Sustainability Reporting describing the company’s environmental, social and governance business practices—co-filed with Walden Asset Management

Emerson Electric: re-filed resolution which received 34% last year. C.R. Bard: a slightly modified version of last year’s resolution was filed. After it received 28% last May, the company met informally with ICCR but then declined to move to greater transparency.

 

Hydraulic Fracturing: Community Impacts – Risk Assessment -- disclosure on the impacts of fracking on local community and the financial risks of these impacts. This resolution includes both environmental impacts to water quality, health impacts from exposure to water and air, and is broad enough to include social ills documented in fracking towns.

 

ExxonMobil: last year’s toxic chemical disclosure received a 28.2% vote Chevron: last year’s toxic chemical disclosure received a 41% vote

 

Here is a sampling of the significant press coverage after last year’s votes.

 

New: Political Spending Resolution – response to Citizens United ruling. Calls on corporations to review policies and oversight processes related to political spending and public policy, both direct and indirect including through trade associations, and present a summary report by September 2012.

 

IBM: Review and disclosure of any direct and indirect expenditures supporting or opposing candidates, for issue ads designed to affect political races, including dues and special payments made to trade associations, such as the U.S. Chamber of Commerce.

September 2, 2011

Increasingly investors have been evaluating the role ofcompanies as they seek to influence legislation, regulation and the publicpolicy debate.

Obviously one way for a company to be an active advocate,especially post the Supreme Court CitizensUnited decision, is to use corporate funds or their PACs to providefunds to affect elections director or indirectly.

Yet companies also work to influence public policy bylobbying directly as well as through trade associations and other third partyorganizations.  And some companies also actively co-ordinate“grassroots lobbying” whereby they reach out to employees and othersupportive groups around the country urging them to write their local Membersof Congress so they can hear from local constituents directly and not from acompany’s Public Affairs office in another state.

For example, when the McConnell Bill was presented to limitthe role of the EPA in addressing Greenhouse Gases related to Climate Change,one oil company sent an email alert to all employees urging them to contacttheir Senator / Representative to support this amendment which constituted afrontal attack on the EPA.

This powerful but indirect grassroots lobbying is much likethe U.S. Chamber of Commerce which sends out regular alerts to its membersurging them to contact their representatives.

Federal Law requires that a company’s federal directlobbying expenditures are publicly disclosed (see sample set of companyprofiles covering two years of expenditures), but indirect expenditures throughthird party and grassroots lobbying are not.  And only 21 states requireany disclosure regarding lobbying of state legislators. In addition, investorsdo not have easy access to this information unless a company adds it to theirwebsite so it is really not directly available.

Thus it is appropriate and timely to ask companies to reporton their lobbying policies, oversight and expenditures just like we seektransparency on political spending.

And some companies do a pretty good job of disclosing suchinformation on their website.

Last year AFSCME took an important step in addressing thisissue by filing resolutions seeking disclosure of lobbying with companies. Theresolution passed muster at the Securities and Exchange Commission (SEC).Formerly, lobbying resolutions had been considered “OrdinaryBusiness” and omitted by the SEC.

Now we know that such a request can properly be presented toa company for inclusion in their proxy for a vote.

I believe that proposing lobbying disclosure for a companyis separate but closely connected to our requests for full transparency onpolitical spending.  However, even though connected, I also believe it iswise to keep the two requests separate and not muddy the waters by combiningthem in one resolution.

I enclose a sample resolution which I have drafted seekinglobbying disclosure.  We also enclose a series of charts on samplecompanies lobbying expenditures we researched.

Note that the resolution seeks more clarity and furtherdisclosure than what is disclosed on the Government website.

I look forward to conversations about your interest in suchan approach as well as companies and industries where such a request should bea priority.

Timothy Smith

Senior Vice President

Director of ESG Shareowner Engagement

Request for Disclosure of Lobbying Policies and Practices

Whereas, businesses, like individuals, have a right to express opinions to legislators and regulators on public policy matters.

However, we believe it is important that our company’s lobbying positions, as well as processes to influence public policy, are transparent.  Public opinion is skeptical of corporate influence on Congress and public policy and questionable lobbying activity may pose risks to our company’s reputation. For example, corporate political spending and lobbying which might harm consumers or the public. Hence, we believe full disclosure of Company’s policies, procedures and oversight mechanisms is warranted.

