Political disclosures a key aim of 2014 proxy proposals

Mar 11, 2014
<p>Investors are more intent on disclosures of contributions to trade associations and membership in charities that promote model legislation</p>

Shareholder resolutions asking companies to disclose more about their political contributions account for 30 percent of all social resolutions filed this year, on par with the last few years, according to the new Proxy Preview report published by As You Sow and Proxy Impact, a proxy advisory startup whose CEO, Michael Passoff, spent more than a decade as senior program director for As You Sow’s Corporate Social Responsibility Program.

Political spending is the single most dominant issue about which investors are seeking more disclosure, Passoff says. 'There used to be a lot of different issues. Now there are better organized campaigns [that focus on particular issues],’ he says.

Political contribution proposals continue to seek corporate disclosure on direct lobbying but more and more they are asking for information about contributions to intermediate organizations such as trade associations, whose ‘dark money’ has become a more significant factor in political influence peddling. In 2013, 63 percent of political activity proposals went to votes, garnering on average just below 25 percent support, while 11 votes exceeded the 40 percent threshold and two received majority support, the report said. This year’s results are expected to be similar.

There was a jump last year in the number of companies with strong political disclosure policies, according to a report released in September by the Center for Political Accountability together with the Carol and Lawrence Zicklin Center for Business Ethics Research at the University of Pennsylvania’s Wharton School. Of the 200 largest companies in the S&P 500 Index that the CPA-Zicklin Index rated based on information available on their websites, 57 percent revealed something about their payments to trade associations. That’s a big increase from 41 percent in 2012 and included 14 percent that said they ask trade associations not to use their contributions for lobbying, up from 5.0 percent in 2012.   

This year, technology firms Google, eBay and Facebook are among the 24 companies that shareholders have asked to disclose their membership in and contributions to the American Legislative Exchange Council (ALEC), a tax-exempt 501(c)3 nonprofit organization that gathers state lawmakers in attempts to have them adopt model legislation written by companies, said John Keenan, corporate governance analyst at the American Federation of State, County and Municipal Employees (AFSCME), in the report. A key aim of these resolutions is to get tech companies to assess whether their support of green energy is in conflict with ALEC’s opposition to renewable energy sources.

The controversy around ALEC has convinced more than 70 companies to terminate their membership after judging that the reputation risk outweighed the benefits of membership, Keenan said.

The proliferation of political disclosure resolutions comes in the wake of the SEC’s removal from its near-term agenda, in December, of a rule that would have required publicly traded companies to report on political spending in their securities filings. The SEC has received more than 700,000 comments supporting an increase in required disclosure.

Fifteen of the 50 lobbying proposals submitted by 60 investors have been withdrawn this year, according to the report. Among these is Boston Common Asset Management, which withdrew its proposal after being told by Visa that it no longer supports ALEC, has increased board oversight and plans to review its lobbying activity each year. Visa also promised to disclose membership in any trade associations that write model legislation. Boston Common’s resolution garnered 37 percent support from investors in 2013.

There are eight examples of a new proposal this year aimed at getting food companies’ to suspend the political contributions they’ve been making to defeat state ballot initiatives concerning labeling genetically modified foods. Still, the goal of most of the political spending proposals is increased disclosure rather than banning contributions, the report said 

Last year, 30 percent of political contribution resolutions were withdrawn versus half of the environmental proposals filed and 70 percent of those focused on diversity and sustainability, says Passoff. The withdrawal rate for political spending proposals is typically lower than other kinds because filers are very clear on what they want.

‘Fewer companies have been willing, when initially contacted [by shareholders], to disclose their political spending, so more of those are going to a vote,’ he says.

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