Corporate Political Influence

The dysfunctional U.S. political arena and deep national political divisions make longstanding shareholder resolutions about the role of corporate political influence more relevant than ever, particularly in the runup to the presidential election next November. The volume of filings is about the same this year but down from a high in 2022. The mix of proponents and resolution types is also the same, although lobbying resolutions are up a bit. (See graph.) Proposals raise concerns about influencing elections (30 resolutions), lobbying that occurs after elections (34) and whether stated corporate policies clash with all of these expenditures (25), as follows:

  • Elections: The Center for Political Accountability (CPA) continues to press companies for board oversight and spending disclosure regarding elections. It assesses corporate performance in the annual CPA-Zicklin Index, released each fall and now covering the Russell 1000 index. CPA’s Model Code released in 2020 tries to more fully address partisan risks. Support for the main proposal has eroded recently, but agreements continue to produce withdrawals.

  • Lobbying: Lobbying proposals have been coordinated by a loose partnership between the American Federation of State, County and Municipal Employees (AFSCME) and Boston Trust Walden, with more now being done by ICCR. There is no comparable lobbying index to track corporate performance, although Si2 has been tracking S&P 500 policies and disclosure activity for more than a decade. Investor support has stayed constant for lobbying oversight and transparency, in contrast to many other issues.

  • Values: Four years ago, proponents began to look harder at where company-connected money goes and whether the viewpoints of recipients clash with stated corporate policies. This focus has grown into a key part of proxy season engagements, and proponents see undisclosed support for non-profit groups who actively advocate in the political arena as a critical challenge they believe presents potent reputational and financial risks. Their concerns focus on support for politicians who are passing laws that erode reproductive health rights, work to end climate change mitigation efforts, constrain LGBTQ peoples’ rights and curb voting rights. These proposals have seen uneven support, dropping for some and staying even for others (after a big drop between 2021 and 2022, climate-related influence reporting support rose by five percentage points last year).

  • Anti-ESG: Proponents have filed at least 14 additional proposals and more are likely to appear; last year there were 17. (See p. 74 for more.)

Proponents: Proponents include social investment and faith-based organizations, leading pension funds from New York City and State, trade unions and individuals. The umbrella Corporate Reform Coalition also supports shareholder activity on corporate spending and includes other reformers concerned about preserving American democracy and supporting accountability.

Resources: Investors may wish to consult several recent sources for more background on corporate influence and investor initiatives, including:

CORPORATE STATE LOBBYING REMAINS A BLACK HOLE


HEIDI WELSH
Founder and Executive Director, Sustainable Investments Institute (Si2)

ROBIN YOUNG
Research Director, Sustainable Investments Institute (Si2)

Senator Elizabeth Warren (D-Mass.) and several colleagues wrote to SEC Chair Gary Gensler on Nov. 15, 2023, to ask about any plans the commission has to mandate fuller disclosure of company approaches to political influence by way of lobbying. The senators said such a rule could require reporting on 1) corporate lobbying strategy, 2) how much a company spends on lobbying and 3) any material risks to the company related to lobbying strategy and spending. The possible rule could address key elements of longstanding shareholder proposals about lobbying.

In response to the letter, Public Citizen commissioned the Sustainable Investments Institute (Si2) to assess relevant information that the SEC might assess in any rulemaking.

Lobbying

The resolved clause for the main lobbying campaign resolution this year has not changed and 12 of the 34 proposals filed are resubmissions (table, previous page) that earned for the most part strong support last year. While the supporting statements raise issues specific to companies, the resolved clause is standard, with few variations. It seeks 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.

CORPORATE LOBBYING DISCLOSURE IS MATERIAL INVESTOR INFORMATION


JOHN KEENAN
Corporate Governance Analyst, AFSCME Capital Strategies

For 2024, more than 30 shareholder proposals have been filed 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.

State Lobbying Disclosure “Black Hole”
Si2’s new study found almost no major U.S. companies provide their investors with state lobbying disclosure, with 98 percent of the S&P 500 failing to disclose state-specific lobbying totals to shareholders.

