SGI, Institutional Investors Continue to Press Companies for Disclosure of Lobbying

Among issues of corporate governance, lobbying disclosure remains an urgent topic for shareholder proposals in 2019. Five SGI members are a part of a coalition of at least 70 investors who have filed proposals at 33 companies asking for disclosure reports that include federal and state lobbying payments, payments to trade associations and social welfare groups used for lobbying and payments to any tax-exempt organization that writes and endorses model legislation. That last sentence was detailed precisely because “following the money” is so complicated when it comes to lobbying expenditures. This year’s campaign highlights the theme of corporate political responsibility, with a focus on climate change lobbying.

Corporate lobbying impacts all aspects of the economy. Companies fund lobbying efforts on issues ranging from climate change and drug prices to financial regulation, immigration and workers’ rights. While lobbying can provide decision-makers with valuable insights and data, it can also lead to undue influence, unfair competition, and regulatory capture. In addition, lobbying may channel companies’ funds and influence into highly controversial topics with the potential to cause reputational harm.

In 2018, more than $3.4 billion in total was spent on federal lobbying. Additionally, companies spend more than $1 billion yearly on lobbying at the state level, where disclosure is far less transparent than federal lobbying. Beyond that, trade associations spend in excess of $100 million each year, lobbying indirectly on behalf of companies. For example, the U.S. Chamber of Commerce spent $95 million on federal lobbying in 2018 and has spent over $1.5 billion on lobbying since 1998.

To address potential reputational and financial risk associated with lobbying, investors are encouraging companies to disclose all their lobbying payments as well as board oversight processes. We believe that this risk is particularly acute when a company’s lobbying, done directly or through a third party, contradicts its publicly stated positions and core values. Disclosure allows shareholders to verify whether a company’s lobbying aligns with its expressed values and corporate goals.

“The faith community has been an active investor voice for around a decade pressing companies to expand disclosure on political spending (related to elections) and also lobbying disclosure. This is more important than ever as we look at issues of concern to ICCR members. For example it is a crucial time to hold companies accountable on their lobbying related to climate change and to urge them to lobby only for legislation consistent with the Paris Accord. Or monitor how drug companies lobby on opioids or drug pricing. Lobbying is not a remote governance issue but it intimately linked to a whole range of corporate responsibility issues we are all working on.”


Tim Smith of Walden Asset Management

Companies Receiving Lobbying Disclosure Resolutions for 2019 are:

  • AbbVie (ABBV)
  • Altria Group (MO)
  • American Water Works (AWK)
  • AT&T (T)
  • Bank of America (BAC)
  • BlackRock (BLK)
  • Boeing (BA)
  • CenturyLink (CTL)
  • Chevron (CVX)
  • Comcast (CMCSA)
  • Duke Energy (DUK)
  • Emerson Electric (EMR)
  • Equifax (EFX)
  • Exxon Mobil (XOM)
  • FedEx (FDX)
  • Ford Motor (F)
  • General Motors (GM)
  • Honeywell (HON)
  • IBM (IBM)
  • JPMorgan Chase (JPM)
  • Mallinckrodt (MNK)
  • MasterCard (MA)
  • McKesson (MCK)
  • Morgan Stanley (MS)
  • Motorola Solutions (MSI)
  • Nucor Corporation (NUE)
  • Pfizer (PFE)
  • Tyson Foods (TSN)
  • United Continental Holdings (UAL)
  • United Parcel Service (UPS)
  • Verizon (VZ)
  • Vertex Pharmaceuticals (VRTX)
  • Walt Disney Company (DIS)

Overpaid CEOs

On Thursday, our friends at As You Sow released their fifth annual report on the 100 Most Overpaid CEOs. The launch included a webinar with Rosanna Landis Weaver (the report’s author), Paul Herman (founder and CEO of HIP Investor), and ex-Secretary of Labor Robert Reich.

Not only are these 100 CEOs overpaid concerning the poor performance of their companies, many fund managers, like BlackRock, Vanguard and StateStreet, routinely endorse the executive compensation package of these CEOs at the annual shareholder meeting. The report points to necessary actions by shareholders concerning executive compensation. It really is worth your time to dive in.

Axios.com offered succinct coverage of the webinar and report here.

The report can be found here. The webinar can be found here.

