Proponents filing resolutions about corporate political influence started asking companies to be more accountable for their spending in the political arena twenty years ago, with the launch of the Center for Political Accountability (CPA). The initial focus was on board oversight and spending disclosure, but this started to shift significantly three years ago when proponents began to look harder at where company-connected money goes and whether the viewpoints of recipients clash with stated corporate environmental and social policies. Oversight and at least some disclosure of direct spending is now routine for almost all large companies—even though they remain reluctant to explain how much cash flows into the political system indirectly via “dark money” channels. This support often comes from politically active intermediaries such as trade associations and so-called “social welfare” nonprofit groups. But the “values congruency” proposals present a new frontier and companies this year continue to grapple with a growing number of proposals on reproductive rights, as well as many on climate change policy influence.

Research by Si2 and others has established that companies spend in a deeply partisan fashion in statehouse elections; they disproportionately support Republicans in red states, where more corporate money flows than to any other U.S. region. It is these states which reflect the increasingly radicalized agenda of the American right wing, clashing with the priorities of many investors and companies about the bottom-line importance of diversity, equity and inclusion, but also measures to mitigate climate change. Also at issue are company contributions to politicians who deny the 2020 election results and seek to restrict voting rights, thus undermining our democracy. While some companies announced they would pause spending to election deniers, they largely have shelved that idea now.

As of mid-February, there are 30 proposals on lobbying, 28 on elections and 35 on other issues, all but one concerning mismatches between corporate policies and recipients’ viewpoints. Only 10 have been withdrawn so far.

(Anti-ESG proponents have filed at least 10 additional political spending proposals and more are likely to appear; last year there were 16. See Anti-ESG, p. 76.)

Proponents: Proponents include social investment and religious organizations, leading pension funds from New York City and State, trade unions and some individuals. Investor concern about corporate election spending began in 2003 and intensified following the 2010 Citizens United U.S. Supreme Court decision—which allows unlimited contributions from companies although not directly to federal candidate campaigns. The CPA’s model oversight and disclosure approach is the standard template for the lobbying disclosure campaign run by Boston Trust Walden and the American Federation of State, County and Municipal Employees (AFSCME). The umbrella Corporate Reform Coalition supports shareholder activity on corporate spending and includes other reformers concerned about preserving American democracy and supporting accountability.

WAR ON ESG HIGHLIGHTS THE NEED FOR LOBBYING DISCLOSURE

JOHN KEENAN
Corporate Governance Analyst, AFSCME Capital Strategies

For 2023, proponents have filed at least 30 proposals asking for lobbying disclosure reports that include federal and state lobbying amounts, payments to trade associations and 501(c)(4) social welfare groups used for lobbying, and payments to tax-exempt organizations that write and endorse model legislation.
Dark Money Attack on ESG
The ongoing attack on ESG demonstrates why investors need disclosure of corporate lobbying, especially payments to third parties, including nonprofit groups writing model legislation.

Resources: In March 2022, an international consortium of investors released Responsible Climate Lobbying: The Global Standard, to help companies and investors assess and ensure that all lobbying efforts support the Paris Climate Treaty goals. ICCR is coordinating some climate change lobbying proposals, too, and issued its own guidance on evaluating corporate behavior last fall. Rhia Ventures is coordinating investor engagement about corporate policies and spending about reproductive and maternal health.

The most recent version of the CPAZicklin Index expanded its coverage in fall 2022 to the Russell 1000 index and tracks company performance about spending on elections; it sits beside a Model Code the Center released in 2020 to more fully address partisan risks. A key provision is for companies to require disclosure from third-party groups they support about where company contributions ultimately end up; this features in an expanded number of proposals in 2023 but none of this new variant has seen a vote so far. No similar index exists on lobbying, although an Si2 survey tracks that issue. The Conference Board’s Committee on Corporate Political Spending offers a more corporate but generally supportive perspective on accountability.

Lobbying

The resolved clause for the main lobbying campaign resolution this year has not changed and roughly half of the 30 proposals filed are resubmissions (table, p. 37). It asks for an annual report that includes:

1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.

2. Payments by [the company] used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient.

3. [The company’s] membership in and payments to any tax-exempt organization that writes and endorses model legislation.

4. Description of the decision-making process and oversight by management and the Board for making payments described in sections 2 and 3 above.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which [the company] is a member.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.

The report shall be presented to the Audit Committee or other relevant oversight committees of the Board and posted on [the company]’s website.

Withdrawals—Proponents have reached deals at Apple, Travelers, Visa and Walt Disney, where investors have voted annually since 2016 and the 2022 vote was 34.2 percent; the company recently expanded its reporting on trade group spending used for political purposes.

