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. Si2 examined:
the extent of demand for such information from investors, the owners of corporations,
the degree to which current voluntary corporate disclosures meet this demand, and
whether current legal mandates from regulatory agencies responsible for oversight and disclosure of the lobbying process already provide investors with what they want to know.
The report, The Corporate State Lobbying Black Hole, was published in early December 2023. It looked at investor sentiment on lobbying over the last 14 years, summarized findings from Si2’s independent assessments of S&P 500 corporations’ lobbying approaches since 2015, and assessed current disclosure mandates in a sampling of states. The focus was on state lobbying given the dearth of available information about corporate spending in statehouses.
Key Takeaways
Investors have shown strong, sustained support for more information: There is clear demand for more corporate oversight and disclosure of lobbying, despite recent headwinds for proponents of ESG business considerations. Since 2010, investors have filed nearly 600 shareholder resolutions asking companies to provide more information about 1) how they oversee lobbying activities directed at federal, state and local government, and 2) how much they spend. Average support for 104 lobbying resolutions voted on since 2020 has been above 32 percent, comfortably within the range of support that typically prompts action.
Little voluntary state spending disclosure exists: Almost no U.S. companies provide their investors with information on how much they spend to lobby state governments: 98 percent of S&P 500 firms do not disclose state-specific totals and 97 percent do not report a combined or aggregate spending total for state lobbying.
Seven companies currently provide their investors with expenditure reports on state-specific lobbying amounts: Altria Group, Devon Energy, FirstEnergy, Lincoln National, United Rental, Walmart and Xcel Energy.
Material risk remains unexamined: The suggested lobbying rule could require companies to disclose material risks connected to lobbying activity. Yet only one company of the 10 best disclosers Si2 examined now includes lobbying as a material risk factor in its 10-K, the annual report to investors about a company’s business. FirstEnergy is the exception and its statement of material risk from lobbying comes after it agreed in July 2021 to pay $230 million to resolve the largest corruption scandal in Ohio’s history. Ohio’s former House speaker started serving his 20-year sentence in June 2023. Further, two company officials were indicted in February 2024.
Additional Conclusions
Lobbying strategy is not discussed: While a lobbying disclosure rule could prompt companies to tell investors more about their lobbying strategy, almost no companies do so now. Only two of the seven firms that currently provide state-level disclosure provide consequential narratives about their strategies—Altria and Walmart.
Current legal mandates are a black hole: Si2’s examination of 15 states that passed anti-ESG legislation in 2023 illustrates what information investors and the public can learn from current state laws on lobbying disclosure. Because of three key failings, the full picture of corporate statehouse spending is obscured. First, a patchwork of corporate identification information means companies cannot be connected to expenditures. Second, states often do not require any identification of the subjects on which lobbyist pursue influence. Third, many states do not collect lobbying information in a format usable for researchers.
Some policies have improved: While reporting on disbursements lags, companies have become markedly more willing to acknowledge their state-level lobbying in formal policies about influence spending: 43 percent mentioned state lobbying in Si2’s most recent full assessment of the S&P 500 in 2021, up from only 30 percent in 2015.
Shareholder proponents have been asking companies for years to explain more about how they influence public policy through lobbying and a new SEC rule to mandate more reporting could help meet this demand. At this point, we simply do not know what companies are spending in half the country to affect state laws, on critical and controversial subjects of intense public interest.
Heidi Welsh
Executive Director, Sustainable Investments Institute
Robin Young
Sustainable Investments Institute