American values were recognized as at risk in 1932 when Adolf Berle and Gardiner Means argued that with dispersed shareholders, ownership has been separated from their control. (The Modern Corporation and Private Property) Ironically, concentration of equities under the umbrella of three or four indexed funds presents an opportunity to end that divide and make companies better reflect American values by being more accountable to their beneficial owners. Accomplishing that goal depends on transparent governance, such as proxy voting, and fostering real dialogue on the issues faced by corporations and investors. As I have argued, real-time disclosure of proxy votes could drive these huge funds to compete with each other based on not only profits and costs but their governance efforts, as reflected in proxy voting records. Continue Reading →
Tag Archives | Center for Political Accountability
Last week the Washington Post reported on Major League Baseball’s embarrassment and backtracking over its political contributions to Congressman Jason Lewis (R). According to the Post, Lewis had lamented the fact white Americans are not reproducing at the same rate as Latinos. He suggested abolishing slavery was an overreach by the federal government. He said female voters who care about abortion and same-sex marriage are “nonthinking.” The Congressman has a long history of racist and misogynistic remarks. Continue Reading →
Support for corporate political disclosure sponsored by the Center for Political Accountability’s resolution jumped among the largest mutual funds in 2018. An analysis by Fund Votes found support moved to 53%, up from 45% in 2017. This 8% increase was the largest since CPA began tracking institutional investor votes on its resolution in 2008. Continue Reading →
2018 CPA-Zicklin Index shows gradual improvement. Public corporations embracing disclosure and accountability of their political spending hold fast despite countervailing pressures from Washington. Continue Reading →
The battle over Main Street Investors could determine the future of the American economy for decades to come. According to Cydney Posner of Cooley PubCo, on one side are those who believe investors must focus on maximizing financial return and management knows best. On the other side are those who want to broaden the focus of investors to include environmental, social and governance (ESG) issues, with everyone participating in the debate. Continue Reading →
Dark money risk is highlighted in recent fine. State Farm agreed to a $250 million settlement last week for $4 million in contributions it allegedly steered through conduits to Illinois State Supreme Court candidate Lloyd Karmeier. Where is the outrage over dark money?
Said Bruce Freed, president of the Center for Political Accountability (CPA).
This case should be a wake-up call to companies of the high price they can pay when they try to hide their political spending, At a time when companies are under heightened pressure to give through secretive non-profits and trade associations, political transparency and accountability are critical for protecting their reputation and treasury.
It should also alert journalists to the need to pay much greater attention to ‘dark money’ that is flooding this year’s state and federal elections.
The Trump Jump
The Center for Political Accountability reported today on a Trump Jump. Mutual funds support for the CPA’s corporate political disclosure resolution jumped significantly in the first year of the Trump presidency. In 2017, support increased to 48% from 43% in 2016, according to an analysis by Fund Votes. The analysis also found that abstentions decreased from 5% to 3%. My own habits also took a Trump jump, since this is the first year I beguan submitting such proposals. My first target is Kimberly-Clark, (KMB) with several more to come.
According to CPA president Bruce Freed, Continue Reading →
Since 2003, the Center for Political Accountability (CPA) has spearheaded disclosure and accountability in corporate political spending. Corporations are the top political spenders at the state and local level. They are a dominant force in shaping public policy. Next proxy season, I will join the Center for Political Accountability in filing proposals on this important topic.
Center for Political Accountability: Citizens United
As I have reminded readers in previous posts, the US Supreme Court’s decision in Citizens United v. Federal Election Commission was based on a false premise. Justice Kennedy’s majority opinion justifies the decision by pointing to the Internet. Continue Reading →
The U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) released a paper on shareholder proposal reform, which contains a “set of recommendations for the SEC on fixing the broken Rule 14a-8 system in order to protect investors and make the public company model more attractive.” See also the Chamber’s press release, U.S. Chamber Offers Recommendations to SEC on Shareholder Proposal Reform.
Rule 14-8 is not broken, many of the Chamber’s attestations are alternative facts and its recommendations are more likely to hurt our economy than help it. The paper is very similar to their previously released Responsible Shareholder Engagement And Long-Term Value Creation: Modernizing the Shareholder Proposal Process. As I wrote in my rebuttal last year (Business Roundtable to SEC: Muzzle Shareholders),
‘modernization’ for the Business Roundtable means moving the SEC further and further from its primary mandate of ‘investor protection’ by creating a democracy-free zone for entrenched managers.
