Shareholders make their views known: they don’t want mandatory disclosure of political activity

Read more from Brad on this issue here.

It used to be that the standard line of the “reform” community was that corporations had to be barred from partisan political activity because they would get a huge return on their lobbying and political spending – which presumably would benefit shareholders (albeit, they would argue, at the expense of the general public). However, since the Citizens United decision in 2010 upheld the First Amendment rights of corporations to make partisan political expenditures, the “reform” community has pivoted, and now argues that corporate spending is harmful to corporations and must be regulated to protect shareholders. Unable to lawfully prevent that spending, they have sought to have the SEC mandate corporate disclosure not only of direct political spending, but of dues to trade associations and contributions to 501(c) organizations. The goal, made express by the left group Media Matters, is to use that information to organize public relations campaigns and boycotts against companies that spend money to defend their political interests.

In addition to the regulatory effort, numerous left-wing “social investment” funds, together with union pension funds, have sought through shareholder votes to get corporations to unilaterally disarm, or at a minimum to voluntarily disclose all their dues payments, with the same ultimate goal of then harassing those corporations. We don’t have a problem with this voluntary action by corporations, so long as the other shareholders understand that the groups promoting this – notably the notorious Center for Political Accountability, which drafts most of these measures, along with the unions and “social investors” – are not trying to maximize shareholder value, but are prepared to lower that value in the hopes of making it up with their political investments.

But these “reform” groups also keep claiming that the SEC should impose such disclosure because shareholders demand it.

The reality is that the ongoing proxy season demonstrates once again that shareholders do not demand this immaterial information, and seem to understand that it is not being sought for their own best interests. These proposals, when actually put to shareholder votes, go down to defeat almost every time, and this proxy season is no different. Here are the results so far during this year’s proxy season. Every measure has been defeated. We’ve listed the percentage of “yes” votes, along with the date and the initiator of the resolution:

  • Jan. 30, Visa: 30.6% (Boston Common Asset Mgmt. [“Social Investment” fund])
  • Mar. 20, Starbucks: 3.8% (Harrington Invesments [“Social Investment” fund])
  • April 18, E-Bay: 23.9% (Missionary Oblates of Mary Immaculate)
  • April 23, Praxair, Inc.: 4.0% (Northstar Asset Mgmt. [“Social Investment” fund])
  • April 23, American Electric Power: 11.1% (3 undisclosed shareholders)
  • April 24, Marathon Oil: 36.6% (New York State Retirement Fund [Public Employee Union Pension fund])
  • April 24, DuPont: 33.4& (Missonary Oblates of Mary Immaculate)
  • April 24, Citigroup: 25.0% (CtW Investment Group [Public Employee Union Pension fund])
  • April 25, Lockheed-Martin: 9.7% (Sisters of St. Francis)
  • April 25, Johnson  & Johnson: 6.4% (Northstar Asset Mgmt.)
  • April 26, Abbot Labs: 24.2% (AFSCME)
  • April 26, AT&T: 25.4% (Undisclosed)

So, for disclosure: 0. Against: 12. Average “yes” vote: 19.5%.

The SEC should take note when they are told that shareholders need and demand such “protection.” The real “protection” racket is the mandatory disclosure ploy.

Update, May 2:

Two more results are in:

  • April 24, CIGNA: 6.2% (AFL-CIO)
  • April 25, Humana: 20.7% (New York State Retirement Fund)

The record drops to 0-14, with an average of 18.7% voting yes.

Update, May 7:

Five more results, and shareholder continue to say “no thank you.”

Here are the latest percentage of “yes” votes from the Manhattan Institute’ Proxy Monitor:

  • April 30, IBM, 24.5% (Madeline Moore)
  • May 1, General Dynamics, 16.6% (New York State Retirement Fund)
  • May 1, EMC Corp., 5.0% (Northstar Asset Management)
  • May 2, Valero Energy, 37.0% (Nathan Cummings Foundation)
  • April 30, Chubb Corp., 3.5% (Northstar Asset Management)

These defeats drop the corporate disclosure movement to 0-19 this proxy season, with an average “yes” vote of just 18.3% when shareholders actually vote on the issue. As we note repeatedly, we’ve no problem with shareholders voting yes. We do have a problem with activists declaring that the SEC should adopt a mandatory rule because shareholders want it, and we do urge corporate managers not to succumb to the “best practices” and “all good companies do it” malarky of the partisan activists promoting these measures without a proxy vote.

Update, May 13:

Several more defeats for those who argue that shareholders are demanding that the SEC act:

  • May 8, Bank of America: 4.6% (proposal to prohibit political spending) (Stephen Johnson & Martha Thompson).
  • May 8, Bank of America: 36.6% (proposal to require more disclosure) (Amalgamated Bank – owned by Service Employees International Union).
  • May 7, Danaher Corp: 32.8% (Mercy Investment Program).
  • May 6, Motorola: 21.7% (Michael Loeb).
  • May 3, Entergy Corp.: 20.4% (Benedictine Sisters of Virginia).
  • May 2, Verizon: 25.8% (AFSCME).
  • May 2, UPS: 10.9% (Walden Asset Management).

This drops the reformers record to 0-26 this proxy season, with an average vote of 19.2% in favor.


  1. […] Brad Smith on SEC Disclosure […]

  2. […] this has been “loudly demanded by investors.” Of course, this is patently false, as shareholder votes on enacting increased disclosure have never passed. In fact, only two resolutions ever garnered over 40% of the vote, with the vast majority […]

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