Global companies and global problems

We have come to take for granted the size and sweep of modern multinational corporations. As companies merge to gain scale, it’s difficult to keep track of the corporation behind the brands we buy. Daily, we dress ourselves in clothes bearing labels of “made in” notices for countries that may be difficult to place on a map. We know that our vehicle, as well as our cell phone, was not made in an individual factory but assembled from components and parts made across a dispersed global supply chain. When out of season locally, we may notice that our fruit and vegetables may have come from distant lands. Multinational corporations seamlessly bring together many essential things in our daily lives.

Over the years, these multinational companies have grown to scales that may surprise us. While not an apples to apples comparison, the largest companies have annual revenues that dwarf the gross domestic product (GDP) of many countries. Some may be able to recite the top five global economies:

  1. United States ($20.5 trillion)
  2. China ($13.5 trillion)
  3. Japan ($5 trillion)
  4. Germany ($4 trillion)
  5. United Kingdom ($2.8 trillion)

Readers may be surprised to learn that Walmart, with over $500 billion in annual revenue, would rank #25, displacing Thailand. The fourth largest company, Royal Dutch Shell, displaces the Philippines at #40. The ninth largest company, Exxon Mobil, comes in just behind the Czech Republic, the 46th largest economy. At #11 among companies, Apple had a billion dollars more in revenue than Peru (#51 among countries) had in GDP. Foxconn, the 24th largest company, has greater annual revenue than the GDP of Kuwait (#58 in GDP). In all, 41 of the 100 largest economic entities on the planet would be corporations.

So, what does that mean for us? While policies and laws and regulations from countries are essential, companies play a critical role in addressing environmental and social issues such as climate change, food justice, health, human rights, and water stewardship. At bottom, the decisions that companies make have a tremendous impact on the most vexing global issues. In fact, choices made by companies, in many contexts, have greater impact than individual countries.

Michael Porter, in a 2015 TED Talk, underscored the importance of business in addressing critical problems. Global norms have been shifting. It is no longer acceptable for multi-national companies to simply meet the legal minimums set by local governments. Today, many international standards, including the UN Guiding Principles for Business and Human Rights, underscore the role of companies. Some of our resolutions with companies this year reflect this emerging understanding of the role of companies in addressing human rights.

The work of SGI contributes to the work of so many others– socially-conscious consumers, non-profit organizations, workers in the supply chain, and ethical executives– in seeking a more just and sustainable world.
Given the scale of multinational corporations and global nature of our economy, our mission is more critical than ever.

Decarbonizing Electricity Webinar

SGI has been leading important work on climate change with regional utilities. Today, we hosted our first educational webinar of 2019 where we learned more about how we can advance those conversations. We hosted Dan Bakal of Ceres and Franz Litz, program consultant at the Great Plains Institute. Dan has been a key partner in our dialogues with the utilities. Franz has led innovative efforts to bring together policy makers, regulators, utilities, and NGOs to take action on climate change. In particular, he has led the building of a Road Map to Decarbonization in the Midcontinent.

We are very grateful for the presence of both our guests in this webinar, for their commitment to work on this issues, and their generosity in sharing their wisdom with us.

As always, we welcome your feedback via a confidential evaluation found here. Slides from the webinar are found here.

Investing in firearm safety

Last week, some SGI members (Sr. Ruth Battaglia, C.S.A., Sr. Reg McKillip, O.P., Mark Peters, and Dan Tretow) and I found ourselves in a rather unusual meeting amid law enforcement, retailers, medical professionals, advocates, public officials, media, investors and philanthropists. Hosted by Common Ground, the Industrial Areas Foundation, and Do Not Stand Idly By (DNSIB), the Gun Safety Expo offered a forum for leading developers showcased products that can prevent gun theft and unauthorized or accidental shootings.

SGI and ICCR have been collaborating with Do Not Stand Idly By on gun safety issues. You may recall Sr. Judy Byron’s wins with Sturm Ruger and American Outdoor Brands

DNSIB and ICCR are working on a coordinated strategy to reduce gun violence via a market strategy. As DNSIB puts it, “Our tax dollars buy about 40 percent of the guns in America. The military buys about 25%, and law enforcement 15%. This is enormous market power.” At this time, our cell phones have better safety features than any gun on the market. If law enforcement demand smart guns (e.g., those that require fingerprint recognition or other technologies), suspects could not use their guns against them. As well, it creates a market demand for more secure devices. Homeowners with guns are more likely to have them used against them (or by their kids) than used in self-defense. A new study shows that household gun ownership can pave the way for a high suicide rate among young people. Smart weapons would reduce senseless deaths. Gun manufacturers can take steps, without any change in laws, to make guns safer so that lives may be saved.