CPA Statement on President Trump’s Silence on “Draining The Swamp” in Money and Politics
Bruce Freed, president of CPA, issued the following statement about President Trump’s failure to address campaign finance reform and corporate political disclosure and accountability in his Inaugural Speech:
President Donald Trump made ‘draining the swamp’ a centerpiece of his presidential campaign. However, the swamp will only deepen with his failure to even mention one of today’s critical issues – campaign finance reform – in his Inaugural address. This is a tremendous missed opportunity. As a steadily growing number of America’s leading companies are adopting transparency and accountability for their political spending, the President could have endorsed their effort and given it a big boost. Instead, his silence only heightens the risks that political spending poses to companies. So sad.
Do not make the same mistake as LL Bean. The last thing I want is to turn CorpGov.net into another social media outlet on Donald Trump. However, the advice offered today by Bruce Freed, president of the Center for Political Accountability (CPA), is something public company boards should be discussing as they try to stay on the good side of President-elect Donald Trump, without being ethically challenged.
While, the advice flowed out of the controversy over President-elect Donald Trump’s endorsement of LL Bean following a contribution to a political action committee supporting Mr. Trump from a Bean family member, it closely tracks advice CPA has been giving for years. Continue Reading →
I continue my review of The Handbook of Board Governance: A Comprehensive Guide for Public, Private, and Not-for-Profit Board Member. With the current post, I provide comments on Part 7 of the book, Governance of Sustainability. This is why I got into the field as an NIMH Fellow in the late 1970s studying what forms of corporate governance would be best for corporations AND society. This part of the Handbook is worthy of a separate 100-page book by itself, probably with broader appeal to the general public. Continue Reading →
Shareholders have been urging companies to fully disclose the lobbying they do directly and through trade associations and third parties for six years now. This year 66 investors joined in filing resolutions with 50 companies seeking expanded lobbying transparency. Twinned with calls for disclosure of political spending aimed at affecting elections, this effort has had a steady positive effect. For example, this year companies including Raytheon, CenterPoint and DuPont came to agreements with investors to expand their lobbying disclosure.
We also find that many companies, even if they do not want to fully disclose, have expanded their reporting on items like Board oversight, priority issues they lobbied on, whether and when they did grassroots lobbying, making it easier to access their quarterly Senate reports or disclosing specific dollar amounts spent on federal lobbying. Continue Reading →
Let’s change Vanguard’s political disclosure vote. Our nation’s largest mutual fund voted against all resolutions submitted by shareholders asking for companies to disclose their political spending. Shouldn’t we have the right to know what candidates our investments are supporting?
Vanguard’s Political Disclosure Vote Needs Changed
Join more than 59,000 American’s who have already petitioned Vanguard to change their proxy voting behavior. Support shareholder resolutions that seek disclosure of political spending at companies where Vanguard owns a shares. If Vanguard votes with us, instead of against us, it won’t be long before other large funds like BlackRock start doing the same. Within a few years, we could actually begin to know what companies are funneling how much money to which candidates. Vanguard’s political disclosure vote can be changed – with your help. Sign the petition by U.S. PIRG to change Vanguard’s political disclosure vote. Continue Reading →
At Alliant’s annual meeting on July 31st 65% of shares were voted in favor of the ICCR-sponsored proposal on increased transparency on company’s state and federal lobbying activities. That’s an exceptionally high vote for a shareholder-sponsored proposal, today investorsin Alliant Techsystems (ATK) an aerospace and defense contractor and gun manufacturer, voted in favor of a shareholder request for greater transparency on the company’s lobbying activities. Continue Reading →
This session features a debate on corporate political spending by Bruce Freed, president and founder of the Center for Political Accountability, and Brian Cartwright, a former general counsel at the Securities and Exchange Commission. They discuss the most frequently submitted type of proxy proposal in 2013, disclosure of political expenditures. How do we address corporate money in politics? There’s no real video on this one, just a picture of the Continue Reading →
Qualcomm Incorporated and the New York State Common Retirement Fund (Fund) announced the Fund has dropped the lawsuit it filed on January 2, 2013 because Qualcomm agreed to implement a revised political spending disclosure policy. According to Dr. Paul E. Jacobs, the CEO and Chairman of Qualcomm, Continue Reading →
As we look back on the 2012 elections one thing is clear, money flowed like water with any barrier that might have contained it removed by Citizens United. Writing for the court in the 5-4 decision, Judge Kennedy opined:
With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. 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. Continue Reading →
Green Century Capital Management, Inc., a Boston-based investment adviser to the environmentally responsible Green Century Funds, announced that Eastman Kodak Company (Kodak) joins 79 other companies that have agreed to greater political transparency and accountability, according to the Center for Political Accountability (CPA).
