Spotlight on CPA - March 2019
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Surge of Political Disclosure Agreements Opens 2019 Proxy Season

Efforts to lift the veil on corporate political spending have gotten a tremendous boost in the opening of the 2019 proxy season. Seven companies announced disclosure agreements so far, and the self-described “world’s leading global business publication” chronicled CPA's success.
In March, CPA and its shareholder partners struck disclosure agreements with five major S&P 500 companies: Ameriprise Financial, Chubb, Mondelez International, MSCI, and Tractor Supply Co. Earlier, agreements were reached with Hilton and General Electric. This brings to 173 publicly held companies the total that have adopted disclosure and accountability agreements over the past 15 years.  
The new agreements marked one of the strongest starts to a proxy season in recent years. The latest accords “represent a significant step forward for corporate governance campaigners, who have used the threat of votes at annual shareholder meetings to wring extra disclosures from companies,” reported The Financial Times.
The London-based global publication took note of the bitterly divided political environment in the U.S. that has brought more controversy to certain corporate political donations or payments.
“Corporate spending on elections and lobby groups has become more controversial as attention has been drawn to companies’ support for candidates and causes that most divide an increasingly fractured US electorate,” The Financial Times article said.
“Boeing’s $1m contribution to Donald Trump’s inauguration attracted fresh headlines last week as the president steered the response to two crashes of the aircraft manufacturer’s 737 Max passenger jets, and some large oil and gas groups have found themselves at odds with the trade associations they fund over carbon taxes,” the article added.
Since publishing last year its “Collision Course” report on the topic, CPA has been sounding a warning about the heightened risks for companies that engage politically in today’s volatile and polarized political climate.
CPA's shareholder partners that negotiated the withdrawals were Bruce Herbert (GE and Ameriprise); Office of the New York State Comptroller; (Hilton); Mercy Investment Services, Inc. (Mondelez); Trillium Asset Management (Chubb); and, John Chevedden and Jim McRitchie (Tractor Supply Co. and MSCI).


Why the Center for Public Accountability Zicklin Index (CPA-Zicklin Index)[1] is useful to investors
Guest Column
By Jake Walko and Jonathan Bailey

Business leaders understand that the success or failure of the companies they manage is not entirely within their own control, and so it is not surprising they may seek to influence the policymakers and regulators who shape their operating environment. The question for investors is whether business leaders are doing this in an appropriate manner.

A decade ago this might have been considered a marginal issue for investors, but as corporate lobbying expenses and political donations have increased, so has the level of public scrutiny and consequently, the risks to businesses found to be acting inappropriately. Investors need data and tools to understand best practices and assess the appropriateness of the actions of their portfolio companies.

Just as with any other topic, we look for data and assessment frameworks which are clear, comparable and decision oriented. In this regard, the CPA-Zicklin Index brings a welcome transparency to a complex area that many investors have historically struggled to understand. The Index contributes to our understanding of the quality of the company’s oversight of these sensitive decisions, the spending choices companies make with shareholders’ capital, and shareholder accountability through a transparent, documented approach.

While we see the materiality of the disclosure as more prominent in relatively highly regulated sectors like aerospace/defense, pharmaceuticals, and energy, we view the topic to be broadly salient. That is why we incorporated an expectation that Boards of Directors be familiar with the CPA-Zicklin Index in our Proxy Voting Guidelines. Recent scandals have shown that no company is immune from mistakes in this area and shareholders have the right to know whether their invested companies take unjustifiable risks in pursuit of political influence.

We respect that the CPA-Zicklin Index does not make a judgement on corporate expenditure – we believe there are legitimate uses of company money, such as articulating important operating nuances to regulators, advocating for support for innovation, and identifying ways businesses and government can work together to support positive outcomes for society. To make this judgment — determining if spending is problematic or positively impactful — investors need information.  The availability, accessibility, and quality of information go a long way in helping inform our engagement with companies, the votes we cast at annual meetings, and ultimately how we protect our clients’ capital and build sustainable value for the long-term.

[1] Neuberger Berman does not maintain a formal relationship with the Center for Public Accountability. Lawrence Zicklin is a former employee of Neuberger Berman and served as the Non-Executive Chairman of the Board from 1999-2003. He rejoined the Board in 2009 and continues to serve as an independent director.
[2] Neuberger Berman, Vice President, ESG Investing, and Managing Director, Head of ESG Investing, respectively.



4th Corporate Political Accountability Roundtable Highlights Disclosure Acceptance, Index Impact

What are the nation’s top experts from academia, business, government, and nonprofits saying about the future of corporate political transparency and accountability?

To find out, just check out a bullet-by-bullet synopsis of the 4th Roundtable on Corporate Political Accountability synopsis by clicking here.

During the Feb. 28-March 1 event at New York University’s Stern School of Business, these experts saluted the increasing acceptance by leading U.S. companies of voluntary disclosure and oversight of their spending to influence politics.They also debated the adequacy of voluntary disclosure at a time when the U.S. Securities and Exchange Commission has not advanced a mandatory disclosure proposal.

