Clean Yield Clients Work to Lessen Influence of Money in Politics

Investors should be appalled that business diverted this huge sum from R&D, shareholder dividends, employee wage and benefits packages, or any number of better options. Even those agnostic to the deleterious impact of such donations on our democracy should give heed to a growing body of academic studies that challenge the conventional wisdom that political donations are effective in buying policy outcomes. Additional studies suggest that above-the-norm political involvement correlates with bad governance and lower stock returns.

In the last decade, investors have registered their distrust of corporate political activity and its more secretive aspects with strong shows of support for shareholder proposals calling for greater transparency and oversight of both political spending and lobbying activities. There has also been record support from investors and the wider public for a proposal submitted to the Securities and Exchange Commission (SEC) calling for a rule to require better disclosure. Comments submitted to the SEC, including one from Clean Yield, are rapidly approaching half a million, making it the most popular rule proposal in history.
But is disclosure enough? The theory behind the push for greater disclosure is that greater sunlight on their activities will motivate companies to be more judicious about their political spending and tie it more closely to their business strategy. Presumably, this would ensure that the spending doesn’t function as an outlet for particular executives’ political preferences or ambitions. But such an approach avoids the hard question of why investors and the public should stand for companies having a vote at the ballot box at all, given that “corporate persons” aren’t like actual persons who must weigh a candidate’s potential impact on not just their pocketbooks, but their entire wellbeing and that of the country as a whole.
We think it’s time to take it up a notch. Clean Yield clients filed resolutions at three companies this year that call on them to study the feasibility of ceasing all political spending from the corporate treasury. This relatively modest proposal doesn’t address political action committee spending (pools of money at least ostensibly raised and controlled by employees) or corporate lobbying budgets (which tend to dwarf political spending from the general treasury). However, a feasibility study would put the onus on companies to justify exactly what shareholders are receiving in exchange for political donations. Is there a return on equity? If it’s low, nonexistent, or indeterminable, why is the company squandering funds and risking its reputation and goodwill on this activity? And if it’s high, well, that would be good to know, too. It could be a sign that a company’s business model or strategy is overly dependent on regulatory laxity.
Our proposals will appear this spring on the proxy ballots of EQT (a Pennsylvania natural gas driller engaged in hydrofracking), 3M, and at Exxon (where our client, the Singing Fields Foundation, has co-filed with our colleagues at Zevin Asset Management).  Similar proposals have been filed this year at Target, Bank of America, Starbucks, and Chevron.

“One of the things I’ve learned is that becoming an active owner of the companies in which we invest is not at all difficult, and doing so in partnership with Clean Yield makes it even easier. Having done this for a while now, I have some words of advice for anyone looking to get more involved. First, the process may seem complicated at first, but it’s really not. Anyone can vote their proxies; it’s a critical venue for expressing our values as mission-related investors. Second and perhaps most important, there is a growing community of investors and advisors who can help you figure this out. You don’t have to go it alone, and some of the field’s leading practitioners are at Clean Yield.”

Jonathan A. Scott, Trustee, Singing Fields Foundation

Room for Optimism

While the current level of money in politics is sobering, there has never been more passionate or organized activity around campaign finance reform, inadvertently made sexy by the 2010 Citizens United decision that opened the doors to ever-higher spending. “Never before have [campaign finance reform movements] seen the level of specific and sustained engagement now on display,” writes John Nichols in a recent issue of The Nation. State and local efforts to advance a constitutional amendment to overturn Citizens United are meeting with easy success to date.  Although many are writing the pursuit of an amendment off as a fool’s errand, the same was said about abolitionism and women’s suffrage. As Nichols points out, even unsuccessful constitutional amendment campaigns can create the political space for policymakers to enact meaningful if less-sweeping reforms. When the target is as loathed as Citizens United, the situation is far from hopeless.