to garner majority support, the investors and the public are still clamoring for lobbying information to be disclosed by BlackRock. Led by BlackRock’s Big Problem, a group devoted to exposing BlackRock’s role in the global climate crisis, many people protested outside of the shareholder meeting and several protestors were even barred from attending the shareholder meeting, despite having the appropriate paperwork.

BlackRock’s Big Problem has identified several ways in which BlackRock is contributing to the global climate crisis. For example, BlackRock is the number 1 owner of new coal investments worldwide. They also own a significant portion of shares in oil companies looking to drill in nature reserves in Canada and Alaska, like ExxonMobil and ConocoPhillips. Moreover, they own stock in companies working to promote the deforestation of the Amazon and parts of Indonesia. Given the climate crisis and the growing public pressure for our nation’s leaders to take bold action to reverse it, BlackRock potentially lobbying in favor of environmentally unfriendly policies could very well come back to harm the company and reduce the viability of investing in the fund. So, it’s very likely shareholders at BlackRock continue to bring proposals to tackle the lack of information at next year’s meeting as well.

In the meantime, although the shareholder resolution lost at BlackRock, there is still a need to make sure the mutual fund does the right thing in the future and votes in favor of similar shareholder resolutions proposed at companies they hold stock in. Groups such as the Corporate Reform Coalition are devoted to promoting shareholder resolutions that increase transparency on the part of companies and help to give investors the information they need to make sound choices with their hard-earned money.

Learn more at:

https://corporatereformcoalition.org/

Less than two months after the Ethiopian Airlines crash of the Boeing 737 MAX that killed 157 people, Boeing will face its shareholders at its annual meeting on April 29 at the Field Museum in Chicago. One question on shareholders’ minds is whether Boeing’s significant influence over aviation regulators in Washington led to the tragic plane crashes in Ethiopia and Indonesia that killed a total of 346 people and has left Boeing embroiled in a legal and reputational fiasco.

Following the second crash, it was reported that the Federal Aviation Administration (F.A.A.) delegates much of the safety inspections of Boeing’s planes to Boeing engineers. This allowed Boeing to bring planes to market faster, an apparent win for cost savings and the company’s bottom line. However, the flipside is that, without thorough independent oversight, a company like Boeing can cut corners, compromise air safety and ultimately find itself facing the aftermath of two fatal plane crashes.

Boeing’s own shareholders have been asking for oversight and disclosure about the company’s government influence, filing shareholder proposals at the last five annual meetings asking Boeing’s board to disclose the company’s federal and state lobbying expenditures, including all payments to trade association used to lobby. Boeing will face this proposal again at its annual shareholder meeting Monday. Will the board take the sixth request for lobbying disclosure any more seriously in the wake of the recent fatal crashes that wiped out some $27 billion in market value?

While companies are required by law to report their federal lobbying, this information fails to capture many arenas where corporations also lobby. At the state level, it’s nearly impossible to get a full picture of a company’s lobbying activity because the 50 different state disclosure requirements are uneven and the data is hard to digest. Additionally, corporations contribute millions annually to trade associations and social welfare organizations that lobby indirectly on their behalf, and shareholders have zero access to this information unless companies voluntarily disclose it.

The largest lobbying trade association in the U.S. is the Chamber of Commerce, whose immense lobbying influence is directly funded by its member companies. The Chamber spent $95 million on federal lobbying in 2018 and has spent more than $1.5 billion since 1998.  The Chamber pushes a controversial agenda including its consistent opposition to climate change regulation. Boeing is listed as participating in the U.S. Chamber of Commerce Foundation, which is the Chamber of Commerce’s charitable group, but shareholders have no idea if Boeing belongs to the Chamber. They want to know if the company is making payments to the Chamber which are used to lobby on its behalf.

This is not the first time Boeing has faced scrutiny for its lobbying activity. In 2006, Boeing was fined $615 million, the largest known fine of its kind at the time, after the company hired a top Air Force official right after she had helped Boeing secure a deal to build tanker aircraft and lease them to the Air Force. The Air Force official and Boeing’s Chief Financial Officer at the time went to prison, and Boeing’s CEO resigned following the scandal.

Now, 13 years later, shareholders are calling on the company to disclose its procedures and policies for overseeing its lobbying activity as part of the shareholder proposal up for a vote at the annual meeting. It’s unclear at this point whether the proposal will receive a majority support of shareholders. With a more than 19% ownership stake in Boeing Vanguard, BlackRock, and T. Rowe Price are in a position to move the needle on this issue. These mutual fund companies consistently vote against this type of disclosure proposal despite the fact that without transparency, corporate lobbying can present reputational risk that harms shareholder value.

