Disclosing Corporate Lobbying

Timothy Smith is Director of ESG Shareowner Engagement at Walden Asset Management and John Keenan is a Corporate Governance Analyst at the American Federation of State, County & Municipal Employees (AFCSME). This post is based on a recent publication authored by Mr. Smith and Mr. Keenan. Related research from the Program on Corporate Governance includes Shining Light on Corporate Political Spending and Corporate Political Speech: Who Decides?, both by Lucian Bebchuk and Robert Jackson (discussed on the Forum here and here), and Corporate Governance and Corporate Political Activity: What Effect Will Citizens United Have on Shareholder Wealth? by John C. Coates (discussed on the Forum here).

Corporate lobbying disclosure remains a top shareholder proposal topic for 2018. A coalition of at least 74 investors have filed proposals at 50 companies asking for lobbying reports that include federal and state lobbying payments, payments to trade associations used for lobbying, and payments to any tax-exempt organization that writes and endorses model legislation.

Corporate lobbying to influence laws and regulations affect all aspects of the economy, on issues from climate change and drug prices to financial regulation, immigration and workers’ rights. Over $3.3 billion in total was spent on federal lobbying in 2017, with companies spending about $2.6 billion. And companies also spend more than $1 billion yearly on lobbying at the state level. State lobbying is far less visible and transparent than federal lobbying. And trade associations spend over $100 million annually lobbying indirectly on behalf of companies. For example the U.S. Chamber of Commerce has spent over $1.4 billion on lobbying since 1998.

Investors are concerned lobbying can pose reputational risks if it contradicts a company’s publicly stated positions, an example of values incongruity. A company’s reputation is an important component of shareholder value. According to the Conference Board, companies with a high reputation rank perform better financially than lower ranked companies, and executives find it is much harder to recover from a reputational failure than to build and maintain reputation. Without openness and transparency, corporate lobbying can be used to promote public policy objectives that can pose reputational risks.

A major focus for the investor coalition is undisclosed payments for trade association lobbying. In some cases, a trade association may actively lobby for issues that are contrary to a company’s public statement or values. Investors advancing these resolutions believe management needs to review trade association memberships to assess whether a trade association is accurately representing the company’s interests and policy positions and should have procedures in place to manage conflicts when a trade association’s position strongly differs from the company on a priority issue. The 2018 lobbying resolutions capture many of these potential trade association value misalignments in the supporting statements.

Climate, drug pricing and tobacco are clear examples of values misalignment risk. Many companies have programs to address climate change, yet are also members of the Chamber of Commerce, which has consistently opposed legislation and regulation to address climate change. Many pharmaceutical companies publicly support a patient’s access to affordable medicines, yet also funded the Pharmaceutical Research and Manufacturers of America’s $100 million campaign that defeated a California lower drug price initiative. And many of these companies support smoking cessation, while at the same time funding the Chamber of Commerce, which has lobbied against global antismoking laws.

And trade associations have also lobbied to undermine shareholder rights. Many companies belong to the Business Roundtable, which is lobbying against investors’ right to file shareholder resolutions. And a third party group like the American Legislative Exchange Council (ALEC) also presents reputational risks for promoting bills that undermine regulations on climate change, raising the minimum wage and workplace safety. The 2018 proposals have been filed at companies that have some or all of the following characteristic: significant lobbying spending, lack of trade association disclosure and controversial lobbying. Since 2012, coalition investors have filed over 340 shareholder proposals which have averaged over 25 percent in voting support and at the same time produced nearly 70 mutually agreed settlements for improved disclosure. The investor coalition is comprised of
public pension funds, labor funds, asset managers, individual investors, international investors, foundations and religious investors, many whom are members of the Interfaith Center for Corporate Responsibility. This initiative is coordinated and supported by AFSCME and Walden Asset Management, of Boston Trust & Investment Management Company.