SEC action—Only Amazon.com and Eli Lilly are mounting fights at the SEC. The former says the proponent failed to prove stock ownership, which may succeed. Lilly is arguing that its disclosures make the proposal moot; it tried this line of reasoning in 2022 to no avail.

Election Spending

The Center for Political Accountability and its investor allies continue to seek board oversight and transparency about election spending from corporate treasuries. Support from investors for these resolutions dropped 10 points in 2022, however, to 33.4 percent and down from 43.8 percent in 2021, but there were 14 agreements that illustrate companies are willing to act.

CPA proposal: The main CPA resolution remains the same, with the 17 proposals mostly noting it excludes lobbying activity. The resolved clause asks companies to produce reports twice a year on:

1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct and indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.

2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:

a. The identity of the recipient as well as the amount paid to each; and

b. The title(s) of the person(s) in the Company responsible for decision-making.

Withdrawals and SEC action—So far proponents have withdrawn after agreements at two companies but one omission is likely:

• The Colgate-Palmolive resolution highlighted a low 2022 CPA Index score but when the company confirmed its spending ban extends to indirect channels the proponent withdrew.

• James McRitchie withdrew at ServiceNow after it implemented the proposal; it will publish its first report this year. The company also had argued at the SEC that the resolution was moot.

• CDW claims procedural errors, which are likely to mean it will be omitted.

New indirect spending proposal: Seven companies have a proposal first introduced last year (which has yet to go to a vote) and at least one more is planned; the resolution is pending at seven (see table). It invokes the CPA Model Code by asking each to

…adopt a policy requiring that any trade association, social welfare organization, or other organization that engages in political activities seeking financial support from Company agree to report to [the company], at least annually, the organization’s expenditures for political activities, including the amount spent and the recipient, and that each such report be posted on [the company’s] website. For purposes of this proposal, “political activities” are:

i. influencing or attempting to influence the selection, nomination, election, or appointment of any individual to a public office; or

ii. supporting a party, committee, association, fund, or other organization organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures to engage in the activities described in (i).

A FRAMEWORK FOR EVALUATING GOALS AND RISKS OF CORPORATE POLITICAL SPENDING

BRUCE FREED
President, Center for Political Accountability

DAN CARROLL
Vice President for Programs and Counsel, Center for Political Accountability

Companies today face a high-risk landscape for their political spending and its impact. The crisis that confronts U.S. democracy and the gridlock blocking action on a broad range of issues from climate change to voting, women’s reproductive rights, guns and even democracy itself has put front and center the role of company political spending in contributing to the breakdown.

SEC action—A procedural problem knocked out the resolution at Walgreens Boots Alliance, but four more challenges were pending as of mid-February. Amazon.com, Elevance Health, Eli Lilly and Merck variously argue that it concerns ordinary business decisions about how they engage with third parties or cannot be implemented because it would require action from third parties. Amazon also says the proposal can be omitted because it is from functionally the same proponent as another on climate lobbying that it received first (see p. 43 below), which it says makes both inadmissible.

Spending ban: Trillium Asset Management points out that Verizon Communications has faced repeated controversy about clashes between stated company values and its election spending, exemplified by contributions to politicians opposed to LGBTQ rights and abortion, and to election deniers. It therefore asks the company to “adopt a policy prohibiting political and electioneering expenditures.” Prohibitions are not popular with investors and a similar proposal from Trillium last year at Elevance Health earned only 4 percent. Verizon in the past has seen high votes on lobbying oversight and disclosure—47 percent in 2020 and 36.2 percent 2018.

Values Congruency

Increasingly, the focus in shareholder proposals about political money has been on apparent contradictions between what companies assert in public policy statements, who they support in elections and what they lobbying about after those elections are finished. Proponents mainly have raised questions about climate change and (increasingly) reproductive health, with a handful of broader concerns. There are 35 such proposals in 2023 and most are still pending as of mid-February. Thirteen are resubmissions.

Climate Change

Proponents have filed 15 proposals about climate change policy influence, with a few new variations. Ten are pending, four have been withdrawn and one omitted as of mid-February.

• Paris-alignment: Echoing earlier resolutions, a proposal about Paris-aligned public policy influence is a resubmission at Phillips 66 (62.5 percent in 2021) and United Parcel Service (33.2 percent last year), but new submissions were filed by Proxy Impact at CNX Resources and Coterra. It asks for an annual report on “if and how”

  
  lobbying and policy influence activities (both direct and indirect through trade associations, coalitions, alliances, and other organizations) align with the goal of the Paris Agreement to limit average global warming to “well below” 2 degree C above pre-industrial levels, and to pursue efforts to limit temperature increase to 1.5 degrees C, and how [the company] plans to mitigate the risks presented by any misalignment.