Kodak will provide increased transparency on its payments to trade associations and other tax exempt groups and will provide more information on its accountability structures governing its political giving.
The agreement resulted from a dialogue Green Century had with the company in conjunction with the CPA, a nonprofit, non-partisan advocacy organization leading the political disclosure and oversight effort. Green Century stressed the importance of ensuring shareowners are aware of the full spectrum of political spending made by their firms, especially those made through trade associations like the U.S. Chamber of Commerce.
Companies are not required by law to disclose political contributions or payments to trade associations for political purposes. Moreover, trade associations are not required to disclose the specifics of their political spending or their membership. This secrecy leaves institutional investors, individual shareholders and even member companies in the dark.
In light of the Supreme Court ruling in Citizens United v. Federal Election Commission, which permits corporations to spend freely on independent advertising for and against political candidates, many investors believe this type of disclosure is more Continue Reading →
Corning’s 6-minute video for CEO Wendell Weeks’ presentation to institutional investors and analysts in New York Feb. 4th has become the most-watched corporate video of all time on YouTube with more than 8.8 million views.
It showcases potential Continue Reading →
Back in July, I signed onto a letter from the Center for Political Accountability, Walden Asset Management and Domini Social Investment asking companies about their use of new corporate political spending routes opened up by the Citizens United decision.
As of October 7, 2010, 68 companies have formally responded, with several more responses expected.
35 of the responders stated they do not plan to engage directly in any independent expenditure activity. However, relatively few companies have committed to hold their trade associations’ political spending to scrutiny by imposing conditions on dues payments or other means. Other notable trends and highlights in the responses include:
- Many smaller companies stated that because they generally do not engage in the political process, they do not see the need to implement a policy regarding independent expenditures or trade association monitoring.
- Several companies stated that they currently or will begin to inform their trade associations that no portion of their dues may be used for political expenditures. Philip Morris International included a template of the communication it sends with its dues payments stating that none of the dues may be used for election activity.
- Many larger companies declined to answer the questions posed or commit to any increased disclosure.
- 30 companies stated that they would not engage in independent expenditures, but were reluctant to monitor or impose conditions on their trade association payments or did not address the issue at all.
- All of the responders in the health insurance industry (Aetna, UnitedHealth, WellPoint) declined to outline their positions on independent expenditures.
- Several responders appear to still be reviewing the implications of Citizens United and were not in a position to comment on the questions posed in the letter. Some of these responders say they will consider our ideas when formulating their policies.
Further information at Companies spend indirectly on politics (USA Today, 9/8/2010) and in this summary document (pdf) with 2-3 prominent quotes from all of the responsive companies. Contact: Aaron W. Stanley, Staff Associate, Center for Political Accountability.
Yes, corporate governance takes on more importance since the decision. Corporations could easily control our elections. ExxonMobil spent $45 million lobbying at the federal level during the 2007-2008 election cycle. Jamin Raskin, Professor of Constitutional Law at American University and a Maryland State Senator, says if they spent 10% of their 2008 profits, or $8.5 billion, on electing their own candidates “that would be three times more than the Obama campaign, the McCain campaign and every candidate for House and Senate in the country spent in 2008. That’s one corporation. So think about the Fortune 500.” (In Landmark Campaign Finance Ruling, Supreme Court Removes Limits on Corporate Campaign Spending, Democracy Now!, 1/22/10)
Who controls corporations? I would argue it is still mostly CEOs. Of course, they’re supposed to report to directors but, so far, the balance of power seems to remain with the corner office and the Business Roundtable. A lot has changed since the early 1990s when Sears allocated over $5.5 million to defeat one independent board candidate, Robert A. G. Monks. Most of the S&P 500 now have a majority vote standard for elections… although directors who don’t get a majority of the vote usually only have to offer their resignation to the board. The board doesn’t have to accept it and nothing stops them from replacing tweedle dee with tweedle dum.
