A Banner Proxy Season for Political Disclosure and Accountability

Bruce F. Freed is President and Dan Carroll is Vice President for Programs at the Center for Political Accountability; and Karl J. Sandstrom is senior counsel at Perkins Coie LLP and counsel at CPA. This post is based on their CPA memorandum. 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 The Untenable Case for Keeping Investors in the Dark (discussed on the Forum here) by Lucian Bebchuk, Robert Jackson, James David Nelson, and Roberto Tallarita.

Support for corporate disclosure and accountability reached new highs in the just concluded 2019 proxy season. This was demonstrated in the number of companies agreeing to disclosure and board oversight over the full range of their political spending and in the surge in shareholder support for the Center for Political Accountability’s model resolution. All of this reinforces earlier findings about “private ordering” making political disclosure and accountability the new norm for companies.

This proxy season’s strong results were a clear affirmation of trends seen over the past several years. Much of corporate America now sees political disclosure and accountability as in its self-interest and shareholders consider it an essential feature of good governance. This is occurring as companies navigate heightened risks posed by today’s hyper-polarized political environment.

Here are the topline results for this season:

The average vote was 36.4 percent at 33 companies that held annual meetings. That was up from 34 percent last year, when 18 resolutions went to a vote. In 2017, the resolution averaged 28 percent over the 22 resolutions that went to a vote.

CPA and its shareholder partners reached disclosure agreements and withdrew resolutions at 13 companies this year. That compares with three in 2018 and seven in 2017.

The 2019 Proxy Season breakdown is as follows:

  • Two majority votes in support of the resolution at Cognizant Technology Solutions Corp. (53.6%) and Macy’s Inc. (53.1%).
  • Eleven votes in the 40% range, including Kohl’s Corp. (49.8%), NextEra Energy Inc. (48.7%), Allstate Corp. (46.9%), Chemed (46.2%), Western Union Co. (44.3%), Fiserv Inc. (43.8%), Alaska Air Group (43.5%), Roper Technologies Inc. (43.0%), Netflix Inc. (41.7%), Centene Corp. (41.6%) and Nucor Corp (40.6%).
  • Twelve votes in the 30% range. The companies included Illumina Inc. (37.7%), Simon Property Group Inc. (37.1%), American Water Works Company Inc. (37.0%), Duke Energy Corp. (35.8%), Wyndham Destinations (35.6%), American Tower Corp. (35%), Royal Caribbean Cruises Ltd. (34.5%), Wynn Resorts Ltd. (34.4%) CMS Energy Corp. (34.3%), Equinix Inc. (34.2%), DTE Energy Co. (33.6%), and J.B. Hunt Transport Services Inc. (31.7%).

At 13 other companies, resolutions were withdrawn after the companies agreed to disclose their political spending and adopt board oversight and accountability policies. They include Alexion Pharmaceuticals Inc.; Ameriprise Financial Inc.; General Electric; Ball Corp.; Chubb Ltd.; Devon Energy; Hilton Worldwide Holdings Inc.; The Kroger Co., and Sysco Corp.; Mondelez International Inc.; MSCI Inc.; Tractor Supply Co.; and SVB Financial Group.

Beyond the votes and agreements, what was striking was what CPA and its shareholder partners learned from its discussions with companies: There is heightened sensitivity to the harm ill-considered political spending may have on company’s reputation, adversely impacting its relationship with its employees, customers and shareholders. One executive unprompted said, , that a controversial contribution can put it at a competitive disadvantage. . Others mentioned that they had read CPA’s Collision Course report, released last year, that examined the risks to companies when the consequences of their political spending conflicted with company core values and positions.

Overall, CPA and its partners found in this year’s dialogues an eagerness by companies to adopt or strengthen political disclosure and accountability policies. This followed the pattern seen over the past four years of S&P 500 companies steadily increasing their CPA-Zicklin Index scores for political disclosure and accountability policies.

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