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May 09, 2013

Biggest Corporate Political Spenders Face Resolutions
    by Robert Kropp

Bank of America, Chevron, ExxonMobil and 3M all face shareowner resolutions requesting that they refrain from using corporate treasuries for political donations.

SocialFunds.com -- It used to be that sustainable investors would be satisfied if corporations disclosed policies describing their rationale for engaging in the political process through donations from their corporate treasuries. Bruce Freed and the Center for Political Accountability (CPA) have won much-deserved accolades for their efforts to convince many of the nation's largest companies to disclose their policies on political spending.

But then came Citizens United. Not surprisingly, the Supreme Court's dubious rationale in equating corporate political spending with free speech unleashed the practice to a degree previously unimaginable. In the absence of a Securities and Exchange Commission (SEC) ruling on the issue—word has it that the Commission is thinking about it, after receiving an unprecedented 500,000 comments, most of them in support of disclosure—sustainable investors and other advocates of meaningful reform have stepped up to address the issue on two new fronts.

Led by the AFSCME Employee Pension Plan and Walden Asset Management, a coalition of investors launched a campaign in 2012 to pressure companies to disclose their spending on lobbying activities. Although direct political spending attracts far more media attention, the fact is that companies spend far more on lobbying activities than they do on expenditures on elections.

The second front seeks to prevent corporations from deploying their treasuries—some portion of which, as owners, shareowners are entitled to—for political purposes altogether. Last year, Green Century Capital Management and Trillium Asset Management filed resolutions with Bank of America, 3M, and Target, requesting that they refrain from making political donations. The resolutions were the first requesting that corporation completely refrain from political spending.

Since last year's proxy season, of course, a Presidential election occurred, and what governance advocates feared would come to pass did. "The first presidential campaign cycle since the Supreme Court's Citizens United ruling lived up to its hype," Demos and US PIRG wrote in a recent repor t, "breaking previous records for total spending and exaggerating the undue electoral power of wealthy individuals and special interests to the point of awakening unprecedented public focus on the failings of our campaign finance system."

With regulatory action on the issue continuing to lag, sustainable investors are back this proxy season with more resolutions calling for an end to political spending by corporations. Green Century has returned with a resolution filed with Chevron, whose $2.5 million donation to GOP SuperPAC represents the largest single corporate donation since Citizens United.

"Companies have not demonstrated the value of these controversial expenditures to shareholders," Leslie Samuelrich, Senior Vice President of Green Century, said. "Consequently shareholders don't want to be left footing the bill as companies make big gambles in politics."

In a letter to ExxonMobil shareowners, Zevin Asset Management submitted its rationale for supporting its resolution requesting that the company refrain from making political donations. "Increased corporate spending in campaign elections is unpopular among the majority of the American public, and consequently exposes companies to business and reputational risk," the letter states.

Furthermore, "academic studies indicate that political spending may not have a positive impact on the company’s bottom line and, in fact, may erode shareholder value," the letter continues.

"When companies become involved in the electoral process, they are unnecessarily courting political and reputational risk," said Sonia Kowal, Director of Socially Responsible Investing at Zevin. "Companies that choose to refrain from political donations signal that they are able to profitably conduct business without resorting to regulatory favors."

A similar proposal at Bank of America was filed by individual shareowners affiliated with Responsible Wealth, and Clean Yield Asset Management requested that 3M refrain from political spending.

According to a press release, the four companies targeted by the resolutions collectively spent more than $11.5 million dollars in the 2012 election cycle.

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