Both the Ethiopian Airlines crash and the Lion Air plane crash in Indonesia are devastating tragedies that illustrate the grave consequences of a reckless regulatory environment where corporations can court government officials to loosen oversight of their activities in pursuit of profit. At a macro level, one could argue it’s time to strengthen the regulatory environment through disclosure, corporate accountability, and regulatory reforms. But at the company level, Boeing needs to begin the hard work of rebuilding its reputation and earning back shareholder trust. Boeing and its board can start this path by embracing accountability and being fully transparent with shareholders, including disclosing its lobbying. Lives have been lost, and Boeing’s reputation is on the line.

On April 29^th, Boeing shareholders will vote on a proposal asking the company to provide a report on its board oversight procedures for lobbying and its federal and state lobbying expenditures, including indirect funding of lobbying through trade associations. Boeing is currently embroiled in a legal and reputational crisis in the wake of the two tragic, fatal crashes of the 737 Max 8 aircraft. With a poll finding 53% of Americans would not want to fly on a 737 Max even after the FAA clears the aircraft for service, it is clear that Boeing’s reputation is damaged and underscores the need for Boeing to embrace accountability and be fully transparent with shareholders, including disclosing its lobbying activity. Companies with a high reputation rank perform better financially than lower ranked companies, and executives find it is much harder to recover from a reputational failure than to build and maintain reputation. [1]

Since 2010, Boeing has spent over $152 million on federal lobbying on issues like aviation safety, FAA funding, bomber programs, tax reform and Iran issues. In 2018, Boeing was the third-highest corporate spender on federal lobbying, spending more than $15 million with nearly 100 lobbyists. At the state level it’s much harder to know exactly how much Boeing spends because state disclosure requirements are uneven and data is hard to digest. To alleviate that problem, Boeing should make this information readily available to its shareholders, which is what investors are asking for in a shareholder resolution that is up for a vote. The proposal is part of an ongoing investor campaign for greater corporate lobbying disclosure.

Boeing sits on the boards of the Business Roundtable and National Association of Manufacturers, which together spent over $32 million on federal lobbying in 2018. Boeing also participates in the U.S. Chamber of Commerce Foundation, which is the Chamber of Commerce’s charitable group, and Chamber events, yet shareholders have no way of knowing if Boeing currently belongs to the Chamber of Commerce. The Chamber spent $94.8 million on federal lobbying in 2018 alone. As a member of at least two of these groups, Boeing should disclose to shareholders exactly how much it pays the trade associations to lobby on its behalf, as involvement with trade associations can pose risks to a company’s reputation.

With more than 19% of the voting power at Boeing, the large mutual fund companies Vanguard, BlackRock and T. Rowe Price are in a position to move the needle on this issue. As the largest managers of retirement savings, mutual funds control significant voting shares in America’s most powerful companies. According to the 2019 Boeing proxy statement, Vanguard beneficially owned 42,082,493 shares (7.4%), T. Rowe Price 33,505,636 shares (5.9%) and BlackRock 32,920,554 shares (5.8%). Yet, Vanguard, T. Rowe Price and BlackRock consistently vote against shareholder proposals that attempt to bring corporate political activity into the light.

In 2018, Vanguard, T. Rowe Price and BlackRock all voted against the shareholder proposal asking Boeing to disclose its lobbying to shareholders. If these three mutual funds had instead voted their combined 105,090,283 shares [2] in favor of the 2018 proposal, it would have received a majority out of the votes cast for and against. [3] A 2017 Public Citizen report illustrates just how detrimental the mutual fund companies’ failure to support political spending disclosure is. In 2016, 64% of political spending disclosure shareholder resolutions at companies where mutual funds own more than 5% of common stock would have received majority support if those mutual funds had voted their shares in support of the resolutions.

Proxy advisor Institutional Shareholder Services has recommended that shareholders vote for the proposal, noting that Boeing “is currently involved in a significant controversy over the FAA’s approval process for its 737 Max 8 aircraft in the wake of two deadly airplane crashes. As a result, the company’s relationship with the FAA and its lobbying efforts will come under closer scrutiny.” [4]

If you own shares directly in Boeing, you should vote in favor of Proposal 4, which asks the company to prepare an annual report on its lobbying activity so that shareholders- the true owners of the company- can assess the associated risk.