  
  The proposal adds a question at Boeing, Kinder Morgan and PACCAR about how each “plans to mitigate the risks presented by any misalignment. In evaluating the degree of alignment, [the company] should consider not only its policy positions and those of organizations of which [the company] is a member, but also the actual lobbying and policy influence activities.”

CORPORATE EFFORTS ON CLIMATE MUST INCLUDE LOBBYING

TRACEY C. REMBERT
Associate Director, Climate Change and Environmental Justice, Interfaith Center on Corporate Responsibility

While climate change always seems to bring troubling news, few reports in the past year are more compelling than those from scientists saying our ability to reach the Paris Agreement’s goal of 1.5˚C above pre-industrial levels is pretty much out of reach. Those alarm bells have enormous implications for investors and, combined with new data on rising emissions in hotspots like the United States, mean that a hodge-podge of voluntary efforts no longer suffices. We have fewer than seven years to turn things around, and we must deploy multiple strategies to get us there.

• Net-zero goals: There is a somewhat new approach at five companies (one not public). At Chubb, Devon Energy, EOG Resources and Wells Fargo, the resolution seeks an annual analysis and report

on whether and how” the company “is aligning its lobbying and policy influence activities and positions, both direct and indirect (through trade associations, coalitions, alliances, and other organizations), with its public commitment to achieve net zero emissions, including the activities and positions analyzed, the criteria used to assess alignment, and involvement of stakeholders, if any, in the analytical process. (At EOG it references a 2040 goal and at Wells Fargo 2050.)

• Framework clarification: At Alphabet, Meta Platforms and Amazon.com, a new proposal seeks a report on the “framework for identifying and addressing misalignments between [the company’s] lobbying (directly and indirectly through trade associations and social welfare and nonprofit organizations)” and company commitments to mitigate climate impact, referencing 2030 goals for either a 1.5-degree Celsius temperature increase or net-zero emissions. Each proposal asks about the “criteria used to assess alignment; the escalation strategies used to address misalignments; and the circumstances under which escalation strategies are used (e.g., timeline, sequencing, degree of influence over an Association).”

  
  Political influence proposals are not new to these companies but this resolution is more specific than one that earned 19 percent at Alphabet last year and general lobbying proposals earlier at Amazon.com and Meta.

SEC action: Amazon is arguing that Newground Social Investments (the proponent of a resolution on indirect spending discussed above), and Investor Voice (the proponent of this climate lobbying proposal) are functionally the same and impermissibly filed two proposals that both can be omitted. The commission has yet to respond. PACCAR is arguing the resolution is moot given its reports using frameworks from the Task Force on Climate-related Financial Disclosure and CDP. CNX Resources challenged the proposal on procedural grounds, such as stating that Charles Schwab’s use of a digital signature was insufficient to prove proof of ownership. Proxy Impact responded that SEC Staff Legal Bulletin No. 14L cautioned companies against the application of “an overly technical reading of proof of ownership letters as a means to exclude a proposal,” The SEC has yet to render an opinion.

Withdrawals: Trillium withdrew after EOG Resources agreed to provide more information about its trade associations. Mercy Investments withdrew at UPS after another agreement; UPS has received 16 proposals since 2010 about political influence, mostly on lobbying, and a somewhat more general climate lobbying proposal there received 33.2 percent in 2022. The proponent also withdrew at Kinder Morgan after an agreement, according to Ceres.

Reproductive Health

In addition to proposals that directly address reproductive health (see Health, p. 54), Rhia Ventures is asking for the fourth year in a row about inconsistencies between company policies on women and election contributions to politicians who oppose reproductive rights, as well as lobbying. Six of its proposals last year went to votes and earned average support of nearly 40 percent, putting it in a strong position for 2023. There are nine companies and two proposal types, with at least one more planned for the fall. All were pending as of mid-February.

• Elections: At five companies, the proposal seeks a report

analyzing the congruence of the Company’s political and electioneering expenditures during the preceding year against publicly stated company values and policies, listing and explaining any instances of incongruent expenditures, and stating whether the Company has made, or plans to make, changes in contributions or communications to candidates as a result of identified incongruencies.

It is a resubmission at AT&T (41.1 percent in 2022) and in its fourth year at Home Depot (42.6 percent in 2022, its highest vote yet and up from 32.9 percent in 2020).

