April 05, 2011
Shareowner Activists to Bypass Proxy Ballot in Addressing Board Membership at Chamber of Commerce
by Robert Kropp
A coalition of investors led by Walden Asset Management plans to introduce resolutions from the
floor of Annual General Meetings of six companies, asking them to compare their own policies,
priorities and actions to those of the Chamber.
The disconnect between companies that proclaim a commitment to sustainability and the US Chamber of
Commerce has grown since the Supreme Court's Citizens United decision in January, 2010. While the
Chamber reportedly dedicated $75 million to defeating candidates with which it disagrees in the
recent mid-term elections, the number of companies adopting policies to disclose their political
spending activities has increased.
According to a recent newsletter from the Center for Political
Accountability (CPA), companies that have adopted disclosure and oversight of political
spending now number 85, as seven major companies have recently "agreed to disclose their direct
corporate political contributions, their indirect political spending through trade associations and
other groups, and to implement board oversight," according to CPA.
In conjunction with
CPA, Green Century Capital Management
recently announced that it had withdrawn a shareowner resolution at Eastman Kodak after the company
agreed to improve disclosure of its political spending.
Referring to the fact that Wells
Fargo is among the seven companies that recently agreed to disclosure and transparency, Bruce
Freed, President of CPA, told SocialFunds.com, "Wells Fargo is the first of the top-tier banks that
has adopted disclosure. The New York banks are obstinate, but Wells Fargo has been taking steps to
inform their associations of the prohibition on political spending and to ask for confirmation."
Yet, many of those same companies that have adopted policies on political spending still
sit on the Board of the Chamber of Commerce. Freed said, "Of the 85 companies, 23 have disclosed
their payments to the Chamber. I would think that most of the 85 companies sit on the Board of the
As Timothy Smith, the Senior Vice President of the Environment, Social and
Governance Group at Walden Asset
Management, told Social Funds.com, "It's important to divide up the resolutions that are
seeking more disclosure of political spending." Referring to the recent successes of CPA and other
advocates, Smith said, "That's the political spending side of it."
"Then there is the
pressure on companies, not just on political dollars spent, but the lobbying and public policy
advocacy of the Chamber of Commerce," he continued. "The companies we're addressing sit on the
board of the Chamber, which we think compromises their work on sustainability. Some of those same
companies have very good policies on political spending disclosure."
"It's good that Green
Century got the Eastman Kodak agreement, but Eastman Kodak is still on the board of the Chamber and
doesn't seem to be dealing with that," Smith observed. Green Century stated that "the firm will
continue to encourage the company to expand its policies and practices."
As an example of
the distinction between a good policy on corporate political spending and membership on the Board
of the Chamber, Smith brought up IBM.
"IBM has a policy that it doesn't allow any money
for political spending. They get an A+ for their policy and disclosure," he said. "But at the same
time they're on the board of the Chamber, and obviously the Chamber is taking a whole raft of
positions, from trying to undo health care reform and targeting any politician that voted for
health care reform, to suing the EPA."
A coalition of sustainable investors led by Walden
has introduced resolutions addressing payments to trade associations at 3M, IBM, and PepsiCo.
However, to pressure companies on their presence on the Board of the Chamber required a different
strategy, because, as Smith pointed out, the Securities and Exchange Commission (SEC) typically
excludes proposals that are too specific in addressing corporate operations.
As a result,
Walden and its partners have decided upon the strategy of introducing floor resolutions at the
Annual General Meetings of six companies in 2011. The adoption of the strategy follows a letter sent to
35 major companies serving on the Board of the Chamber, asking them to evaluate "the significant
risks posed by misalignment between company and Chamber policy objectives as well as the Chamber's
aggressively partisan role in electoral politics."
"A floor vote does not fall under SEC
rules but is actually part of a company's own bylaws," Smith said. "In its proxy statement, the
company alerts investors that a resolution will be introduced from the floor. There will be a vote,
and you can solicit votes, but we will not be soliciting votes this year. We're making this as a
statement to the Board, top management, and the investors in the room."
"If we want to be
very specific about a company reevaluating its role on the Chamber of Commerce, we felt it was
preferable to use this new strategy and go in with exactly what we wanted to say through a floor
resolution," Smith continued. "The language can be much more direct."
Resorting to the
strategy of floor action has already produced a victory, according to Smith.
"Pfizer has a
new policy on political spending that came as a result of shareowner resolutions prodding them on a
range of political spending questions," he said. "We also had a resolution for floor action at
Pfizer about their involvement on the board of the Chamber. We engaged in in-depth dialogue with
Pfizer, and Pfizer agreed to put the head of its environmental program on the environment committee
of the Chamber. So we will not move the resolution from the floor, and we withdrew the resolution
on political spending as well."
While the strategy of introducing resolutions from the
floor has limitations—for one thing, it is unlikely to attract nearly the number of votes that a
more generally worded shareowner resolution might—its use as a tool in support of an emerging issue
could increase the options available to shareowners.
"A year ago, very few companies were
paying attention to the fact that they were on the board of the Chamber, and whether there were any
contradictions," Smith said. "Now, while I can't say we have an enormous number of companies
dramatically shifting their position, we have heard from a number of companies that their boards
and top management are well aware of this issue and are discussing it."