If you don’t own stock directly in Boeing –or any other company where these shareholder resolutions are filed this year– but are worried about undisclosed political spending by corporations that is being used to influence our democracy, chances are you can have an impact through your 401(k) instead. If you invest your retirement with Vanguard, BlackRock, Fidelity, or State Street, tell them to change the way they vote so that progress on disclosure can move forward.

Click here to read a shareholder advisory from The Province of Saint Joseph of the Capuchin Order, who filed the lobbying disclosure resolution.

[1] “Reputation Risk,” The Conference Board, 2007, p. 6.

[2] Vanguard and BlackRock ownership figures taken from Boeing 2018 proxy, T. Rowe Price figures from T. Rowe Price 13F for period ended 12/31/17.

[3] The 2018 shareholder proposal for lobbying disclosure received 96,831,907 votes for, 300,353,428 votes against and 11,558,179 votes that were abstentions.

[4] ISS 2019 Boeing Proxy Analysis, April 2, 2019, p. 26.

Last week the investing world lost a giant. John “Jack” Bogle, founder of the Vanguard Group, passed away at the age of 89. He left behind a legacy that changed the way Main Street Americans invest and was never shy about speaking out against excessive Wall Street greed and reckless corporate management.  

In 2016, Bloomberg estimated that Bogle had saved investors more than $500 trillion in fees and trading costs since he founded Vanguard. In addition to re-inventing the way Americans save for retirement with his index fund, Bogle was always outspoken about shareholder rights, putting investors first, and out- of- control Wall Street greed. He railed against corporate CEO’s who make excessively more than their employees and managers who won’t disclose basic things like how the company is planning for climate change or spending its shareholders’ money to influence politics. Bogle went so far as to submit a public comment to the Securities and Exchange Commission (SEC) on the petition for a rulemaking asking the SEC to require corporations to disclose their political spending. He graciously shared his time with the Corporate Reform Coalition to talk about his belief that shareholders should be served first and that if they want disclosure, they should get it.  

Now, coalition partners share their thoughts and reflections on the father of the index fund: 

Jack Bogle’s wisdom, grit, and boldness will be greatly missed. You can read more about his life and work in the Philadelphia Enquirer and watch the interview he did with this coalition on corporate responsibility below. Our thoughts are with his family and friends at this time. 

The Declaration for American Democracy, a broad coalition of 100 national advocacy groups, officially launched last week to kick off its work to respond to the public’s calls for a democracy in which everyone can participate and every voice is heard. The new coalition’s efforts will focus on passing voting rights, ethics, and money- in- politics reforms that voters have been calling for throughout the 2018 midterm election cycle.

This new coalition expands past the organizations that have historically focused on money-in-politics and voting rights issues to include groups like National Security Action, Service Employees International Union (SEIU), NARAL Pro- Choice America, The National LGBTQ Task Force, the National Immigrant Justice Center, and Planned Parenthood. It’s clear why these groups have joined the campaign: the outsize influence of “big money” campaign spenders impacts Congress’ ability to make progress on most issues like safe access to abortion, LGBTQ+ equality, labor rights, immigration reform, health care, climate justice, and gun violence prevention reform.

Americans are witnessing the devastating effects of a presidential administration staffed almost exclusively by corporate insiders. The actions of Trump’s administration are the culmination of the president’s belief that corporations do not need to play by the same rules as regular Americans. If a regular American donates over $200 to a candidate, that information is available on the Federal Election Commission’s website for anyone to find. However, since the Supreme Court’s 2010 decision in Citizens United v. FEC corporations can secretly funnel large amounts of money through groups that don’t disclose their donors without their shareholders, customers, or the public ever knowing.

One reason spending large sums on elections is appealing to wealthy special interests is that it is a way to get their foot in the door with future lawmakers.  By supporting a candidate’s run for office these donors are more likely to build a relationship that leads to better lobbying access down the road. Since regular citizens can’t come close to matching the large donations of corporate interests or super wealthy individuals this leads to lawmakers giving preference to big businesses and the richest “one- percent,” often at the expense of what is best for the voters.

The problem of money in politics is just getting worse. The 2018 midterms are on track to be the most expensive midterm election in history, with more than $1 billion coming from outside sources– meaning entities that are not directly coordinated with the candidates running for office. A particularly problematic subset of these outside spenders are organizations, mostly political nonprofits, that can receive unlimited corporate contributions, spend that money to influence the outcome of the election, while not being required to disclose their donors. Among the reforms being pushed by the Declaration for American Democracy are measures that would shine light on this secret money that is flooding our politics and require corporations to be honest about the money they spend to rig our democracy in their favor.