SGI members offered the following reactions:

While I have never been around guns, have no desire be introduced to them, and fail to comprehend some people’s need to have ready access to a gun, attending the Firearm Safety Expo nudged me to accept, if not fully embrace, a non-polarized way of addressing the deadly impact of guns. Innovative safety technologies offer some hope in reducing the number of gun-related suicides, deaths, and injuries. We, as socially responsible investors, can join our voices with public officials, law enforcement, and legal services in asking gun manufacturers to develop and use gun safety technologies that make their product child-proof, useless to thieves, and able to save the lives of police and civilians alike.

Sr. Ruth Battaglia, C.S.A.

I guess I was hit with the irony of it all….The more we make guns safe, the more attractive it would be for people to purchase them. We also can use that same logic with gun manufacturers who are not wanting to invest in safety measures…the safer you make the gun, the more people will feel comfortable purchasing a gun.

Sr. Reg McKillip, O.P.

It was very well-planned like all IAF and CG [Common Ground] events, and I was impressed with all the partners they’d brought into the campaign, like the Medical College of WI, and all the elected officials who were present. It is definitely not the whole answer as far as gun control, but it may be the only approach that has a chance in the current political climate. I’m not a gun owner or user, but if I was I think I would have been very interested in some of the products that were either in development or already on the market.

Mark Peters

[The event] was very interesting. I think they had the right players in attendance. The law enforcement presence was especially impressive (WI, IL and OH). The trigger locks make a lot of sense for the existing guns. I think the Biofire presentation and his fingerprint stock was the best idea at the show. I hope his smart gun technology turns into the new standard for weaponry in home safety/security and law enforcement/military application. I hope the gun manufacturers take this into consideration going forward. I agree with the speaker that said incentives will help promote the use of these devices. Government (local/state/federal) use and demand for smart guns by law makers will hopefully cause less accidental shootings and suicides.

Dan Tretow
Milwaukee Mayor Tom Barrett

Among the public officials present were: Tom Barrett (mayor of Milwaukee), Chris Abele (Milwaukee County Executive), John Chisholm (Milwaukee District Attorney), and Barry Weber (Wauwatosa Chief of Police). Vendors included: Biofire, Everwatch, Gun Guardian, Identilock, Ignis Kinetics, SAAR, Safety First Arms, and Vara. These represent companies demonstrating user authenticating guns, personalized locks and gun tracking products. The Oak Creek campus of Milwaukee Area Technical College hosted the event. As home to the Regional Police Training Center, a shooting range was available to allow for live demonstrations.

Some additional coverage of the event:

ICCR provides an excellent, detailed list of coverage of investor action around gun safety here.

Opioid Epidemic: What can investors do?

Opioid addiction has become a disease that has destroyed the lives and families of millions of everyday working Americans. The epidemic is not abating.  With increasing frequency, new headlines emerge as the problem grows in scale and the consequences become ever more devastating. New data from the National Institute on Drug Abuse shows there were over 72,000 estimated overdose deaths last year, a 10% increase on the prior year. These estimates mean the problem is more deadly than gun violence, car crashes and AIDS.

In addition to the human cost, the massive economic cost grows daily. For example, the U.S. Center for Disease Control reports that opioids have cost the American workforce the largest portion of labor since the Spanish flu epidemic in 1918. A recent report from Ohio State University also documents that the crisis is costing Ohio more than the state’s annual budget for k-12 education.

Over the last year, SGI has been working with Investors for Opioid Accountability, an initiative that joins ICCR members with other investors to engage corporations who have profited from this epidemic. We engage pharmaceuticals producers, distributors, and retailers. We believe that companies that have acted negligently should be held to account. However, we do not believe that opioid producers and distributors should be the only stakeholders considered when tackling this issue. Opioids are effective pain killers that are commonly prescribed for acute and chronic pain. To fully address the issue, we believe that regulators, pharmacists, insurers, point-of-care providers and users all have a role to play.

