Disclosure of Payments for Federal and State Lobbying, Trade Associations and ALEC

kristy SRI/ESG News

Shareholder Initiative: More than 40 investors filed shareholder resolutions at 40 corporations asking them to report on lobbying expenditures, including indirect funding of lobbying through trade associations. 22 of these proposals are expected to go to a vote at annual stockholder meetings in Spring 2012.
What the proposal asks for:
• Oversight policies by the board
• Listing of lobbying payments at the Federal and State level and including payments to trade associations used for lobbying.
• Membership in any tax exempt organization that writes and endorses model legislation

Lobbying oversight a board responsibility. Under Sarbanes-Oxley, board responsibilities include overseeing company systems to ensure compliance with laws and regulations, including lobbying.

Most companies do not have lobbying oversight in place. Out of the S&P 500, 64 percent of companies make no mention of lobbying activities, policies or oversight. To date only 13 companies in the S&P 500 provide investors information on how much they spend on lobbying.
Corporate lobbying exceeds other political expenditures by a 9-to-1 ratio. In 2010, S&P 500 companies spent a total of $1.1 billion on political contributions and lobbying, with $979.3 million in federal lobbying expenditures comprising 87 percent of this spending. And the lobbying figure does not even include corporations’ state level expenditures.
Lobbying by trade associations and the corporate contributions that fund this activity are largely unreported. In 2009, the Chamber of Commerce and seven other trade groups took in more than $1.3 billion and spent some $500 million on lobbying and other political activity. And in 2010 the Chamber $132 million on lobbying involving financial reform legislation.
ALEC risks. The American Legislative Exchange Council (ALEC) is the only 501(c)(3) non-profit that we know of which convenes state lawmakers to adopt model laws written by corporations. ALEC was involved in Florida’s Stand Your Ground law, in the headlines because of the killing of Trayvon Martin. ALEC’s corporate members are facing negative publicity as a result.

Corporate lobbying presents reputational and financial risks
• Target faced a boycott in 2010 after its payment to Minnesota Forward
• Sears’ donations to Tom DeLay’s PAC resulted in a settlement with prosecutors
• Merck’s 2004 anti-gay-marriage donation attracted negative attention

International Support – The International Corporate Governance Network (ICGN) representing more than $18 trillion in assets, supports lobbying disclosure and political disclosure as best practice, and supports disclosure of any amounts over $10,000.