April 19, 2024
Volume XIV, Number 110
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Corporate Political Disclosure Fight Shifts to Mutual Funds
Thursday, May 4, 2017

Corporate political disclosure activists this week launched a new tactic in their fight to pressure companies to publicly disclose information about their political and lobbying activities.

For more than a decade, public pension funds and others have aggressively pushed shareholder resolutions that call on public companies to self-disclose information about contributions to trade associations and other non-profit groups that pay for election-related advertisements.  These efforts have been largely unsuccessful.  Since 2006, according to the Manhattan Institute’s ProxyMonitor, only one such proposal has received majority shareholder support, with average support over the last two years at just 23 percent.

These relatively low levels of shareholder support have come as other corporate political disclosure efforts have fizzled.  In 2015, Congress prohibited the Securities & Exchange Commission from using appropriated funds to promulgate a rule requiring public companies to disclose their political spending.  And just this week Congress voted to keep these restrictions in the latest appropriations bill.

Stymied in these efforts, the advocacy group Public Citizen yesterday published a report arguing that major mutual fund companies like The Vanguard Group, BlackRock Inc., and Fidelity Investments could change this trend if they used their shares to vote for corporate political disclosure shareholder resolutions.  According to the report, “64 percent of political spending disclosure shareholder resolutions at companies where mutual funds own more than 5 percent of common stock would have received majority support in 2016 if those mutual funds had voted their shares in support [of] the resolutions.”  The report comes in connection with a  grassroots advocacy campaign aimed at mutual funds and efforts by Senator Bob Menendez (D-NJ) to rally support for the cause.

It is unclear how successful these groups will be at convincing mutual funds to weigh in.  Mutual funds often defer to the experience and judgment of corporate boards and, to date, mutual funds have not supported these proposals.  They may be reluctant to reverse course now given the traditionally low levels of shareholder support, the fact that much of the requested information is already publicly disclosed, and criticisms that corporate political disclosure efforts can harm shareholder value.

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