In 2018, IOA members filed 35 resolutions at the following 11 companies: Alkermes; Amerisource Bergen (ABC); Cardinal Health (CAH); Depomed; Endo; Insys Therapeutics; Johnson & Johnson (JNJ); Mallinkrodt; McKesson; Pfizer; Walgreens.

Below are outcomes for the resolutions that went to a vote:

  • ABC – 62% of indep. votes for board risk report
  • ABC – 52% of indep. votes for clawback
  • ABC – 49% of indep. votes for indep. chair
  • Pfizer – 25% for indep. chair
  • Pfizer – 33% corporate lobbying disclosure
  • JNJ –17.8% for stop exclusion of legal costs in executive compensation
  • Depomed – 62.5% for board risk report
  • McKesson – 39% corp. lobbying, 34% accelerated vesting, 1% GAAP, 12% withhold Audit chair
  • Rite Aid – 56.7% for board risk report

An additional 13 resolutions were settled:

  • CAH: Cardinal separates chair and CEO ahead of meeting 
  • JNJ: Indep. chair annual review of combined roles
  • ALK: Board agreed to expand corporate lobbying expenditure disclosure
  • CAH: Board published risk report, misconduct clawback and separated chair & CEO
  • DEPO: Board agreed to misconduct clawback
  • ENDO: Board agreed to risk report, misconduct clawback and expand political spending reporting
  • MCK: Board agreed to continued reporting on anti-diversion efforts
  • MNK: Board agreed to misconduct clawback and expand political spending reporting, Board elected to sell opioid business
  • Insys: Board agreed to misconduct clawback

Next year, we will have even more filings regarding this important issue. It is our hope that more SGI members can become involved in this work so critical to many communities across the U.S.

Proposed Rollback of Methane Regulations Threatens Long-term Viability of Oil and Gas Sector

SGI joined a group of investors in a letter sent to oil and gas companies to warn against the Environmental Protection Agency’s (EPA) proposed rollback of the New Source Performance Standards (NSPS), a regulation the investors say is critical to the long-term viability of the oil and gas sector in the energy transition already underway.

Sent to 30 companies on behalf of 61 investor signatories representing US$1.9 trillion in assets under management, the letter calls upon the companies to offer public support for continued EPA regulation of methane emissions and to oppose the elimination of direct regulation of methane emissions.

More than 610 different companies accounted for 50% of U.S. oil and gas production in 2017. While most of the companies receiving the letter have responded positively to investor engagement on methane management, there are hundreds of companies that are not managing methane emissions carefully, which threatens the reputation of natural gas as a ‘cleaner’ fossil fuel.  A study earlier this year in the journal Science estimated that in the U.S., methane equivalent to 2.3 percent of all the natural gas produced in the nation leaks into the atmosphere during the production, processing and transportation of oil and gas every year.

Strong and fair methane regulations, which require companies to conduct regular inspections for leaks and report on their methane management efforts, create a more stable environment by leveling the playing field among U.S. oil and gas companies. As the U.S. is a net exporter of natural gas, and as an increasing number of countries adopt legislation and other policies to address climate change, sound methane regulation preserves the industry’s global competitiveness. According to the recent IPCC report, countries won’t be able to limit global warming to 1.5 degrees Celsius above pre-industrial levels, considered by some scientists and policymakers to be the “safe” limit of climate change, without immediate and rapid reductions in a wide range of greenhouse gases, including methane.

In 2015, ICCR launched a concerted methane campaign with the goal of engaging primarily U.S. companies across the natural gas value chain on improving disclosure, reducing emissions and reporting critical information on methane management efforts, such as leak detection and repair (LDAR). If the EPA is successful in rolling back the NSPS, LDAR, currently one of the most cost-effective ways to curb dangerous methane emissions, will be significantly weakened which, investors say, benefits no one. 

Apart from publicly declaring their support for the NSPS Rule, we ask companies to submit comments to the EPA regarding the benefits of industry-wide methane regulation by December 17th. 

“The companies receiving the letter are large producers representing 35% of U.S. oil and gas production,” said Rob Fohr of the Presbyterian Church, USA.  “Our hope is to convince these more influential companies to use their voices in support of sensible and cost-effective methane regulation to bring along the entire industry and mitigate the risk of an unregulated market.”

A link to the investor letter and signatories as well as a list of the companies receiving the letter can be found at this link. The complete ICCR press release can be found here. Bloomberg covered the letter in an article here.