A vote will occur for the first time at Walt Disney. First-time votes on this proposal also are slated for Coca-Cola and Comcast although political influence resolutions are not new there, either. Investors gave 12.6 percent support to a global influence proposal last year at Coke and there were seven years of lobbying proposals at Comcast before it agreed in 2022 to provide more information about nonprofits it supports.

Elections and lobbying: The resubmission at four more companies is more expansive. Each iteration raises questions about reproductive health but they also mention diversity, voting rights and climate change. The resolved clause asks AbbVie (39.5 percent in 2022), CIGNA (46.3 percent in 2022) and UnitedHealth (38.2 percent in 2022)—for annual reports just as in the proposal above but adds lobbying expenditures, which will

analyze and report…the congruence of [the company’s] political, lobbying, and electioneering expenditures during the preceding year against its publicly stated company values and policies, listing and explaining instances of incongruent expenditures, and stating whether the identified incongruencies have or will lead to a change in future expenditures or contributions.

The resolved clause further asks Pfizer to consider its “stated goal to ‘end discrimination against women, ensure equal opportunities for leadership and access to reproductive health.’”

SEC action: Pfizer is arguing at the SEC that the proposal is moot given reports it already makes about its policies and contributions to politicians and trade associations. Up for a test is whether the SEC agrees the proposal is substantially the same as one last year from the National Center for Public Policy Research that earned 10.4 percent, less than the 15 percent requirement for a second-year proposal. The resolved clause of last year’s proposal was the same as one from Tara Health in 2021 about values congruency, but Tara’s had earned 47.2 percent. (Tara resubmitted in 2022 but was pre-empted by NCPPR, which filed first.) The NCPPR version outside the resolved clause criticized the company’s diversity programs and support for abortion rights politicians. The SEC has yet to decide on the challenge.

Other Issues

Multiple concerns: At Altria, Trinity Health raises concerns about tobacco harms, voting rights, climate change and related political influence efforts by Altria and the trade associations it supports, using the same resolved clause as the Rhia resolution noted above about election and lobbying spending.

Proposals at JPMorgan Chase and United Parcel Service also use the “all-in” resolved clause noted above about election and lobbying expenditures, with specific concerns:

• While the proposal earned 30 percent at JPMorgan in 2021 and was withdrawn last year, James McRitchie now points to “hundreds of thousands of dollars to state and federal lawmakers with extreme anti-LGBTQ+ voting records,” as well as giving to abortion opponents, and its sponsorship of the State Financial Officers Foundation (SFOF). That group consists of elected Republican officials who actively oppose ESG considerations; it is behind a raft of new laws.

• Boston Trust Walden says that despite a high CPA-Zicklin Index for UPS, it does not explain how it decides to spend in the political arena nor how it evaluates the “congruence of these expenditures with UPS’s public commitments and policies, nor company actions to address instances of misalignment.”

At Mastercard, As You Sow uses the election spending values congruency resolved clause and elsewhere in the proposal takes issue with a mismatch between the company’s 2040 net-zero GHG reduction goal and its support for industry groups working to stop climate change legislation. As with the JPMorgan proposal, it points to Mastercard’s sponsorship of an anti-ESG trade association called the State Finance Officers Foundation (SFOF). (Last year, a proposal at Mastercard asking for board oversight of political spending noted its contributions to Members of Congress who denied the 2020 election results; it earned 10 percent.)

Human rights: At Northrop Grumman, a new proposal asks about political influence alignment with human rights. It calls for an annual report “describing the alignment of its political activities (including direct and indirect lobbying and political and electioneering expenditures) with its Human Rights Policy,” and says it should “list and explain instances of misalignment, and state whether and how the identified incongruencies have or will be addressed.” Proponents have raised human rights concerns for years at the company and a proposal seeking a report on its human rights impacts earned 22.4 percent in 2021, down from 31.1 percent in 2016.

Access to medicine: Last year, several ICCR members filed proposals asking drug companies to explain inconsistencies between their lobbying activities and policies to make medicines affordable. Results were strong, with 50.2 percent at Gilead Sciences, 43.3 percent at Johnson & Johnson and 34 percent at Eli Lilly. There are just two proposals this year (one not public). CommonSpirit Health has returned to Lilly and wants a third-party review and report within the year on how it

reconciles the strong commitments to both innovation and patient access, reflected in Lilly’s statement that it “strike[s] a balance between access and patient affordability, while sustaining investments to research innovative life-changing treatments for some of today’s most serious diseases”—when lobbying and engaging in other policy advocacy activities (both direct and through trade associations).

Global influence: Harrington Investments is again asking three food companies--Coca-Cola, McDonald’s and PepsiCo— about their efforts to influence public policy outside the United States. They earned votes in the teens in 2022.