Withdrawals: Proponents have withdrawn just two proposals after reaching agreements as of mid-February, at Boeing and Starbucks. While no details of the Boeing agreement are available, James McRitchie says Starbucks agreed to report on which social welfare organizations it supports with more than $25,000 and to provide a total amount it spends, prompting his withdrawal.

SEC action: The resolution at Hewlett-Packard Enterprise was filed too late and omitted; a similar challenge is pending at Cummins. Just two other companies have lodged challenges. At Meta Platforms this proposal earned 14.6 percent in 2023 and 20.6 percent in 2022, thus missing the 15-percent second-year refiling requirement; a vote is unlikely because the company’s challenge points this out.

Wells Fargo, on the other hand, says the proposal is too long. It also says in a challenge to a separate proposal about climate lobbying (see p. 42) that it intends to include this proposal, though, and argues the climate lobbying proposal duplicates this one. A climate lobbying at Wells Fargo in 2023 earned 32.3 percent, up from the 8.3 percent a general lobbying disclosure proposal received in 2017.

Election Spending

The Center for Political Accountability and its investor allies continue to seek board oversight and transparency about election spending from corporate treasuries. The number of votes on the main CPA proposal has dropped significantly and so has support. In 2020, 28 proposals averaged 38.6 percent support, while the next year 13 proposals averaged 46.7 percent; last year only six went to votes and the average was 30.4 percent. But agreements engendered by company commitments to add more oversight and disclosure have at the same time produced 47 withdrawals in the same five-year period, including 10 last year. This illustrates considerable traction in corporate America for CPA’s approach, even if companies remain wary of the newest CPA effort to persuade them to report on what intermediary groups spend in the political arena.

Main CPA proposal: The primary CPA resolution has not changed for some time. A total of 25 pending proposals mostly note they exclude lobbying activity and 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.

SEC action—Two proposals have been struck for procedural reasons, at Church & Dwight and PACCAR, but no other challenges exist.

Indirect spending proposal: Just two proposals this year ask companies to adopt the CPA’s Model Code; one is a resubmission at Elevance Health, where it earned 8.1 percent last year. The other is at Delta Air Lines. Last year there were three votes in addition to the one at Elevance, but all were lower: 4.1 percent at Eli Lilly, 7.3 percent at Merck and 5.4 percent at Oracle. The proposal adds this year that it “does not encompass lobbying.” It also asks each company 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).

Both recipients have seen numerous political influence proposals before. In 2020, the standard CPA proposal earned 46 percent at Delta Air Lines where a lobbying proposal earned 27.6 percent in 2022, after a climate change lobbying proposal earned 62.9 percent in 2021. Earlier proponents asked Elevance Health to end its election spending and earned 4 percent in 2022 and 1.7 percent in 2014, not enough support to qualify for resubmission in either case. The 2024 proposal at Elevance notes its contributions to third-party groups with extreme positions on voting rights, climate change, abortion and the January 6 attacks on the U.S. Capitol.

Spending ban: Trillium Asset Management points out that Verizon Communications has faced repeated controversy about clashes between its stated values and election contributions, including those to 54 politicians who deny the validity of the 2020 election results. In 2020, a proposal to the company about lobbying oversight and disclosure earned 47 percent, up from 36.2 percent 2018 and four earlier votes. Last year, Trillium sought a spending ban and earned 6.3 percent support; this year it asks for a report on such a move, asking the board to:

commission, oversee, and publish an independent third-party study which examines the impact on the company, the sector, and American democracy of the company adopting a policy prohibiting the use of corporate or PAC funds for direct or indirect contributions to political candidates. The study should provide recommendations and potential next steps.

A CODE FOR CORPORATE POLITICAL SPENDING DISCLOSURE


BRUCE FREED
President, Center for Political Accountability

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

Today’s headlines are focused on the threats to democracy fueled by the looming 2024 presidential and congressional elections. Far less attention is being paid to the corporate treasury dollars underwriting activities that imperil our democracy.

