Lobbying disclosure remains a top shareholder concern for the 2018 season, as evidenced by proposals filed at 50 companies by 74 institutional and individual investors. A coalition is asking for lobbying reports that include federal and state lobbying payments, payments to trade associations used for lobbying, and payments to any tax-exempt organization that writes and endorses model legislation. (Above graphic from The Nation’s Where Have All the Lobbyists Gone?)
I urge readers to vote in favor of all these resolutions. In Citizens United v. Federal Election Commission, dealing with the related issue of political contributions, Justice Kennedy’s majority opinion justified the Supreme Court’s decision by pointing to the Internet.
With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.
He also said that disclosure
permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
And the court expressed enthusiasm that technology today makes disclosure “rapid and informative.”
Yet, corporations are not required to make political or lobbying disclosures to shareowners as Justice Kennedy seems to have believed. How can we, as shareowners, hold corporate managers accountable when we do not know what candidates, measures or lobbying efforts they are supporting?
Corporate lobbying to influence laws and regulations affect all aspects of the economy, on issues from climate change and drug prices to financial regulation, immigration and workers’ rights. Over $3.3 billion in total was spent on federal lobbying in 2017, with companies spending about $2.6 billion. And companies also spend more than $1 billion yearly on lobbying at the state level. State lobbying is far less visible and transparent than federal lobbying. And trade associations spend over $100 million annually lobbying indirectly on behalf of companies. For example the U.S. Chamber of Commerce has spent over $1.4 billion on lobbying since 1998.
Investors are concerned lobbying can pose reputational risks if it contradicts a company’s publicly stated positions, an example of values incongruity. A company’s reputation is an important component of shareholder value. According to the Conference Board, 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 openness and transparency, corporate lobbying can be used to promote public policy objectives that can pose reputational risks. According to the group, “Many companies have programs to address climate change, yet are also members of the U.S. Chamber of Commerce, which has consistently opposed legislation and regulation to address climate change.”
Lobbying Disclosure & Trade Associations
A major focus for the investor coalition is undisclosed payments for trade association lobbying. In some cases, a trade association may actively lobby for issues that are contrary to a company’s public statement or values. Investors advancing these resolutions believe management needs to review trade association memberships to assess whether a trade association is accurately representing the company’s interests and policy positions and should have procedures in place to manage conflicts when a trade association’s position strongly differs from the company on a priority issue. The 2018 lobbying resolutions capture many of these potential trade association value misalignments in the supporting statements.
Climate, drug pricing and tobacco are clear examples of values misalignment risk. Many companies have programs to address climate change, yet are also members of the Chamber of Commerce, which has consistently opposed legislation and regulation to address climate change. Many pharmaceutical companies publicly support a patient’s access to affordable medicines, yet also funded the Pharmaceutical Research and Manufacturers of America’s $100 million campaign that defeated a California lower drug price initiative. And many of these companies support smoking cessation, while at the same time funding the Chamber of Commerce, which has lobbied against global antismoking laws.
And trade associations have also lobbied to undermine shareholder rights. Many companies belong to the Business Roundtable, which is lobbying against investors’ right to file shareholder resolutions. And a third party group like the American Legislative Exchange Council (ALEC) also presents reputational risks for promoting bills that undermine regulations on climate change, raising the minimum wage and workplace safety.
Lobbying Disclosure: 2018 Initiative
The 2018 proposals have been filed at companies that have some or all of the following characteristic: significant lobbying spending, lack of trade association disclosure and controversial lobbying. Since 2012, coalition investors have filed over 340 shareholder proposals which have averaged over 25 percent in voting support and at the same time produced nearly 70 mutually agreed settlements for improved disclosure. The investor coalition is comprised of public pension funds, labor funds, asset managers, individual investors, international investors, foundations and religious investors, many whom are members of the Interfaith Center for Corporate Responsibility. This initiative is coordinated and supported by AFSCME and Walden Asset Management, of Boston Trust & Investment Management Company.
Proposals about corporate political activity, where I am more active, totaled about 80 as of Feb. 16, down from 90 in 2017. For the sixth straight year, lobbying disclosure proposals have surpassed proposals on election spending.
Companies Receiving Lobbying Disclosure Resolutions for 2018
Companies targeted this proxy season include AbbVie, Alphabet, Aetna, BlackRock (BLK), AT&T, Boeing, Citigroup, Exxon Mobil and Goldman Sachs Group (GS). Proposals have already been withdrawn at Atmos Energy, Encana, Duke Energy, Goodyear Tire & Rubber, Textron, SCANA and Travelers Cos. because those companies have taken steps to address investor concerns. At Walt Disney Co.‘s annual meeting Thursday, about 37% of investors supported the coalition’s proposal. The group’s 2018 proposals have also already been voted on at Emerson Electric Co. and Tyson Foods, where they were supported by 39.6% and 12% of shareholders, respectively. (Investor coalition files proposals at 50-plus companies on lobbying activities)
Alkermes Plc (ALKS)
American Water Company (AWK)
Atmos Energy (ATO)
Bank of America (BAC)
Bombardier Inc. (BBD.D)
Charter Communications (CHTR)
Chesapeake Energy (CHK)
Consolidated Edison (ED)
Devon Energy (DVN)
Dicks Sporting Goods (DKS)
Duke Energy (DUK)
Eli Lilly (LLY)
Emerson Electric (EMR)
Exxon Mobil (XOM)
Ford Motor (F)
Franklin Resources (BEN)
Goldman Sachs (GS)
Goodyear Tire & Rubber (GT)
Imperial Oil (IMO)
Morgan Stanley (MS)
Motorola Solutions (MSI)
Nucor Corporation (NUE)
SCANA Corp (SCG)
Travelers Companies (TRV)
Tyson Foods (TSN)
United Parcel Service (UPS)
UnitedHealth Group (UNH)
Vertex Pharmaceuticals (VRTX)
Walt Disney Company (DIS)
Filers of Lobbying Disclosure Resolutions for 2018
Public Pension Funds
New York State Common Retirement Fund
City of Philadelphia Public Employees Retirement System
The Employees’ Retirement System of Rhode Island
International Asset Managers and Pensions
Labor Pension Plans and Organizations
CTW Investment Group
International Brotherhood of Teamsters
UAW Retiree Medical Benefits Trust
Asset Management Companies
Azzad Asset Management
Boston Common Asset Management
Dana Investment Advisers
Domini Social Investments
First Affirmative Financial Network
Fresh Pond Capital
Pax World Management Corp.
