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February 21, 2014
Shareowners Continue Efforts to Limit Corporate Political Spending
    by Robert Kropp

Sixty institutional investors file 48 shareowner resolutions calling on corporations to report on federal and state lobbying expenditures, including payments to trade associations.

Shareowner advocate Simon Billenness recently brought to my attention a post on Republic Report, revealing that former Chevron lobbyist Stephen Sayle is now a senior staff member of the House Committee on Science. “In recent months, the House Science Committee has become a cudgel for the oil industry, issuing subpoenas and holding hearings to demonize efforts to improve the environment,” Republic Report states. “Some of the work by the committee reflect the lobbying priorities of Chevron.”

Ever since the Supreme Court's controversial Citizens United decision in 2010, the issue of well-funded special interests exerting wildly disproportionate influence has loomed over the US electoral process. Led by the combined efforts of the Center for Political Accountability (CPA) and many sustainable institutional investors, at least 100 of the nation's largest corporations have agreed to adopt disclosure and board oversight of political expenditures. Yet special interest money continues to flow into the electoral process in unprecedented amounts; and, as The New York Times warned in a recen t editorial, “This election year will be the moment when individual candidate super PACs — a form of legalized bribery — become a truly toxic force in American politics.”

The issue of corporate political spending has been of such importance to shareowners that for the past three years, resolutions addressing it have been the most common shareowner proposals. And with the 2014 proxy season upon us, a coalition of sixty investors announced recently that they have filed 48 resolutions with companies, requesting that they “annually report their federal and state lobbying. That includes any payments to trade associations used for lobbying as well as support for tax-exempt organizations that write and endorse model legislation.”

“While many companies have modest government affairs budgets, others spend tens of millions of dollars annually on lobbying directly and through trade associations,” said Timothy Smith of Walden Asset Management, one of the coordinators of the investor initiative. “In addition, many companies work through lobbying organizations like the American Legislative Exchange Council (ALEC) to influence legislation and regulation at the state level such as their attack on renewable energy regulation.”

Funds from corporate treasuries that are earmarked for lobbying purposes actually far exceed those for direct political contributions, a situation that is made even worse when corporate contributions to politically active trade associations are taken into account. “The Chamber of Commerce spent more than $1 billion on lobbying since 1998, making it the country’s largest lobbying spender,” the investors stated. “The majority of companies do not disclose the portions of their trade association payments used for lobbying. These payments can create reputational risks for companies.”

Furthermore, “The resolutions also ask companies to disclose payments to and membership in tax-exempt organizations that write and endorse model legislation, which includes the American Legislative Exchange Council (ALEC),” the investors continued. “ALEC approved model legislation based on Florida’s Stand Your Ground law that gained national attention after the tragic killing of teenager Trayvon Martin.”

The resolutions request the following disclosures:

1. Company policy and procedures governing lobbying, including that done on the company’s behalf by trade associations.
2. Payments used for lobbying and grassroots lobbying communications.
3. Membership in and payments to any tax-exempt organization that writes and endorses model legislation.
4. Decision-making processes and oversight by management and the board.

“We need sunlight on lobbying operations so we can evaluate potential risks to our investments,” New York State Comptroller Thomas P. DiNapoli said. “Any political spending, including lobbying, made with shareholder dollars should be disclosed.”

It's often assumed that the vast majority of political funds are donated in support of conservative causes, although a perusal of the Open Secrets suggests that the reality is not so clear-cut. “Technically known as independent expenditure-only committees, Super PACs may raise unlimited sums of money from corporations, unions, associations and individuals, then spend unlimited sums to overtly advocate for or against political candidates,” the website reports.

The Times reported this week that hedge fund billionaire Tom Steyer has founded a SuperPAC named NextGen Climate Action. NextGen's goal is to “spend as much as $100 million during the 2014 election, seeking to pressure federal and state officials to enact climate change measures through a hard-edge campaign of attack ads against governors and lawmakers,” according to The Times.

Frustration at Congressional inaction on climate change is entirely understandable, but in this case does the end—electing representatives who are more likely to support climate change legislation—justify the means? Not according to Fred Wertheimer, president of Democracy 21. “This is about as far away as we can get from representative government,” he told The Times.

“A small number of the richest individuals in America are attempting to use their enormous wealth to purchase government decisions to advance their own personal interests,” he said.

Sustainable investors have always championed effective legislation and regulation as allies in the transition to a sustainable economy. "Public policy is a critical tool for making macro-level systemic change," Lisa Woll of US SIF: The Forum for Sustainable and Responsible Investment, once said. "We could spend the next 40 years getting companies to have better carbon footprints and doing less damage to the climate, or we could get a bill that addresses it."

Democracy 21 is advocating for the passage in the House of Representatives of the Price-Van Hollen bill, which, the organization states, would establish a public financing system for congressional races; shut down individual candidate Super PACs by defining their characteristics as creating impermissible coordination between these PACs and the candidates they support; and strengthen the rules prohibiting coordination between other outside spending groups and the candidates and parties they support.


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