Key excerpts included the following:

Harvard Law Prof. Lucian Bebchuk said, “A growing number of large public companies have voluntarily adopted policies that require disclosure of their political spending.” He added, “Kudos to the Center for Political Accountability for playing a key role in this transformation by drafting model disclosure policies, partnering with investors for the filing of shareholder proposals, and facilitating agreements with over 150 public corporations committing to disclose their political spending.”

Most political spending by corporations flows to intermediate organizations such as the U.S. Chamber of Commerce and industry trade associations that are not required to disclose their donors, a prominent political scientist said, and this anonymity is a factor in shaping the corporations’ conduct. A portion of this spending, if exposed to sunlight, would not be popular overall with the general public or shareholders. Yet shareholders need this information and “it is a good basis for democracy” as publicly available information allows citizens to form movements around shared priorities.

CPA sponsored the Roundtable with the Stern School, the Zicklin Center for Business and Ethics Research at The Wharton School at the University of Pennsylvania, and the Zicklin School of Business at Baruch College.

The voluntary movement toward corporate political disclosure, called “private ordering” by academics, keeps gaining ground. The CPA-Zicklin Index is an important plank in building this success.


Disclosure Resolution Gains Attention
March was a strong month for notices alerting corporate leaders, shareholders and investors to the ways in which CPA’s model disclosure resolution is gaining momentum.
Shareholder resolutions on disclosure of political contributions ranked in the top 10 proposal types filed so far in 2019, according to a blog post at the Harvard Law School Forum on Corporate Governance and Financial Regulation. The political contributions resolutions were behind only proposals on lobbying and on environmental impact in their numbers. The post was written by Subodh Mishra, executive director of Institutional Shareholder Services, Inc.
Stoel Rives LLP, a large business law firm, flagged attention to the popularity of the disclosure proposals. Separately, Proxy Preview 2019 reported that “Corporate political influence spending and climate change top investors’ concerns in about half the proposals filed,” and it devoted a special article to CPA’s efforts and model resolution. The Preview is published by As You Sow, Sustainable Investments Institute, and Proxy Impact.


Conference Board-CPA Webcast Reaches Corporate Directors 
In a webcast targeted at corporate directors, CPA President Bruce Freed was interviewed by Doug Chia, executive director of The Conference Board Governance Center. The Conference Board is a leading business membership and research organization., where the webcast was streamed, gave this summary:
“Like diversity and ESG issues, political spending disclosure and accountability continues to gain more attention in the boardroom. More companies and boards are communicating their policies on corporate political spending every year, while shareholder proposals (and voting support for these proposals) continue to pick up steam. Specifically, what questions should boards be asking?” went on to quote Freed from the webcast: “It’s even more important today that boards adopt policies for disclosure and accountability – and that boards be knowledgeable about political spending, the laws and regulations governing it, the risks that they face, and the types of steps they should take to be able to protect the company. But, also, [boards should] take a broader view of the impact of their spending and the role of the company as a member of the body politic and a member of society.”



CPA in New York Times, Dallas Morning News

Scholars are finding valuable uses for the annual CPA-Zicklin Index on Corporate Political Disclosure and Accountability. In one of the latest instances, researchers working with the Harvard Law School program on corporate governance set out to learn how chief executive officers align when they make personal political contributions. A New York Times column by Andrew Ross Sorkin discussed the study and its usage of the Index. The study is entitled "The Politics of CEOs" and is part of the work of the Project on Corporate Political Spending of the Harvard Law School Program on Corporate Governance. 

The Dallas Morning News, meanwhile, wrote about a decision by AT&T to embrace greater disclosure of its lobbying payments, with overlap for certain political payments to trade associations and 501(c)(4) nonprofit groups. “With the new disclosure policy in place, AT&T could not potentially score in the category [of U.S. companies] made up of fewer than 60 companies in the S&P 500 with the highest transparency scores,” CPA told the newspaper.

Transparency for Private Companies, Too?
Stephen Pearlstein, a business and economics columnist for The Washington Post, says private companies need to step up their disclosure.
“After all, whether public or private, big companies have significant impact on a wide range of stakeholders beyond investors — customers, employees, pensioners, creditors, suppliers and neighbors. Those stakeholders are entitled to know the basic facts about the companies they do business with, work for, contract with or invite into their communities,” Pearlstein wrote in March.
“In addition to traditional financial reports, large private companies should be required to state their purpose and values, to disclose what products and services they sell and in what markets they sell them, and to state concisely their short and long term strategic goals. … Disclosure should also be required of any major legal or regulatory actions that they face or are involved in, what taxes they paid and how much spent, directly or indirectly, on lobbying and political contributions.”

CPA in the Classroom
CPA’s Freed and Director of Programs Dan Carroll conducted a webinar with students from a corporate governance class at Temple University’s Fox School of Business on March 19 about CPA’s work and impact on corporate political spending.
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
Copyright © 2019 Center for Political Accountability, All rights reserved.

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