The 50 Companies Receiving Lobbying Disclosure Resolutions for 2018 are:

AbbVie (ABBV)
Aetna (AET)
Alkermes Plc (ALKS)
Alphabet (GOOG)
American Water Company (AWK)
AT&T (T)
Atmos Energy (ATO)
Bank of America (BAC)
BlackRock (BLK)
Boeing (BA)
Bombardier Inc. (BBD.D)
CenturyLink (CTL)
Charter Communications
Chesapeake Energy (CHK)
Chevron (CVX)
Citigroup (-C-)
Comcast (CMCSA)
ConocoPhillips (COP)
Consolidated Edison (ED)
Devon Energy (DVN)
Dicks Sporting Goods
Duke Energy (DUK)
Eli Lilly (LLY)
Emerson Electric (EMR)
Encana (ECA)
Exxon Mobil (XOM)
FedEx (FDX)
FirstEnergy (FE)
Ford Motor (F)
Franklin Resources (BEN)
Goldman Sachs (GS)
Goodyear Tire & Rubber (GT)
Honeywell (HON)
Imperial Oil (IMO)
McKesson (MCK)
Morgan Stanley (MS)
Motorola Solutions (MSI)
Nucor Corporation (NUE)
Pfizer (PFE)
SNC-Lavalin (SNC)
Textron (TXT)
Travelers Companies (TRV)
Tyson Foods (TSN)
United Parcel Service (UPS)
UnitedHealth Group (UNH)
Verizon (VZ)
Vertex Pharmaceuticals (VRTX)
Walt Disney Company (DIS)

Filers of lobbying disclosure resolutions for 2018 include:

Public Pension Funds

New York State Common Retirement Fund
City of Philadelphia Public Employees Retirement System
The Employees’ Retirement System of Rhode Island

International Asset Managers and Pensions

ACTIAM (Netherlands)

Labor Pension Plans and Organizations

CTW Investment Group
International Brotherhood of Teamsters
UAW Retiree Medical Benefits Trust
United Steelworkers
Asset Management Companies
Azzad Asset Management
Boston Common Asset Management
Dana Investment Advisers
Domini Social Investments
First Affirmative Financial Network
Fresh Pond Capital
Investor Voice
Pax World Management Corp.
Rockefeller and Co.
Sustainability Group, Loring, Wolcott & Coolidge
Walden Asset Management
Walden Equity Fund
Zevin Asset Management


444S Foundation
Brainerd Foundation
Daniel Altschuler 1986 Trust
Lemmon Foundation
Max and Anna Levinson Foundation
Merck Family Fund
Nathan Cummings
Needmor Fund
The Oneida Tribe of Indians Trust Fund for the Elderly
Swift Foundation
Tides Foundation

Non-Profit Institutional Investors

Center for Community Change
Dwight Hall Socially Responsible Investment Fund at Yale
SHARE (Shareholder Association for Research & Education)

Religious Filers

Benedictine Sisters of Baltimore – Emmanuel Monastery
Benedictine Sisters of Chicago
Benedictine Sisters of Mount St. Scholastica
Benedictine Sisters of Virginia
Benedictine Sisters, Sacred Heart Monastery
Community Church of New York
Congregation of Benedictine Sisters, Boerne, TX
Congregation of Sisters of St. Agnes
Congregation of St. Joseph
Congregation of the Sisters of the Holy Cross, Indiana
Congregation of the Sisters of St. Joseph of Brighton
Daughters of Charity, Province of St. Louise
Dominican Sisters of Hope
First Parish in Cambridge – Unitarian Universalist
Friends Fiduciary Corporation
Glenmary Home Missioners
Grand Rapids Dominicans
Mercy Investment Services
Missionary Oblates of Mary Immaculate
Monasterio De San Benito
Monasterio Pan de Vida
Northwest Women Religious Investment Trust
Oblate International Pastoral Investment Trust
Province of St. Joseph of the Capuchin Order
School Sisters of Notre Dame Cooperative Investment Fund
Sinsinawa Dominicans
Sisters of Notre Dame
Sisters of Notre Dame de Namur-Boston
Sisters of St. Francis Charitable Trust
Sisters of St. Francis of Philadelphia
Sisters of the Holy Family, CA
Sisters of the Holy Names of Jesus and Mary, US Ontario Province
Trinity Health
United Church Funds
Ursuline Sisters of Tildonk, US Province
Unitarian Universalist Association


Carol Master
Gwendolen Noyes

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