Resolved:

The shareholders of Company request the Board authorize the preparation of a report, updated annually, disclosing:

1. Company policy and procedures governing the lobbying of legislators and regulators, including through trade associations. The disclosure should include both direct and indirect lobbying and grassroots lobbying communications.

Payments (both direct and indirect, including payments to trade associations) used for direct lobbying as well as grassroots lobbying communications, including the amount of the payment and the recipient.

Membership in and payments to     any tax-exempt organization that writes and endorses model legislation     composed of both corporate members and state legislators.

Description of the decision-making process and oversight by the management and Board for

a.   direct and indirect lobbying contribution or expenditure;

b.   payment for grassroots lobbying expenditure.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation, (b) reflects a view on the legislation and (c) encourages the recipient of the communication to take action with respect to the legislation.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.

The report shall be presented to the Audit Committee of the Board or other relevant oversight committees of the Board and posted on the company’s website. 

Supporting Statement

As shareholders, we encourage transparency and accountability on the use of staff time and corporate funds to influence legislation and regulation both directly and indirectly as well as grassroots lobbying initiatives. We believe such disclosure is in shareholder best interests. Absent a system of accountability, company assets could be used for policy objectives contrary to a company’s long-term interests posing risks to the company and shareholders.

For example, a company may lobby directly or through a trade association to weaken the Foreign Corrupt Practices Act, or stop the EPA from regulating climate change or trying to limit the Consumer Finance Protection Bureau.

Company funds of approximately $XXXX million from July 1, 2010 to June 30, 2011 supported direct federal lobbying activities, according to disclosure reports.  (U.S. Senate Office of Public Records http://www.senate.gov/pagelayout/legislative/one_item_and_teasers/opr.htm)  This figure may not include grassroots lobbying, to directly influence legislation by mobilizing public support or opposition. Also, not all states require disclosure of lobbying expenditures to influence legislation or regulation.

We encourage our Board to require comprehensive disclosure related to direct, indirect and grassroots lobbying.

By now, most corporate leaders are at least vaguely familiar with Target Corp.’s ill-fated dalliance in the arena of financing election campaigns. During the 2010 Minnesota gubernatorial race, the big Minneapolis-based retailer gave $150,000 to MN Forward, a pro-business fund-raising group that supported Republican candidate Tom Emmer.

Target officials say they liked Emmer’s free-market economic policies, but the conservative politician also opposed gay rights. Word of the contribution, from a company that has long worn its support for equal opportunity in the workplace on its sleeve, ignited a firestorm of protest from the gay and lesbian community.

A loose alliance of activists staged boycotts and picketed Target stores around the country, and in a separate protest, but related to the company’s troubled political connection, earlier this year pop music icon Lady Gaga widely publicized her pullout of an exclusive marketing deal with the retailer. Target officials met with protesters and some riled investors. They offered mea culpas and eventually beefed up the company’s political spending policies and oversight. But the damage to the retailer’s progressive reputation had already been done.

Prior to the contribution, Target had a perfect 100 on the Human Rights Campaign Foundation’s Corporate Equality Index, which measures workplace treatment of gays and lesbians. After getting docked 15 points because of the expenditure, its score stands at 85, about middle of the pack.

At this June’s annual meeting, 10 of the 12 shareholder questions for Chairman and Chief Executive Gregg Steinhafel were about the contribution and Target’s response. “Does anybody have a question relating to our business that’s unrelated to political giving?” an exasperated Steinhafel asked at one point. “I’d love to hear any question related to something else.”

There was nothing illegal about what Target did. Indeed, in 2010, the U.S. Supreme Court affirmed the standing of corporations as “persons,” with First Amendment speech rights. Money passes for speech nowadays, and that means companies are free to give as much as they want to nonprofit political front groups, or even offer more direct support to candidates (as long as they’re not working in concert with their campaigns)—straight from the corporate treasury.

But as the fallout illustrates, just because a company can make political contributions might not mean that it should—at least not without a strong oversight process in place.

