In 2019, the investor campaign for lobbying disclosure is focusing on corporate political responsibility, with an increased concentration on climate change lobbying. More than 30 proposals have been filed asking companies to disclose their federal and state lobbying, trade association payments and support for the American Legislative Exchange Council (ALEC).
Corporate lobbying can provide decision-makers with valuable insights and data, but it can also lead to undue influence, unfair competition and regulatory capture. In the U.S., $3.4 billion was spent on federal lobbying in 2018, and over $1 billion is spent yearly to lobby at the state level, where disclosure is less robust. Trade associations spend over $100 million annually lobbying indirectly on behalf of companies.
Disclosure is important for investors because corporate lobbying presents reputational and financial risks. If lobbying had no effect upon company value, then companies would not be doing it. A risk for investors occurs when a company’s lobbying, done directly or through a third party, contradicts a company’s public position or core values.
The lobbying proposals highlight assertions about corporate political responsibility. While many corporations take credit for green deeds and sustainability efforts, their lobbying often tells another story. Today companies like ExxonMobil and Ford issue reports lauding their conservation and environmental efforts. But investors have discovered many of these companies are lobbying, often through their trade associations, to block policies to address climate change. For example, many companies belong to the Chamber of Commerce, which consistently opposes climate change regulation and spent $95 million to lobby in 2018.
Investors seeking disclosure believe that companies that embrace sustainability must be transparent about their political activity, as their lobbying can have great influence on protecting, or harming, the environment. Does a company’s lobbying align with its values and goals? As evidenced with climate, many companies are not consistent in their policy engagement, and trade association lobbying conducted on their behalf is not aligned with company positions.
The 2019 proposals focus on companies that lobby heavily at the federal and state levels, do not disclose their trade associations lobbying payments and are members of ALEC, which also undermines climate change regulation. In addition to climate lobbying, the proposals also target lobbying misalignments on childhood obesity, drug pricing, net neutrality, opioids, sick leave, shareholder rights and tobacco.
Since 2011, AFSCME and Walden Asset Management have led a coalition of investors comprised of religious investors, foundations, public and labor pension funds, asset managers and international and individual investors in filing over 380 shareholder proposals. The campaign has produced over 75 agreements to provide greater lobbying disclosure, and coalition members have engaged more than 80 companies that have left ALEC, including notable 2018 departures AT&T, ExxonMobil, Honeywell and Verizon. But the need for a uniform standard of disclosure remains, as called for in a rulemaking petition presented to the SEC in October from a $5 trillion coalition of investors seeking broader ESG disclosures, including political spending disclosure.