Behind the Chamber’s Attack on the Proxy Process, Fear of Disclosure – and CPA
By Bruce Freed
Why is the U.S. Chamber of Commerce still running from sunlight? What are the Chamber and many of its members trying to hide?
CPA Filing 2020 Resolutions at Fast Pace
--The Chamber receives dues from members it represents and “has spent $143 million on elections since the 2010 cycle, making it the top dark money spender post-Citizens United,” according to OpenSecrets.org.
--The Chamber has championed proposed U.S. Securities and Exchange Commission rule changes that would muzzle small shareholders, and it has sponsored big-dollar advertising backing the rules.
--These SEC proposals could hobble an increasingly successful effort led by the Center for Political Accountability and joined by shareholder partners to cast sunlight on, and bring accountability to, spending by public corporations to influence elections in America.
--Through this effort, CPA has identified at least a staggering $36.9 million in previously undisclosed corporate payments to the Chamber from 2015 to 2018, thanks to certain companies adopting increased transparency.
--For shareholders, voters, and others who want to know about companies influencing elections and policy, our efforts are helping to pull aside the veil on which companies belong to some of the nation’s biggest business trade groups and the millions these companies pay to the trade associations’ coffers.
Is it a coincidence that the Chamber, which does not disclose its members, is crusading for changes to shareholder proxy rules that would stifle small investors and potentially cripple our campaign for corporate political disclosure? (For details, see our January newsletter or our comment to the SEC.)
At CPA, we don’t believe it’s a coincidence. The Chamber and member companies that want to hide their big political spending don’t want to give up the secrecy they have enjoyed for too long.
Secrecy is helping conceal, for example, the identity of many corporate donors whose spending could have enormous bearing on the critical, once-a-decade redistricting processes that will take place across the U.S. in 2021.
Both political parties are raising multimillion sums to try to win majorities in state legislatures before 2021, according to OpenSecrets.org. Going head-to-head in this fundraising race are the Republican State Leadership Committee and the Democratic Legislative Campaign Committee.
In 2010, before the last Census, the former group came out of obscurity to outspend the latter almost three to one and help flip 20 state legislative chambers from blue to red. In 2012, new political maps crafted in state legislatures yielded GOP gains in Congress even though the Democratic president, Barack Obama, won re-election. Moreover, the 2010 drive to take control over state capitals helped seat numerous legislators who in turn sponsored highly controversial measures on abortion rights, LGBTQ rights, and “religious freedom.”
The Chamber of Commerce was the biggest donor to the RSLC at more than $3.9 million for the 2010 cycle. Our own research team recently documented that in the 2010 election cycle, public corporations and their trade associations combined gave a whopping 62 percent of what the RSLC raised. They donated 38 percent of the money raised by its Democratic counterpart.
The Chamber is a dark-money giant. It’s also a champion for radically regressive SEC shareholder proxy rules that would make the effort by CPA and its shareholder partners for corporate political disclosure far more difficult.
This, we believe, is no coincidence.
Notwithstanding the SEC’s pending proposal, the 2020 Proxy Season is entering full swing and shareholder partners have filed the CPA model resolution at 34 companies. The Center intends to have 40 or more proposals filed before the 2020 season is complete.
In 2019, 33 resolutions went to a vote, averaging 36.4 support. At 13 other companies, resolutions were withdrawn after the companies agreed to disclose their political spending and adopt board oversight and accountability policies. More update to come once voting begins.
Big 3 Silent on CPA’s offer
Last month, CPA offered the Big 3 institutional investors – BlackRock, Vanguard and Fidelity -- its help to move to vote for corporate political disclosure and accountability resolutions. So far, none have responded. Meanwhile, Harvard Magazine carried an article about the passivity of the Index funds.
More Than 14,000 Have Responded to SEC Proposed Rules Change
The U.S. Securities and Exchange Commission has received a deluge of more than 14,000 responses to its proposed rule changes governing the shareholder proxy process and certain activities of proxy advisors.