Rockefeller and Co.
Sustainability Group, Loring, Wolcott & Coolidge
Walden Asset Management
Walden Equity Fund
Zevin Asset Management
Daniel Altschuler 1986 Trust
Max and Anna Levinson Foundation
Merck Family Fund
The Oneida Tribe of Indians Trust Fund for the Elderly
Non-Profit Institutional Investors
Center for Community Change
Dwight Hall Socially Responsible Investment Fund at Yale
SHARE (Shareholder Association for Research & Education)
Benedictine Sisters of Baltimore – Emmanuel Monastery
Benedictine Sisters of Chicago
Benedictine Sisters of Mount St. Scholastica
Benedictine Sisters of Virginia
Benedictine Sisters, Sacred Heart Monastery
Community Church of New York
Congregation of Benedictine Sisters, Boerne, TX
Congregation of Sisters of St. Agnes
Congregation of St. Joseph
Congregation of the Sisters of the Holy Cross, Indiana
Congregation of the Sisters of St. Joseph of Brighton
Daughters of Charity, Province of St. Louise
Dominican Sisters of Hope
First Parish in Cambridge – Unitarian Universalist
Friends Fiduciary Corporation
Glenmary Home Missioners
Grand Rapids Dominicans
Mercy Investment Services
Missionary Oblates of Mary Immaculate
Monasterio De San Benito
Monasterio Pan de Vida
Northwest Women Religious Investment Trust
Oblate International Pastoral Investment Trust
Province of St. Joseph of the Capuchin Order
School Sisters of Notre Dame Cooperative Investment Fund
Sisters of Notre Dame
Sisters of Notre Dame de Namur-Boston
Sisters of St. Francis Charitable Trust
Sisters of St. Francis of Philadelphia
Sisters of the Holy Family, CA
Sisters of the Holy Names of Jesus and Mary, US Ontario Province
United Church Funds
Ursuline Sisters of Tildonk, US Province
Unitarian Universalist Association
2018 Lobbying Disclosure Resolution Filed at ExxonMobil
Whereas, we believe in full disclosure of ExxonMobil’s direct and indirect lobbying activities and expenditures to assess whether ExxonMobil’s lobbying is consistent with its expressed goals and in the best interests of shareholders.
Resolved, the shareholders of ExxonMobil request the preparation of a report, updated annually, disclosing:
- Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.
- Payments by ExxonMobil used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.
- ExxonMobil’s membership in and payments to any tax-exempt organization that writes and endorses model legislation.
- Description of management’s and the Board’s decision making process and oversight for making payments described in sections 2 and 3 above.
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which ExxonMobil is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on ExxonMobil’s website.
We encourage transparency and accountability in ExxonMobil’s use of corporate funds to influence legislation and regulation. Since 2010, ExxonMobil has spent over $94 million on federal lobbying. These figures do not include lobbying expenditures to influence legislation in states, where ExxonMobil also lobbies in 33 states (“Amid Federal Gridlock, Lobbying Rises in the States,” Center for Public Integrity, February 11, 2016), but disclosure is uneven or absent. For example, ExxonMobil has spent over $3.6 million lobbying in California since 2010, and its lobbying on California’s cap and trade bill attracted media attention (“Businesses Spent Millions Lobbying Before Cap-and-Trade Vote,” E&E News, July 26, 2017).
ExxonMobil is a member of the American Petroleum Institute (API), Business Roundtable and National Association of Manufacturers, which together spent over $74 million on lobbying for 2015 and 2016. ExxonMobil does not disclose its memberships in, or payments to, trade associations, or the amounts used for lobbying. We are concerned that ExxonMobil’s lack of trade association lobbying disclosure presents reputational risks. For example, API and ExxonMobil have drawn scrutiny for lobbying against stricter benzene regulation (“Oil Companies Leaking Benzene Lobbied against Pollution Rules,” International Business Times, September 6, 2017).
And ExxonMobil is a member of the American Legislative Exchange Council (ALEC), and its ALEC membership has drawn media focus (“Exxon Continued Paying Millions to Climate-Change Deniers under Rex Tillerson,” Huffington Post, January 9, 2017). Over 100 companies have publicly left ALEC, including BP, ConocoPhillips and Shell.