Communications Industry Shareholder Lobbying, Political Spending Proposals Face Uphill Battle

Comcast had the most-recent such proxy vote. In an SEC filing Tuesday, the company said shareholders rejected requiring it to prepare an annual report on lobbying activities, 304.3 million to 60.4 million votes. Similar proposals for lobbying disclosures were shot down in March by Disney shareholders; in April by General Electric shareholders; in May by Boeing, CenturyLink and Motorola Solutions shareholders and earlier this month by Facebook shareholders. AT&T shareholders in April rejected proposals requiring both lobbying and political expenditure reports annually. Alphabet shareholders in June also rejected proposals requiring annual lobbying and political expenditure reports. Similar shareholder proposals were voted down in 2016 at such companies as Alphabet, AT&T, Boeing, Comcast, Facebook and Verizon.

One political spending proposal at a major publicly held company -- construction company Fluor -- passed in 2016 despite opposition from the board, likely because it received public employee retirement system support, said Jim Copland, director-legal policy at the Manhattan Institute. "They essentially never pass."

The lobbying and political spending proposals are often very similar from company to company, Cohn said. The Comcast lobbying proposal would have required the company to disclose annually its lobbying policies and procedures; payments used for direct or indirect lobbying and for grassroots lobbying communications, including the amount of payments and recipients; and company membership in and payments "to any tax-exempt organization that writes and endorses model legislation." The AT&T lobbying proposal used nearly identical wording. The political spending requirement would have had the company annually disclose "indirect monetary and non-monetary expenditures used for political purposes, i.e., to participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, and used in any attempt to influence the general public, or segments thereof, with respect to elections."

Political spending-related shareholder proposals date back years, and the Supreme Court's 2011 Citizens United decision added to their frequency, said Copland. He said lobbying proposals have started becoming more predominant and some companies voluntarily adopted political spending disclosures.

The proponents are typically social investment funds, state pension funds or labor-affiliated pension funds, and their ultimate goal, "whether they admit it or not," is to motivate companies to quit taking part in the political process directly or through trade associations, Copland said. He said company opposition to these kinds of disclosures is because it potentially could undercut companies' abilities to influence the political process through actions such as association membership.

"It comes down to transparency and accountability," said Jeffery Perkins, CEO of Friends Fiduciary, a faith-based investment firm that submitted lobbying proposals at Comcast and CenturyLink, though it later withdrew its CenturyLink proposal that was similar to one also submitted by the AFL-CIO. Perkins said Friends Fiduciary sees a potential risk of damage to Comcast's reputation from its association with organizations like the American Legislative Exchange Council. Making that information more readily public would prompt Comcast "to think very carefully about associations like that," he said. "It's important that level of due diligence is occurring in this era where there's potential reputational risk." Comcast and CenturyLink didn't comment.

In many cases, the companies oppose the disclosure proposals by arguing the same information is already made public elsewhere. Comcast, in its proxy statement issued in April, advised a "no" vote, saying the information to be disclosed "is generally publicly available in appropriate detail [and] implementing this proposal would require us to incur unnecessary expense, would divert management attention away from our primary business activities and would raise potential competitive concerns." AT&T in its April proxy statement called the political spending proposals “duplicative of [its] existing practices and are unnecessary,” and the lobbying proposal was superfluous given the disclosures it already makes. It also argued lobbying disclosure requirements "should be addressed by lawmakers and uniformly imposed on all entities." AT&T didn't comment.

Lobbying shareholder proposals generally have received only 26 to 27 percent of votes in support, said Copland. Failures don't reflect behind-the-scenes talks between companies and shareholders, with some companies likely having negotiated disclosure policies before shareholders go as far as bringing proposals up for vote, Cohn said. She said since such shareholder proposals almost always lose, companies need to "assess thoughtfully whether to provide disclosure and how much disclosure to provide given the company and its circumstances.”

Lobbying and political spending proposals likely won’t become successful until more investors understand the reputational risks that can come from lobbying and political campaign expenditures and from trade association membership “and reflect that in the way they are voting on shareholder proposals," Perkins said. He said Friends Fiduciary likely will again approach Comcast and CenturyLink for discussions about changes to its lobbying policies. "There's always opportunity for what we would deem movement," he said.