“If you’re just doing a business analysis of what this did to Target’s reputation, it wasn’t a very smart thing to do,” says Timothy Smith, senior vice president
and director of environmental, social, and corporate governance shareowner engagement with Walden Asset Management, a $2 billion fund in Boston that owns shares in Target.

Walden sponsored a shareholder resolution calling on Target’s board to perform a “comprehensive review” of its political giving process. The motion was withdrawn after the retailer improved its contribution review policies and gave a board committee direct oversight of future expenditures.

“We’re not saying, don’t make political contributions,” Smith explains. “What we’re saying is, if you’re going to make these kinds of contributions, do it with your eyes open. You need to be willing and able to stand up and explain why it’s in the best business interests of shareowners.”

For boards already struggling with a backbreaking list of external demands, political spending is quickly emerging as another topic that demands attention. Politics is a bare-knuckled, elbows-flying kind of endeavor. At a time of growing partisanship, every statement of political support can generate backlash from customers and investors who don’t agree with the company’s views—or, as in Target’s case, the views it implicitly (or unintentionally) winds up supporting.

By Ted Allen on July 8, 2011 3:56 PM

While most U.S. companies have accepted shareholders’ views on the frequency of future “say on pay” votes, there are at least two exceptions. Annaly Capital Management, a New York-based real estate investment trust, and American Reprographics, a California-based document-management firm, both have said they will hold triennial votes, even though investors gave majority support for annual votes.

Under the Dodd-Frank Act, shareholder votes on pay vote frequency--like the advisory votes themselves--are non-binding, but most boards have quickly acceded to investors’ wishes on this issue, even at companies where management strongly preferred less frequent votes.

“It’s a bad precedent to ignore a majority of shareholders,” noted Lisa Lindsley of the American Federation of State, County, and Municipal Employees, a long-time advocate of annual pay votes. “Companies that choose to ignore their shareowners are inviting additional scrutiny of their board and pay practices.”

Tim Smith of Walden Asset Management, another proponent of annual “say on pay” votes, expressed a similar view. “Clearly, companies disregarding shareholder input without an extensive and extraordinary explanation risk real push back from share owners,” he said.

The vote wasn’t close at either firm. There was 70 percent support at both Annaly and American Reprographics for an annual frequency. So far, 608 companies made recommendations for triennial or biennial votes that were not followed by their investors, according to ISS data.

Annaly justified its decision by citing the non-binding nature of the frequency vote.

“The Board has considered the appropriate frequency of future non-binding advisory votes regarding compensation awarded to its named executive officers. Among other factors, the Board considered the voting results at the Company’s 2011 Annual Meeting with respect to the non-binding advisory vote regarding the frequency of non-binding advisory votes regarding compensation awarded to its named executive officers. The Board has determined that future non-binding advisory votes regarding compensation awarded to its named executive officers will be submitted to shareholders of the Company every three years. The Board will continue to evaluate this decision annually,” the company said in a May 20 filing.

American Reprographics argued that a triennial frequency was appropriate given the three-year employment contracts that it recently reached with its named executive officers.

“The Company believes that any attempt to modify the terms of those contracts prior to expiration could pose an executive retention risk to the Company. In addition, the Company has not historically engaged in problematic pay practices. Rather, compensation paid to the Company’s named executive officers in prior years reveals a practice of curtailing executive compensation in response to a challenging economic environment. A three-year frequency cycle will also allow stockholders to continue to evaluate the effectiveness of the Company’s executive compensation program on long-term performance of the Company. For these reasons, and those set forth in the Company’s 2011 proxy statement, the Company has decided to conduct future stockholder advisory votes on executive compensation every three years until the next required advisory vote on frequency of stockholder advisory votes on executive compensation,” American Reprographics said in a May 3 filing.

While companies are required to hold frequency votes just once every six years, Annaly and American Reprographics could face shareholder proposals on this matter in 2012. Under the final SEC’s “say on pay” rules, companies may omit shareholder proposals that seek a different frequency if they adopt a frequency that is supported by a majority shareholder vote.

It remains to be seen whether investors will oppose these firms’ directors in the absence of a pay vote. Annaly received 75.1 percent support for its pay practices this year, while American Reprographics earned 99 percent approval.