Playing in politics and policy making—particularly secretly—is not without its consequences for corporations. For example, AT&T came under public scrutiny after it was revealed that the company paid Trump’s attorney Michael Cohen, who has since pleaded guilty to multiple counts of fraud, $600,000 to consult on policy matters without disclosing that information to shareholders. Another example of a company facing public outcry for its political activity was when gun violence prevention advocates from Parkland, Florida staged “die- in” protests at two Publix supermarkets following reports that the company had made political contributions to Florida gubernatorial candidate Adam Putnam, who is an outspoken supporter of the National Rifle Association. Publix released a statement and halted its donations to Putnam following the protests. Although this activity was fully disclosed by Publix, this example illustrates the challenge companies currently face to ensure that their political engagement lines up with their stated corporate values and customer expectations.

The revelation of AT&T’s payments to Michael Cohen followed 5 years of calls from its shareholders to disclose the full extent of the company’s lobbying activity including payments for direct and indirect lobbying and oversight policies. And, shareholders have been calling on other major companies to disclose their political activity for years as well. Shareholder proposals about corporate political activity are one of the most frequently filed proposals every year, with 80 filed in 2018. In response to calls from their shareholders to be more transparent, many companies are voluntarily adopting accountability and transparency policies. Currently, more than half of the S&P 100 companies are disclosing some or all of their election- related contributions with corporate money. If a company chooses to engage in the policy making process for the sake of their business there should be no reason why they would want to hide that critical information from their shareholders and customers. However, these voluntary steps are not enough, these disclosures must be mandatory so that investors can understand potential risks to the company down the road—something called for by the Declaration for American Democracy.

Starting tomorrow, the coalition will begin a new campaign to ensure that Congress prioritizes democracy reforms in 2019. Increasing transparency around corporate engagement in politics is just one part of the Declaration’s plan to restore the balance to our democracy, which will also include protecting the right to vote, empowering small dollar campaign donors, and reducing the influence of wealthy special interests in our elections. While Americans are calling for policies that create an economy that is built for working people, address the impacts of climate change, establish affordable healthcare, and rebuild our infrastructure and schools, the “big money” campaign donor grip on our democracy stymies progress on all of these issues. Therefore, before we can solve the most pressing challenges facing the nation, we must ensure that our democracy works for all.

You can support the work of the Declaration for American Democracy by following it on Facebook and Twitter or check out the campaign website for all the latest updates.

This week, the Supreme Court affirmed a lower court’s decision that certain nonprofit groups that spend money to support or oppose political candidates need to disclose their donors.

The decision comes as negotiators in Congress decide whether to keep a provision in the federal budget that protects corporations that spend secret money in politics from having to be honest about their spending. Last week, the Corporate Reform Coalition sent a letter urging conferees to remove language from the final appropriations deal that stops the Securities and Exchange Commission (SEC) from finalizing a rule requiring public companies to disclose their political spending to shareholders and the public.

Since the U.S. Supreme Court’s decision in Citizens United v. FEC came down in 2010, corporations have been allowed to spend unlimited undisclosed amounts of money to influence American elections and in turn affect policy outcomes. Noting the danger of “dark money” for both American democracy and the shareholders of the companies that are spending in secret, a strong coalition of diverse allies has been working together since the decision to bring corporate spending in politics into the light.

The members of the Corporate Reform Coalition believe the SEC should be allowed to and encouraged to move forward with the rulemaking that would require public companies to disclose to their shareholders and the public how they spend money in politics. This information is material to investors- the constituency the SEC is responsible for protecting.

The Supreme Court’s decision to give corporations the right under the First Amendment to spend unlimited funds from their corporate treasuries to support or attack candidates is troubling for several reasons, and investors concerned about the value of their investments and citizens concerned about the future of American democracy are looking to the SEC to take the action that so many investors have demanded and require disclosure of political spending.

Without direction from the SEC, there are no rules or procedures established in the United States to ensure that shareholders – those who actually own the wealth of corporations – are informed of, or have the right to approve, decisions on spending their money on politics. Investors want more disclosure in order to make sound investment decisions. That is why 1.2 million comments- the most in the agency’s history- have come into the SEC on this rulemaking petition from diverse stakeholders including the founder of Vanguard, John Bogle, five state treasurers, a bi- partisan group of former SEC chairs and commissioners, and investment professionals representing $690 billion in assets.

