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February 07, 2012
ICCR Publishes 2012 Proxy Resolutions and Voting Guide
    by Robert Kropp

The Guide reveals a focus by members of the Interfaith Center on Corporate Responsibility on social issues and corporate engagement.

The nation's first presidential election since the Supreme Court's controversial Citizens United decision occurs this year, and it's not surprising to find that members of the Interfaith Center on Corporate Responsibility (ICCR) have filed 49 shareowner resolutions already for the 2012 proxy season that address political expenditures and lobbying.

As ICCR's recently published 2012 Proxy Resolutions and Voting Guide states, "In a system where one person, one vote is the supposed rule, American corporations exercise an outsized influence. Individual Americans are becoming adamant that elections be determined by votes, rather than deep-pocketed corporations."

Sixteen of the resolutions request corporate disclosure of political spending activities, including payments made to politically active trade associations such as the US Chamber of Commerce. Resolutions filed with 3M and Bank of America go so far as to request that the companies adopt policies "to refrain from using treasury funds in the political process."

Last year's proxy voting guide counted 26 shareowner resolutions addressing disclosure of corporate political spending filed by ICCR members.

What is new this year is the focus of additional resolutions, filed at AT&T, Chevron, General Electric, Goldman Sachs, JP Morgan Chase, and 26 other major US corporations, addressing lobbying expenditures. "While a number of companies are being more open about their political spending by voluntarily posting such information on their corporate websites, few by contrast are doing so in regards to their lobbying expenditures," this year's Guide states.

As a report published in November by the IRRC Institute (IRRCi) and the Sustainable Investments Institute (Si2) revealed, more than $1 billion was spent by corporations in 2010 on efforts to influence the political process. Most of those funds—$979 million, or 87%—went to lobbying, according to the report.

In response, Walden Asset Management and the AFSCME Employees Pension Plan—both of which are ICCR members—organized a coalition of institutional investors that have filed resolutions addressing lobbying expenditures with 40 corporations.

"This year investors have taken a logical next step and asked companies to disclose their direct and indirect lobbying activities," Timothy Smith, Director of Environmental, Social and Governance (ESG) Shareowner Engagement at Walden, stated. "We believe it is timely and appropriate for companies to be much more transparent."

The number of resolutions addressing environmental health issues declined from last year, from 42 to 32, but resolutions targeting the controversial practice of natural gas extraction known as hydraulic fracturing, or fracking, increased from seven to 11. Although the first resolutions addressing the practice were filed as recently as 2009, by 2010 shareowner support for them had already reached 40%.

What is different about the resolutions filed this year by ICCR members is their focus on community impacts; as Laura Berry, ICCR's Executive Director, said, "Increasingly these proposals are being deliberately written to remind companies that the consequences of corporate decision-making aren't abstractions, they have human faces."

Pat Zerega, director of shareholder advocacy at Mercy Investment Services, added, "This year nearly all the resolutions on fracking cite community impact which stems directly from our member’s experience in towns where fracking occurs."

"Negative local impacts are straining community resources and generating opposition to fracturing operations," a resolution filed with Chevron states. "In this climate, companies risk increased regulatory and legal risks or bans on fracturing operations outright."

In December, ICCR collaborated with the Investor Environmental Health Network (IEHN) on an Investor Guide to help increase corporate disclosure and mitigate the impacts of fracking.

ICCR's emphasis on social issues is also evident in resolutions filed with five companies, including Caterpillar and Halliburton, requesting that they adopt human rights policies consistent with international standards and "determine the potential for human rights abuses in the countries where they operate."

A resolution filed with US Airways requests that the company adopt a human rights policy that includes the prohibition of sexual exploitation of children. The policy, the resolution states, should "address provisions contained in The Code of Conduct for the Protection of Children from Sexual Exploitation in Travel and Tourism.

Last year, a similar resolution filed with Delta was withdrawn when the company became the first US-based airline to sign the code.

The issue of a free and open Internet, or net neutrality, has been challenging for shareowner advocates. In 2010, the Securities and Exchange Commission (SEC) disallowed at least four resolutions addressing the issue on the grounds of ordinary business.

Jonas Kron, Deputy Director of ESG Research & Shareholder Advocacy at Trillium Asset Management, told in 2010 that the SEC's Corporation Finance division concluded that the proposals did not address a significant policy issue.

Nevertheless, Trillium and other ICCR members have filed resolutions addressing net neutrality with three cellphone companies—AT&T, Sprint Nextel, and Verizon—asking that they "commit to operating their wireless broadband networks consistent with network neutrality principles."

"Open Internet policies on wireless networks (the fastest growing segment of the Internet) have particular importance for minority and economically disadvantaged communities," the resolution states.

An important corporate governance issue newly addressed by shareowner resolutions is the legislative risk associated with aggressive tax strategies. A resolution filed with Amazon, which collects sales tax in only five states, notes that the IRS is investigating "transfer pricing that would result in an additional $1.5 billion in federal tax expense." A resolution filed with Boeing, noting that the company has 38 subsidiaries in foreign tax havens, warns that the proposed Stop Tax Haven Abuse Act could adversely affect its future financial results.

In keeping with ICCR's decades of work on behalf of transparency in the financial sector, four large financial institutions—Bank of New York Mellon, Citigroup, JP Morgan Chase, and Morgan Stanley—have been asked by ICCR members to disclose how repurchase agreements are cleared, and how they are collateralized in the event of a default.

Overall, ICCR reports that its members have thus far filed a total of 160 shareowner resolutions. In 2010, the number was 308. The primary reason for the decrease is ICCR's focus on engagement; currently, ICCR members are involved in over 170 ongoing corporate dialogues.

As Berry of ICCR told last year, "The only real win is withdrawn resolutions, when companies look to us as a focus group for risk management."

This year marks the first time that ICCR's Resolutions and Proxy Voting Guides are available in one publication. In previous years, they were published separately. The 2012 Proxy Resolutions and Voting Guide is available for purchase on ICCR's website.


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