CORPORATE REFORM COALITION
May 7, 2012
NYC Pension Trustee, Institutional Investors and Advocates Plan Challenge to 3M on Political Spending Policies at Shareholder Meeting
Carleton College among institutions taking part; Advocates organize outside 3M meeting as part of ‘shareholder spring’
MINNEAPOLIS – The Minneapolis-based company 3M will face criticism from institutional investors inside its shareholder meeting on Tuesday because of its political spending practices, investors said on a teleconference call on Monday. A coalition of advocacy organizations, including Minnesota Common Cause, Public Citizen and Take Action Minnesota, detailed plans for a rally that is to occur outside the shareholder meeting.
New York City Public Advocate Bill de Blasio, a trustee of the $40 billion New York City Employee Retirement System (NYCERS), stated, “Political intrigue is bad for the bottom line and a risk to the retirees that have millions invested in 3M stock. It’s time for 3M’s corporate board to wake up and do its job: secret political spending has to stop.” NYCERS, which like most pension funds is heavily invested in index funds, owns millions in 3M stock. “We need much greater accountability from 3M,” de Blasio said.
3M ranked in the bottom tier of the CPA-Zicklin Index of Corporate Political Accountability and Disclosure last year, scoring just 24 out of 100. Even though the company has made some improvements in the past year, it still does not disclose its payments to trade associations and other tax-exempt groups that are used for political purposes. Since the 2010 U.S. Supreme Court decision Citizens United v. Federal Election Commission, these third parties have engaged in electioneering activities at unprecedented levels. The lack of transparency makes it impossible for shareholders to fully gauge the risks the company may face. Furthermore, a recent review of the academic literature on the correlation between shareholder value and political activity has indicated that there is a negative correlation between the two and that shareholder value actually may be hurt by firm political activity (https://www.citizen.org/sites/default/files/4637-8.pdf).
The Citizens United decision lifted a century-old ban on the unlimited use of corporate treasury funds for political purposes. Shareholders increasingly are concerned that such funds, which can be funneled to Super PACS, trade associations and other organizations for political use, often without proper oversight or board and shareholder knowledge, could create a risk to shareholder value.
“In 2010, after Target Corporation faced boycotts and protests due to a political contribution to a controversial group that supported an anti-LGBT gubernatorial candidate, 3M put its brand and shareholder value at risk by making an additional donation to the same group, MN Forward,” said Shelley Alpern, vice president at Trillium Asset Management, a Boston-based investment firm, who spoke on today’s call. Trillium filed a resolution on 3M’s 2012 proxy asking that the corporation refrain from political spending, both directly and indirectly via third-party vehicles. “3M undermined its own commitment to diversity by supporting MN Forward. It’s a strong example of how corporations would be better off discontinuing political spending and making their policy preferences known via other means,” Alpern said.
Also on 3M’s shareholder ballot is a proposal calling for greater transparency around the company’s lobbying activities. Forrest McKnight, a student at the Northfield, Minn.-based Carleton College and a member of the Carleton Responsible Investment Committee (CRIC), spoke at the news conference about that proposal. “3M shareholders need to know what lobbying activity is being conducted in their name, without it first becoming a scandal,” he said. “We will be attending the shareholder meeting to support the lobbying expenditures disclosure resolution.” The CRIC advises the Carleton Board of Trustees on the proxy voting policies of Carleton’s $650 million endowment. The shareholder resolution on lobbying expenditures was filed by the Boston-based firm Walden Asset Management.
On the phone call, advocates described the rally: “Our rally in support of political spending reform at 3M echoes the concern of shareholders across the country,” said Mike Dean, executive director of Common Cause Minnesota, referring to what has been dubbed as the “shareholder spring” because so many annual shareholder meetings are now places of protest and active engagement with corporate leadership. “Shareholders, individuals and organizations are bringing grievances directly to corporate executives at annual shareholder meetings because the democratic process and political system are too broken to bring redress. That corporations continue to influence the democratic process in a nontransparent way is a fundamental part of the problem,” said Dean. Common Cause helped organize the rally.
“Our democracy has been under attack for decades both at the ballot box and in the board room,” said Dan McGrath, executive director of Take Action Minnesota and an organizer of the rally. “Citizens United opened the flood gates to corporate spending in our elections. We need a system of checks and balances on the money flowing to candidates. We can’t afford to let another year go by with big money drowning out the voices of Minnesotans.”
Lisa Gilbert, deputy director of Public Citizen’s Congress Watch division, added, “The use of corporate treasury funds to influence politics – which began following the devastating Citizens United decision – has unleashed a maelstrom of spending. Resolutions like those filed at 3M and Bank of America represent shareholder distaste for this new Wild West of unlimited corporate campaign participation. Public Citizen, as a key leader in the diverse Corporate Reform Coalition, has been working to bring shareholders into the decision-making process.”
The “shareholder spring” actions that Common Cause and its allies are conducting are part of a larger umbrella of activities under the 99% Power banner. 99% Power is a broad coalition that includes workers, retirees, families fighting foreclosure, the unemployed, students, immigrants and environmentalists.
The 3M proposals on lobbying transparency and the cessation of political spending are part of a separately coordinated wave of shareholder proposals at more than 100 companies this year.