Efforts to Restrict

Corporate Speech

Efforts to Restrict Corporate Speech

Special interests are attempting to force the disclosure of corporate
public policy expenditures through multiple avenues:

FEDERAL
LEGISLATION

STATE
LEGISLATION

AGENCY
PRESSURE

SHAREHOLDER
PROPOSALS

Ample evidence suggests that greater corporate disclosure is not the end goal of political activists,
but merely part of a broader effort to influence company decision-making, undermine opposing
viewpoints, and harm long-term economic value for all shareholders.

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The Goal: Exclude Business Community from Public Policy Debates

Media Matters Three Year Campaign Document Revealed its Plan to
Attack Corporations That Participate in Public Policy Debates

The Three-Step Plan

(1) [L]aunch shareholder resolution campaigns
(2) Use the data gained to provoke backlashes
among companies shareholders, employees, and
customers, and the public-at-large
(3) [M]ake the case that a corporations political
efforts have the potential to irreparably damage its
brand and bottom line

Efforts to Create an Uneven Playing Field

Partisan Interests are Seeking to Impose Burdensome Disclosure
Requirements Solely on Public Companies

[Center for Political Accountability] and our partners are putting pressure on companies to
adopt political disclosure, to curb the independence of trade associations, and to change
the behavior of companies and trade associations in their political spending. I think whats
critical to remember is that the CPA strategy is not vulnerable to political
obstruction or legal challenge. What were finding is that corporate governance
oers a route that allows the issue to be addressed almost unimpeded.
- Bruce Freed, Center for Political Accountability

The latest ploy is an effort to convince American businesses to voluntarily disarm and leave the
playing field to unions and foundation-funded lobbying groups. Leading this effort is an organization
called the Center for Political Accountability (CPA)
- Bradley Smith, Former Federal Election Commission Chairman

Pressure to Disclose Political and Lobbying Engagement

Send Letters to S&P 500 Companies

An activist or group of activists approach a
company to request that it voluntarily adopt
particular disclosures.

File Shareholder Proposals

Activists submit shareholder proposals seeking to force the
disclosure of, and to place additional limits on, corporate
participation in the public policy debate.

. . . To Leverage Negotiations
Some companies, eager either to avoid a
resolution or to get a resolution withdrawn, feel it
necessary to negotiate with activists.

Companies often are dismayed to find that reforms made one year
invite further demands the next year.
- Jonathan R. Macey, Yale Law School

The Political Activists False Narrative:

Corporate Engagement is Risky and Bad for Investors
The Center for Political Accountability (CPA) and its allies seek to influence
public perception with faulty statistics and dishonest reports.
Manipulate Outcome-Oriented Surveys

Annually change the scoring methodology of the CPA-Zicklin Index

Inflate Levels of Support

Disregard abstentions when calculating overall levels of shareholder support for

disclosure

Mischaracterize the support of major mutual funds by emphasizing the votes of

minority sub funds
A word to company officers and shareholders: Ignore the [CPA-Zicklin] index . . .
[I]ts ranking system is deeply flawed. The design and metrics are outcome-oriented,
reflecting the subjective and political biases of the indexs sponsors.
- Jonathan R. Macey, Yale Law School, October 21, 2013

Rationale for Disclosure Makes No Sense

ACTIVISTS CLAIM

Political expenditures/lobbying hurt shareholder value

FACTS
A June 2012 study by economist (and former Clinton Administration official)
Robert J. Shapiro found that [e]xtensive analysis and evidence . . . support the
view that corporate participation in the political process yields generally
positive returns to firms and their shareholders and that [c]orporate
political activity appears to have a generally positive effect on firm value, as
reflected in excess market returns.
Strategas Research Partners' Lobbying Index, which measures the stock
performance of the 50 companies that spend the most money on lobbying, has
outperformed the S&P 500 for 15 consecutive years. The Lobbying Index
generated an average annual return of 17.4 percent in 2012 and 2013,
compared to 6 percent for the S&P 500.
Jason Trennert, Managing Partner of Strategas, has stated that companies are
understanding better the idea that [lobbying] is important that it is a fiduciary
duty to spend money and make sure your voice is heard.

Pressure on SEC to Force Disclosure of Public Policy Expenditures

Political activists have spearheaded an Astroturf campaign to send thousands of letters to the
SEC in support of mandatory disclosure of corporate lobbying and public policy expenditures.

Despite such pressure, SEC Commissioners recognize that materiality is the SECs governing standard
and have warned against straying from the SECs mission to appease special interest groups:
The SEC makes its decisions based on an impartial assessment of the law and the facts and what we
believe will further our mission and never in response to political pressure, lobbying, or even public
clamor.
- Chair Mary Jo White

Requiring disclosure of all corporate political contributions adds a pile of inherently non-material
information to the mountain of disclosure already mandated at considerable cost.
- Commissioner Daniel Gallagher

Types of Shareholder Proposals

Political Activists are Increasingly
Focusing on Lobbying Disclosure

POLITICAL
SPENDING
DISCLOSURE

LOBBYING
DISCLOSURE
PROPOSALS

BAN LOBBYING
OR POLITICAL
SPENDING

Increasing Demands for the Disclosure of Corporate

Lobbying Expenditures Expose Activists True Intentions to
End Corporate Participation in Public Policy
2011

2013

2012

3%

15%

8%
42%

55%

44%

48%

85%
Source: The Manhattan Institute

Shareholders Have Overwhelmingly Rejected Proposals for

Disclosure of Corporate Lobbying and Public Policy Expenditures
Shareholder Votes Related to Public Policy or
Lobbying Expenditure Proposals, Fortune 250
100%
80%

Receiving on average support from

only 19 percent of shareholders
among Fortune 250 companies.

60%
40%
20%
0%

AGAINST / ABSTAIN
FOR
2009

2010

2011

2012

2013

2014 (to date)

The Manhattan Institute

Mutual Fund Votes Related to Public Policy or

Lobbying Expenditure Proposals

In 2013, the five largest mutual fund

families Vanguard, Fidelity,
PIMCO, American Funds, and T.
Rowe Price supported only two
percent of proposals related to
corporate public policy expenditures.

98%

AGAINST / ABSTAIN
FOR

2%