The Center for Political Accountability (CPA) is addressing this with an expanded program that’s focused on widening corporate political disclosure and accountability, deepening the public’s and media’s understanding of the scope and impact of company political spending and changing how companies approach election-related spending.

Why is CPA’s effort so important? It circumvents a dysfunctional political process that has blocked action for the past 20 years. And, it has brought about substantive change.

Values Congruency

As noted above, shareholder proponents are increasing focus on contradictions between what companies assert in public policy statements and the policies and laws that emanate from those they support in elections. They also highlight such contradictions in lobbying, where the sums are much higher. Issues range from reproductive health to climate change, and more recently to voting rights. There are 23 such proposals in 2023 and most are still pending as of mid-February. A majority—15—are resubmissions. The proponents have not made information public on four of them.

Climate Change

A dozen proposals ask companies to report on how they are trying to influence public policy on climate change. Six are resubmissions that received varying levels of support last year—ranging from a high of 47.4 percent at PACCAR to a low of 9.8 percent at Meta Platforms, where votes are always lower given the company’s dual-class stock structure.

There are two main variants this year, but almost all are at companies that have set net-zero goals. The proponents want nine companies—Amazon.com, American Express, Bank of America, Consolidated Edison, IBM, Meta, NextEra Energy, Tyson Foods and Wells Fargo—to explain how they decide to engage lawmakers. Some ask for the process for “identifying and addressing misalignment between” their stated goals and the direct and indirect activities of “trade associations, coalitions, alliances, and social welfare organizations.” Many ask for specifics on the “criteria used to assess alignment, the escalation strategies employed to address misalignment, and the circumstances under which escalation strategies are used (e.g., timeline, sequencing, and degree of influence over an Association).”

The second type is at two companies—Boeing and one company yet to be identified publicly. It asks the board to

annually conduct an evaluation and issue a report…describing if, and how, Boeing’s lobbying and policy influence activities (both direct and indirect through trade associations, coalitions, alliances, and other organizations) align with the Paris Agreement’s ambition of limiting global temperature rise to 1.5 degrees Celsius, and how Boeing plans to mitigate the risks presented by any misalignment. In evaluating the degree of alignment, Boeing should consider not only its policy positions and those of organizations of which Boeing is a member, but also the actual lobbying and policy influence activities.

All of the recipients have been in discussions with their investors about political influence before, with resubmissions of climaterelated lobbying proposals in 2023 noted in the table above.

Vote: The only vote so far has been 10.2 percent for a resolution at Tyson Foods (which is family controlled, resulting in low votes for shareholder proposals).

SEC action: Four companies have lodged challenges. Alphabet pointed out the vote in 2023 was less than the 15 percent resubmission threshold (the resolution earned 19 percent in 2022) and the proposal has been omitted. Amazon.com contends the proponent failed to provide enough times to meet to discuss the proposal as new SEC rules require; Consolidated Edison says it is moot, ordinary business since it would micromanage and also too vague; and Wells Fargo says this proposal duplicates a standard lobbying resolution.

Social Issues

In addition to proposals that directly address reproductive health (see Health, p. 52), Rhia Ventures is continuing to ask about inconsistencies between company policies on women and election contributions to politicians who oppose reproductive rights, as well as lobbying. Six of its proposals went to votes in 2022 and earned average support of nearly 40 percent, but the average dropped to about 27 percent for nine proposals in 2023. In 2024, there are nine companies and two proposal types, with at least one more planned for the fall. All were pending as of mid-February. Four recipients have yet to be named publicly.

Elections: Five companies—Comcast (where the vote was 19 percent last year), Molina Healthcare (a new recipient with a zero rating on the CPA-Zicklin Index), Verizon Communications (another first-time recipient of this proposal although a lobbying proposal earned 47 percent in 2020) and Walt Disney (36.3 percent last year), plus two others—have a proposal asking each to report on

political and electioneering expenditures, identifying and analyzing any potential incongruence between such expenditures and its stated values and policies. The report should state whether [the company] has made or plans to make changes in contributions or communications as a result of identified incongruencies.

