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.

A hearty welcome to Riverwater Partners

As you likely know, last year, SGI added 5 new members, and we are grateful for the efforts of our members, in particular Mark Peters (an SGI board member, chair of our development committee, and director of Justice, Peace and Reconciliation for the Priests of the Sacred Heart), to encourage more organizations to join SGI and to make us genuinely an interfaith organization. We’d like to introduce our newest member, Riverwater Partners, to the broader SGI family.

Our members may have learned a bit about Riverwater Partners from a recent article from the Milwaukee Journal-Sentinel:
Wisconsin’s B Corporations want to be a force for good, not just profit.

Additionally, they describe their work in the following way:

Riverwater Partners, an employee-owned registered investment advisor, believes it is in the best interest of our clients, our firm, our communities, and our world to consider the Environmental, Social, and Governance (ESG) policies and practices of the firms in which we invest our clients’ assets, as we do at Riverwater Partners. Therefore, we evaluate potential investment candidates on the basis of their ESG efforts, alongside their more traditional investment characteristics of Superior Business, Exceptional Management, and Reasonable Valuation.

Riverwater Partners uses a Three Pillar Approach to evaluate the ESG efforts of companies being considered for inclusion in client portfolios:

Research

Riverwater Partners analysts and portfolio managers research the ESG efforts of companies, gathering information provided in sustainability reports, financial statements, corporate disclosures, and press releases. In addition, we inquire about ESG efforts when we speak with management directly.

Engagement

Riverwater Partners engages company Executives and Boards regarding their ESG efforts, or lack thereof, in order to assist them in understanding the benefits of, and in initiating and/or improving their ESG efforts. It is our goal to promote greater impact over time with respect to improved corporate governance, fair treatment of all stakeholders, enhanced environmental impact, and ultimately, superior financial outcomes and real economy benefits.

Collaboration

Riverwater Partners collaborates with organizations that promote ESG efforts to inform our practice. Riverwater is a member of US SIF, CDP Worldwide, Seventh Generation Interfaith Coalition for Responsible Investment, and is a signatory of United Nations PRI. In addition, Riverwater is a Certified B Corp. Membership in these organizations provides us with thought leadership on best practices, current trends, impact, etc., which enables us to focus our ESG lens effectively.

Many believe one must sacrifice financial gain to achieve real economy gain; however, history has shown that companies that incorporate ESG policies and practices into running their business have generally outperformed companies that do not. The fact is that these practices often result in meaningful financial gain in the form of increased revenue (as customers want to support the efforts) and/or decreased expenses (as a result of lower energy consumption, for example) or potential liability. Our commitment to investing in companies that consider impact on all stakeholders will likely generate superior investment returns for our clients and will surely lead to a better world.

Again, we offer a hearty welcome to Riverwater Partners and look forward to their collaboration with us in the work of building a more just and sustainable world.

“Change is inevitable, growth is optional”

By Frank Sherman

December is a time of hope……a time to reflect on the past and dream of the future.

As I look back on 2018, I think of Nobel Peace Prize winners Nadia Murad, 25, who became the voice and face of women who survived sexual violence by the Islamic State, and Dr. Denis Mukwege, 63, the Congolese gynecological surgeon has treated thousands of women in a country once called the rape capital of the world. I think of Time magazine Persons of the Year, “The Guardians” – a group of journalists who have been targeted for their work. I think of CNN’s Hero of the Year, Dr. Ricardo Pun-Chong, a physician who provides rooms for poor families who bring their children from the countryside for life saving surgery in Lima, Peru. These are ordinary people doing extraordinary things. 

What about our members of Seventh Generation Interfaith? Are they making a difference?

This year SGI members worked with Midwestern electric utility companies to develop long term climate change scenarios and set ambitious greenhouse gas emission reduction targets. We promoted transparency in corporate political spending and lobbying. We challenged pharmaceutical companies to base their executive remuneration policies on innovation and patient outcomes rather than predatory pricing. We helped companies eliminate deforestation and reduce water pollution in their supply chain. We asked food brands and restaurants to improve their nutritional profile and follow marketing-to-children guidelines to fight obesity. We advocated for human rights policies and ethical recruitment to support workers and communities impacted by global corporate supply chains. 

Our message is growing. Over the past year, SGI added 5 new members and are developing many more prospects to diversify our faith traditions. Our quarterly webinars, semimonthly blog articles and weekly newsletters kept our members informed on our issues and trained on our tactics.

So what do we have to look forward to in 2019? Our Corporate Engagement Plan is bigger than ever including 53 companies in active dialogue with over half of our members. SGI members have filed or cofiled 28 resolutions to amplify our voice to the broader shareholder base. SGI staff and members are active in ICCR leadership and program workgroups. 

Fr. Dan Crosby said it best in his keynote speech at our 45th anniversary when he spoke of his bother Fr. Mike’s conviction to live the Gospel. He reminding us that “change is inevitable, growth is optional”. He ended saying that “…four virtues are essential to SGI’s work: collaboration, solidarity, courage, …….and hope”.

A very blessed holiday season to you and your family, and a hopeful New Year!