A hat tip to the Davis Polk corporate governance blog for pointing out these filings.

By Dan Bacher

The Senate Natural Resources and Water Committee, in a special hearing in the State Capitol in Sacramento on July 7, passed AB 685, the Human Right to Water bill.

This landmark bill would establish in law a state policy that every Californian has a "human right to clean, affordable, and accessible drinking water for their basic human needs," according to a joint news release from the Environmental Justice Coalition for Water (EJCW) and Unitarian Universalist Service Committee (UUSC).

"After hearing moving testimony from safe water advocates and residents of California communities without access to safe drinking water, the committee voted 5-3 in favor," said Debbie Davis, Policy Director of the Environmental Justice Coalition for Water. "A broad-based coalition of faith-based, human rights, environmental, consumer rights and environmental justice groups celebrated the latest legislative victory for the human right to water package moving through the legislature."

The vote was on party lines, with the 5 Democrats present voting for the bill and the 3 Republicans voting against it. Democratic Senators Fran Pavley, Noreen Evans, Christine Kehoe, Joe Simitian and Lois Wolk voted yes, while Republican Senators Doug LaMalfa, Anthony Cannella and Jean Fuller voted no. Democratic Senator Alex Padilla was absent.

"California is one step closer to being the first state in the nation to establish this historic policy which would help everyone have access to clean, affordable water at their tap," stated Davis.

AB 685, introduced by Assemblyman Mike Eng, is the lead policy bill in package of six Human Right to Water bills. Four of the five other bills in the package -- AB 938 (V.M.Perez), AB 983 (Perea), AB 1221 (Alejo) and SB 244 (Wolk) have also won support in their house of origin and received bipartisan support in the latest round of policy committees votes, according to Davis.

"Although this latest vote was on party lines, we hope that the bill proceeds to the Senate Floor and receives bi-partisan support," said Reverend Lindi Ramsden, Executive Director of the Unitarian Universalist Legislative Ministry. "We have collected over 1,000 letters of support from people of a variety of political perspectives across the state from Humboldt County to San Diego County."

"While billions of dollars have been spent on water projects in California, we have still much work to do to make sure that everyone has access to clean water to drink," emphasized Ramsden.

More than 11.5 million Californians rely on water from suppliers that experienced at least one violation of State Drinking Water Standards as reported to the Department of Public Health in 2004, according to Davis. As many as 8.5 million Californians rely on supplies that experienced more than five instances of unsafe levels in a single year.

“The Human Right to Water bill passed the Legislature and was vetoed by Governor Arnold Schwarzenegger in 2009,” added Davis. “We are hopeful that with Brown’s experience on California water issues, we’ll have a different outcome this year.”

Co-sponsoring organizations include the Environmental Justice Coalition for Water, Community Water Center, Unitarian Universalist Legislative Ministry, Food and Water Watch, California Rural Legal Assistance Foundation, Unitarian Universalist Service Committee, Southern California Watershed Alliance, Winneman Wintu Tribe, Urban Semillas, Catholic Charities Diocese of Stockton and Clean Water Action.

This bill is opposed by the Association of California Water Agencies (ACWA), the Western Growers Association and several other water service providers, who contend the bill "may lead to a requirement that water agencies provide water service without consideration to affordability, thereby increasing water bills and have other unintended consequences," according to the Legislative Analysis.

While the state and federal governments continue to promote the construction of a peripheral canal ("conveyance") through the Bay Delta Conservation Plan (BDCP) to facilitate the export of northern California water to corporate agribusiness on the west side of the San Joaquin Valley and southern California water agencies, many rural and urban communities have to rely on surface and groundwater supplies contaminated by fertilizers, toxic chemicals, sewage and other pollutants.

In July 2010, the General Assembly of the United Nations adopted a resolution recognizing access to clean water and sanitation as a human right. The vote was 122 for and 0 against, with 41 countries, including the United States, abstaining. Over 884 million people throughout the word lack access to safe drinking water.

For more information, contact: Debbie Davis, EJCW, (916) 743-4406, or Shelley Moskowitz, UUSC, (857) 222-8824.