The rider blocking the SEC from making progress on this rulemaking was inappropriately included in the appropriations process, and the budget should be free of any partisan, poison pill policy riders. Disclosure of a corporation’s political spending is good for business and good for our democracy. Congress should not stop the SEC from finalizing this important disclosure rule.

The Corporate Reform Coalition commends ExxonMobil for announcing today its decision to discontinue its membership in the American Legislative Exchange Council (ALEC).

ALEC is controversial for promoting bills that undermine regulations on climate change, raising the minimum wage and workplace safety, and Exxon’s ALEC membership has drawn media focus in the past. In December, Exxon opposed an ALEC proposal to pressure the Environmental Protection Agency to rescind a federal finding that greenhouse gases are harmful.

Shareholders have been raising concerns about ALEC for years. Since 2011, a coalition of investors have filed more than 300 shareholder proposals asking companies to disclose their federal and state lobbying, trade association payments and support for ALEC. Coalition members have also engaged more than 70 companies that have left ALEC.

At this year’s 2018 Exxon shareholder meeting, the United Steelworkers and 25 co-filers had filed a proposal asking Exxon to disclose its federal and state lobbying, trade association payments and membership in and contributions to ALEC. This was the sixth year in a row that the lobbying disclosure proposal had come to vote at Exxon.

Companies face real risks when their membership in and lobbying through third-parties conflicts with a company’s core values. Corporate reputation is an important component of shareholder value. Without transparency, corporate lobbying involving controversial political positions can harm a company’s reputation and hurt shareholder value.

More and more companies are evaluating the risks of controversial third-party involvement against their commitments to sustainability and corporate responsibility. For example, in 2014, Microsoft ended its ALEC membership, stating that ALEC’s position on climate change “conflicted directly with Microsoft’s values.”  Google also cut its ALEC ties the same year, with Chair Eric Schmidt noting ALEC was “literally lying” about climate change.

Exxon’s decision to leave ALEC underscores the need for companies to monitor their third-party memberships and to provide political spending disclosure and transparency for investors. With the announcement, Exxon joins more than 100 companies that have withdrawn membership and funding for ALEC. Ultimately, the U.S. Securities and Exchange Commission (SEC) should require broad disclosure of companies’ political activity, including payments to organizations like ALEC, through a rulemaking. Unfortunately, Congress has inserted a poison pill rider into the budget that stops the SEC from finalizing a corporate political spending disclosure rulemaking, despite the fact that the petition for this rulemaking has received 1.2 million comments— the most in the agency’s history.

This piece originally appeared on Boston Common Asset Management’s website. You can view the original piece here. 

This proxy season Boston Common joined 74 other investors in filing lobbying disclosure resolutions at 50 companies in the US. We were lead filers on resolutions at American Water Works (40.3%) and Verizon Communications (36.3%) which in May received strong support from shareholders. We filed this resolution because unlike some of its peers including Alliant Energy, Ameren and Atmos Energy, American Water Works is a member of ALEC (American Legislative Exchange Council) which is controversial for promoting bills that undermine regulations to address issues like climate change, workplace safety and workers’ rights. More importantly, the company does not disclose its memberships in and payments to trade associations and other organizations nor its related policies and oversight mechanisms.  In the case of Verizon Communications, we had similar concerns with their membership in ALEC- from which Sprint and T-Mobile have left. Without transparency and accountability, corporate assets can be used to lobby for public policy objectives that can pose reputational risks and could be used to indirectly support positions that are opposed to those of its corporate position.

Boston Common has been part of a coalition of investors since 2011 that has filed over 350 shareholder proposals asking companies to disclose their federal and state lobbying expenditures, trade association payments and payments to tax exempt organizations that write and endorse model legislation. In 2013 Boston Common took this global by engaging half of the FTSE 100 on UK company influence in US politics through their trade associations.  Through Boston Common’s C-Suite engagement with GlaxoSmithKline, we were instrumental in getting the company to revise their oversight and due diligence process for vetting trade associations and ultimately leaving ALEC as more than 100 companies have now done.

