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June 05, 2012
Shareowners to Vote on Lobbying by Energy Companies
    by Robert Kropp

Resolutions submitted by Walden Asset Management at Devon Energy and Chesapeake Energy call for disclosure of corporate lobbying expenditures.

More than $1 billion was spent by corporations in 2010 on efforts to influence the political process. Investors collaborating with the Center for Political Accountability (CPA) have made some inroads in pressuring corporations to disclose their political spending activities—CPA announced in March that 100 companies have now adopted disclosure and board oversight of such expenditures—but 80% of S&P 500 companies engage in lobbying. Lobbying expenditures accounted for $979 million, or 87%, of corporate political spending in 2010.

A coalition of 40 sustainable investors, led by Walden Asset Management, has filed resolutions addressing lobbying expenditures at 40 companies this year. Tim Smith, Director of Environmental, Social and Governance (ESG) Shareowner Engagement at Walden, stated, "It is important for investors to understand how company dollars are spent to influence our laws and regulations by lobbying activities. We believe it is timely and appropriate for companies to be much more transparent."

Resolutions at two energy companies—Devon Energy and Chesapeake Energy, both headquartered in Oklahoma, will be voted on this week. The resolution at Devon Energy states, "Absent a system of accountability, company assets could be used for policy objectives contrary to a company's long-term interests posing risks to the company and shareholders." For example, the resolution continues, "Devon is actively involved in the American Petroleum Institute & National Association of Manufacturers, both very active lobbyists."

Devon Energy sought to have the SEC allow it to omit the resolution from its proxy statement, arguing that it was vague and misleading, and would result in the micromanagement of the company by investors. The SEC disagreed, stating, "The proposal focuses primarily on Devon Energy's general political activities and does not seek to micromanage the company to such a degree that exclusion of the proposal would be appropriate."

"While this resolution focuses primarily on lobbying disclosure rather than seeking information on direct and indirect political spending to influence elections, further research discovered the facts that Devon had spent $6.13 million for federal lobbying from 2007 to 2011," Smith stated, "But more revealing is the fact that half of its federal spending went to 527 political committees all of which were channeled to Republicans."

"In particular, American Solutions for Winning the Future, organized in 2007 by Newt Gingrich to promote his particular political proposals and agenda, received $500,000 from Devon Energy," Smith continued. "This set the stage for his Presidential run, and by mid 2011 raised $50 million."

"How did Devon think such contributions promoted shareholder interests and built shareholder value?" he asked.


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