More corporations are moving to split the roles of CEO and chair. Many, like Whole Foods, appear to be making the change, not because they believe in good governance but because they want to avoid unnecessary distraction. In his blog (12/29/09), Mr. Mackey writes, “Was I forced to give up the Chairman’s title? Absolutely not! Both the idea and the decision to give up the title were completely my own… At no time has anyone on the Board or in management ever asked me to give up the title.” (Whole Foods: Progress But Still a Lapdog Board, CorpGov.net, 12/30/10)
We finally won repeal of broker votes, which almost always went to management. However, there is still the issue of blank votes… when a shareowner votes at least one item on their proxy but leaves others blank, the blanks magically turn into votes for management. (see SEC petition, 5/15/09)
But, all in all, shareowners have gained relative power in the last few years. CEOs may still control corporations but through organizations such as the Council of Institutional Investors, the International Corporate Governance Network and businesses like the RiskMetrics Group and Glass Lewis, institutional shareowners have gained substantial clout. In a few years, ProxyDemocracy.org, MoxyVote.com, Shareowners.org, and the Investor Suffrage Movement might similarly empower retail shareowners and that is where I will probably put most of my efforts.
Since posting Corporate Governance: More Important than Ever with Supreme Court Decision yesterday, I’ve already gotten several inquiries concerning my statement that “We either need a law like in the UK so that companies must get permission from their shareowners in advance to make political contributions in excess of some amount or we need a massive number of shareowner resolutions at each company to accomplish the same.”
I understand Senator Charles Schumer is already considering a bill that would require shareowner approval of certain political contributions. I trust the Center for Political Accountability will expand their current focus from disclosure to shareowners to permission from shareowners if they can. Our friends at Calvert, Walden Asset Management, Domini, Trillium Asset Management and elsewhere are likely to take up the charge and I will be there lending whatever support I can.
For me, the most important immediate task will remain trying to level the playing field. Investors need to move from holding poker-chip like entitlements to being actual owners. Once investors begin to think like owners, instead of gamblers, they will demand accountability from their corporations. Since most shareowners invest in a market basket of companies, rather than single companies, we should all be able to agree that it is in our best interest if none of our companies makes political contributions.
One big start in getting investors to think like owners would be to repeal section 17A, subdivision e, of the Securities Exchange Act of 1934, which requires the Securities and Commission to immobilize securities certificates. As we point out in our draft petition to the SEC, a direct registration system will facilitate shareowner-shareowner communications, reducing the cost of proxy contests and making corporate elections more democratic.
Appropriate steps should be taken to ensure communications are presented in a manner that is intelligible to and convenient for average investors. For example, shareowners have long sought integrated proxy solicitations that combine materials from all parties in a contested election. DRS would facilitate this.
An increased volume of communications would go hand-in-hand with an increase in the number of contested elections or issues. As average investors realize they were being offered opportunities to make real decisions, retail shareowner participation in corporate elections will likely rise. To further enhance this trend, technology and policies can allow shareowners to customize their participation, opting out of some types of communication, and controlling the form of media and style of presentation of others, much as users customize some news websites to deliver only the types of news that interest them… an RSS feed for shareowners.
So, my answer for now is, “let’s get control of corporations.” Institutional investors are already required to vote in order to meet their fiduciary duty. Many are conflicted. Our best hope may be to get individual investors to think like owners. First step is to make them actual owners, instead of holding security entitlements. Take a look at that draft petition, my table on how street name registration results in rights denied, and give us some feedback. You can either do that through the comment function (yes, you have to register with the site first… I don’t want to clean out a lot of spam) or you can e-mail me.
Start using ProxyDemocracy.org for proxy research, MoxyVote.com for voting, join Shareowners.org and the Investor Suffrage Movement. Years down the road, let’s hope Citizens United is overturned. Even then, getting control over corporations, which have so much influence over us, will be vitally important.