SEC action—Verizon is testing out the proposition that this proposal duplicates another from Trillium Asset Management that seeks a report about ending political spending altogether; it has lodged a challenge to this effect at the SEC.

SUPPORT FOR INCLUSIVE, HEALTHY WORK FORCE LEADS TO BUSINESS GROWTH


NADIA KHAMIS
Director of Corporate Engagement, Planned Parenthood Action Fund

Planned Parenthood Action Fund (PPAF) works to ensure all people have equitable access to quality, affordable sexual and reproductive health care no matter their background or location. This includes protecting the ability of 600 Planned Parenthood health centers to serve economically and medically underserved patients across the United States. Those health centers see every day the devastating impact to the workforce and consumers from legislative attacks on reproductive health care access and bodily autonomy.

All political influence: Trinity Health is returning to Altria with a proposal about both election spending and lobbying that earned 10.9 percent last year; it follows an earlier proposal about lobbying that earned 33.3 percent in 2021. Outside the resolved clause, Trinity Health raises concerns about tobacco, deregulation and political influence efforts by Altria and its trade associations, asking that it

annually analyze and report on the congruence of both political spending and lobbying expenditures during the preceding year, compared to its public Vision, Responsibility Focus Areas and Cultural Aspirations statements, listing and explaining instances of incongruent or misaligned expenditures, and reporting whether the identified incongruencies will lead to changes in future expenditures.

Harrington Investments takes a similar approach in another resubmission which earned 28.5 percent at Wells Fargo last year. It takes issue with the company’s ties to the State Financial Officers Foundation (SFOF), a group of elected Republican officials who actively oppose ESG considerations through both legislation and litigation.

The proposal asks for an annual report that will provide

a congruency analysis between corporate values as defined by Wells Fargo’s stated policies and Company contributions on electioneering and to any organizations dedicated to affecting public policy. The report should include a list of any such contributions occurring during the prior year misaligned with stated corporate values, stating the justification for such exceptions.

SEC action—Wells Fargo says the proposal duplicates another that it plans to include in its proxy statement concerning lobbying since both mention indirect spending and values incongruency.

Human rights: Another repeat proposal comes from faith-based investors concerned about the influence of two defense contractors long criticized on human rights. The School Sisters of Notre Dame and the Sisters of St. Francis of Philadelphia have filed at Lockheed Martin and Northrop Grumman (where the proposal earned 20 percent last year). At Lockheed, the proposal notes arms sales to Israel and its heavy lobbying and funding of think tanks that favor U.S. involvement in foreign conflicts. At both companies, the proponents link human rights values to political influence. They want a report

describing the alignment of its political activities (including direct and indirect lobbying and political and electioneering expenditures) with its Human Rights Policy. The report should list and explain instances of misalignment, and state whether and how the identified incongruencies have or will be addressed.

Global spending: The final proposal is another resubmission, at PepsiCo, from Harrington Investments and in its third year (previous votes were 18.5 percent in 2023 and 17.6 percent in 2022). Unlike all the others, it is about activity outside the United States. Among other things, it notes the company’s lobbying against food labeling regulations in Mexico. It seeks an annual report on:

global public policy and political influence, disclosing company expenditures and activities outside of the United States. Such report should disclose company funding and in-kind support directed to candidates or electioneering, lobbying, scientific advocacy, and charitable donations for the preceding year including:

- recipients and amounts;
- date and timeframe of the activity taking place
- the Company’s membership in or payments to NGOs including trade and business associations, scientific or academic organizations and charities.
- the rationale for these activities.

The Board and management may, in its discretion, establish a de minimis threshold, such as contributions to an individual or organization totaling less than $250, below which itemized disclosures would not be required.