Corporate America Develops a Conscience?

By Frank Sherman

There has been a lot of media coverage this week of the Business Roundtable CEOs new commitment and statement on the purpose of corporations. Leaders of companies including JPMorgan Chase, Apple, Amazon and Walmart have abandon their 40+ year sole focus on shareholders to embrace a “fundamental commitment” to all their stakeholders: putting employees, suppliers and communities on a pedestal that once belonged only to shareholders.

Anand Giridharadas, author of Winners Take All: The Elite Charade of Changing the World, has been an effective critic of the statement.  “I absolutely see the change. It has become socially unacceptable as a company or a rich person not to be doing good. But what many are failing to do is ask: ‘What have I done that may be drowning out any of the do-gooding I’m doing?’ ” (Fortune, Aug 19, 2019). He cites the 2017 tax bill, supported by the Business Roundtable, in which the lion’s share of the benefits ended up in the hands of the top 1%, increasing the income inequality underlying many social problems.

The ‘enlightened’ CEOs are also taking heat from the right. The Wall Street Journal editorial page was quick to criticize (WSJ, Aug 19, 2019)… “A close reading shows there’s less substance here than meets the media spin, but it’s still notable that the CEOs for America’s biggest companies feel the need to distance themselves from their owners. Yet these CEOs are fooling themselves if they think this new rhetoric will buy off Ms. Warren and the socialist left. It may even embolden them by implying that corporate rules that require a focus on achieving value for shareholders are somehow morally insufficient.”

But Steven Pearlstein, Pulitzer Prize-winning columnist for The Washington Post, professor of public affairs at George Mason University, and author of the book Can American Capitalism Survive? has a different take from the BRT statement. His article in the American Prospect five years ago (When Shareholder Capitalism Came to Town, Apr 19, 2014) partly blamed the BRT for corporate America’s sole focus on shareholder value leading to the corruption of capitalism. However, Pealstein was optimistic about the BRT statement. “It’s important because it signals a shift in attitude in norms. That’s already occurring. It’s sort of confirming something that’s happening that’s, I think, the pendulum swinging back in the right direction, after having swung too far in favor of shareholders.” Pealstein met J.P. Morgan Chase’s CEO and chair of the BRT, Jamie Dimon, in his office last year to discuss the growing public distrust of corporations and CEOs.

When asked by PBS host John Yang if this may just be a P.R. gimmick, Pearlstein gave some practical advice that all stakeholders can benefit.  “Yes, it is good for P.R., but if they don’t follow through, if we continue to see companies that say, I’m giving up my American citizenship so that we don’t have to pay U.S. taxes anymore because our shareholders are making us do it; if companies say, we’re going to crush our unions because our shareholders are making us do it; they won’t be able to get away with that anymore.”

It’s up to us to remind these CEOs of their new found conscience!

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.

A Math Challenge for Tech’s Gender Gap

Even if companies pledge to making women the majority of new hires, redressing the gender imbalance at companies like Facebook, Apple, and Google could take more than a decade, according to Jennifer Saba in an article at Reuters Breakingviews. In the age of #MeToo, Silicon Valley firms face new scrutiny about male dominance in their labor force. Reuters also provides a handy calculator to project when a company could achieve gender parity.

Key quotes:

  • “[A]t 200 companies surveyed, women made up 36 percent of entry level positions in the technology sector but just 27 percent of middle-management positions. The figures were worse for positions at vice-president level or above.”
  • “Say Google, Facebook and Apple committed to 51 percent of new staff being women – pretty close to the overall makeup of the labor market.
  • “Based on the rate their workforces expanded last year, and assuming one in five existing workers quit and are replaced annually, it would take Apple 15 years to reach parity. Google would do it in 14, and Facebook in a faster-but-still-slow seven years.
  • “Small steps make a big difference. Set a truly bold goal of six in 10 new hires being women, keeping all else constant, and all three companies would achieve parity within six years.”

Inside the tech industry, efforts like #CauseAScene raise the issue of “inclusion and diversity as the latest marketing buzz words” rather than occasioning substantive change. The sorts of efforts that Saba points to in her article could well occasion real change in Big Tech. Concern about the gender gap in the workforce complements SGI’s work in Racial Justice Investing. Making workforce composition more transparent will help industry leaders, investors, and stakeholders take meaningful steps toward an authentically inclusive and diverse workforce.