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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In conjunction with CPA, Green Century Capital Management recently announced that it had withdrawn a shareowner resolution at Eastman Kodak after the company agreed to improve disclosure of its political spending.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, "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 Chamber."

As Timothy Smith, the Senior Vice President of the Environment, Social and Governance Group at Walden Asset Management, told Social, "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."


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