During the last two years, we have moved our focus to encouraging companies to promote progressive climate policies through their public policy engagement and trade association memberships. In May, Lauren Compere, Director of Shareowner Engagement spoke at two PRI Climate Forums in Toronto and Montreal to highlight the work we have done on climate lobbying practices in the US and globally.  As part of these events PRI launched a new publication, Converging on Climate Lobbying:  Aligning Corporate Practice with Investor Expectations which features Boston Common’s case study on lobbying engagement with the banking sector under our Banking on a Low Carbon Future initiative. This case study concluded that banks fall short in encouraging trade associations and industry groups to advocate for progressive climate policies, at least in line with their own policies. By not actively engaging with their own trade associations, banks could undermine prospects for business opportunities linked to progressive market regulations and subsidies to support the low-carbon transition.  We do hope, however, to raise the level of progressive climate lobbying by banks across the globe and we aim to enable the market mechanisms and regulations to accelerate the transition to a low-carbon economy.

AT&T is currently embroiled in a legal and reputational fiasco of its own making through the now disclosed $600,000 in payments to President Trump’s personal attorney, Michael Cohen. But shareholders that asked AT&T to improve its lobbying disclosure can only wonder if AT&T’s lack of transparency, disclosure and oversight were the major factors that contributed to this public relations and regulatory nightmare.

Just two weeks ago, on April 27^th, AT&T shareholders actually voted on a proposal asking the company to provide a report on its federal and state lobbying, including board and management oversight. Walden Asset Management and Zevin Asset Management were lead filers of a proposal that also included numerous co-filers.[1]

AT&T Lobbying Disclosure Shareholder Proposal

The proposal asked AT&T to prepare a report, to be updated annually, disclosing:

1. AT&T’s policies and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications
2. the Company’s payments for direct and indirect lobbying, or grassroots lobbying communications, including amounts and recipients
3. disclosure of AT&T’s membership in and payments to tax-exempt organizations that write and endorse model legislation
4. the management’s and Board’s decision making process and oversight for making such lobbying payments.

In its opposition to providing greater transparency and oversight of its lobbying, AT&T made the following claims:

• AT&T “actively participates in the legislative processes in order to protect and further stockholders’ interests by contributing prudently to lobbying organizations that constructively advocate positions which advance the Company’s business objectives and stockholders’ interests.”
• “AT&T is committed to adhering to the highest ethical standards when engaging in any political activities.”
• “The Board is confident that the Company’s lobbying activities are aligned with its stockholders’ long-term interests.”

Despite the AT&T board’s opposition, the proposal received 34.26% of the votes cast. This was the fifth year in a row that the shareholder proposal for lobbying disclosure and oversight had come to vote. AT&T cannot claim it was unaware that many of its shareholders were concerned with the risks from its lobbying. With the disclosure of the Michael Cohen payments, AT&T’s commitment to the highest ethical standards apparently failed.

Failure of the Public Policy and Corporate Reputation Committee?

According to its corporate governance documents, the Public Policy and Corporate Reputation Committee was responsible for oversight. Where was the oversight of this spending? Was the Public Policy and Corporate Reputation Committee asleep on the job?

According to its charter, the Public Policy and Corporate Reputation Committee “shall have the authority to review the corporate policies and practices in furtherance of AT&T’s corporate social responsibility, including public policy issues affecting AT&T, its shareholders, employees, customers and the communities in which it operates; to determine how Company practices impact public expectations; and to provide guidance and perspective to the Board and management on these issues” and “shall have the authority to review AT&T’s management of its brands to ensure that the value and reputation of the Company’s brand names is maintained and enhanced.”

Was the committee doing its job? Public Policy and Corporate Reputation Committee Chair Laura D’Andrea Tyson and committee members Samuel Di Piazza, Jr., Glenn Hutchins, William Kennard, and Cynthia Taylor will likely have some explaining to do to AT&T shareholders as to why their committee oversight failed to catch or prevent this.

Reputation Matters

Corporate reputation is an important component of shareholder value. Companies with a high reputation rank perform better financially than lower ranked companies, and executives find it is much harder to recover from a reputational failure than to build and maintain reputation. Without transparency, corporate lobbying can present reputational risk that harms shareholder value. In the case of AT&T and its hidden payments, AT&T management is getting a crash course in reputational crisis management and AT&T shareholders are getting a close-up view of what happens when a system of proper board oversight and lobbying spending transparency are not in place.  For the proponents of lobbying disclosure, they are left to wonder why AT&T and its board were so opposed disclosure that could have mitigated this unfolding disaster.

[1] Proposal cofilers included: the Benedictine Sisters of Mount St. Scholastica, Dana Investment Advisors, the Grand Rapids Dominicans, the Max and Anna Levinson Foundation, Monasterio De San Benito, the Needmor Fund and the Sisters of the Holy Family, CA.