CPA submitted its response in January, contending that the rule changes would cripple small investors’ ability to seek policy changes from American companies and undermine their First Amendment rights. Some other responses to the CPA echoed or acknowledged CPA.
Public Citizen cited CPA’s successes among the initiatives by shareholder resolution advocates that have won an embrace from corporations. “As of 2019, 316 companies in the influential S&P 500 reported to the CPA- Zicklin Index that they disclose some or all their election-related spending or that they prohibit such spending,” Public Citizen said in its response.
A response by James McRitchie, publisher of Corporate Governance, saluted CPA among advocates pressing for corporate accountability and stated that CPA “leads efforts for corporate political disclosure and accountability” in the U.S.
One of the more comprehensive responses came from Sanford Lewis, Director, Shareholder Rights Group. He concluded:
“The combined rulemaking proposals would not only undermine our rights and interests as shareholder proponents; they would deprive all investors of the opportunity to weigh in on the proposals that they would support on governance, risk management, and corporate responsibility issues. The impact of reduced risk management, diversity, environmental responsibility, or climate change responsiveness from excluding hundreds of proposals every year would exceed the ostensible savings by many orders of magnitude in potential bankruptcies, environmental liabilities, stranded assets, reputational damage and harm to the global economy.”
Other responses notable for their comprehensive reach or targeted arguments included one from John Coates IV, a Harvard Law School professor and Barbara Roper, Consumer Federation of America; and one from Lucian Bebchuk of Harvard Law, saying “the proposed rule would have an adverse effect on capital formation.”
At responsible-investor.com, meanwhile, Paul Hodgson interviewed Heidi Welsh, Director of the Sustainable Investments Institute, for an article entitled “US analysis: The fate of ESG votes if they’d been subject to the SEC’s latest proposals.”
Morton Kondracke at RealClearPolitics commented on a book by Neal Simon titled “Contract to Unite America: Ten Reforms to Reclaim Our Republic.” Discussing legislation to require disclosure of any political donations greater than $100, Kondracke listed national leaders in the fight for such legislation and mentioned CPA among them.
CPA’s Bruce Freed was quoted by Bloomberg in a Financial Post article headlined, “Climate Skeptic Asset Managers Face Pressure to Reveal Donations.” Freed said about Harris Associates and a key Harris official who was the subject of the article, “People are free to do what they want. But given this person’s senior position in a firm that’s forward-looking on ESG issues, it presents reputation challenges that could turn into business challenges.”
MarketWatch reported that no S&P 500 CEOs were donating to democratic presidential hopefuls Sens. Bernie Sanders or Elizabeth Warren. “I’m not surprised …because they have been attacking the conduct of companies, and they’ve been calling for major structural change,” Freed told MarketWatch. “On the other side, those candidates don’t want that money because they have been using that to attack their opponents,” Freed added. “Just take a look at the attacks on Buttigieg, [with Sanders supporters] calling him ‘Wall Street Pete’ because he’s taken some Wall Street money.”
ICCR Proxy Season Preview
CPA’s top staff discussed “Ramping Up the Push to Change Company Political Spending Behavior” in a piece for the Interfaith Center on Corporate Responsibility's (ICCR) 2020 Proxy Resolutions and Voting Guide.
Report Examines Role of Proxy Advisors
A newly published report on the role of proxy advisors in investor voting is worthwhile reading for companies, asset managers and shareholders alike. Here are its principal findings: “ISS, the largest proxy advisor, is more supportive of environmental and social resolutions than the largest asset managers;” “There is little evidence to suggest a systematic overreliance on the recommendations of proxy advisors for responsible investment resolutions;” and “ISS is more likely to recommend that investors support environmental and social shareholder resolutions than the second largest firm, Glass Lewis.”
The study was compiled by ShareAction for the Charities Responsible Investment Network.
|CPA is a non-profit, non-partisan organization created in November 2003 to bring transparency and accountability to political spending. To learn more about the Center for Political Accountability visit www.politicalaccountability.net.