Oregon Investment Council Will Press For Greater Transparency Of Corporate Political Activity

Disclosure reduces risks for companies and benefits shareholders, according to proxy expert

Oregon public trust funds could help spur more transparency about how corporations spend money on political causes. 

 

Oregon beneficiaries of public trust funds such as the Oregon Public Employees Retirement Fund and Oregon Common School Fund are major investors in public companies, collectively owning billions of dollars in stock.

 

As a result, those funds can have a significant voice in how those corporations are run. As a responsible investor, Oregon interacts with companies in several ways, including directly engaging with executives and using proxy votes at annual shareholder meetings. The goals: improve corporate responsibility and enhance profitability.

 

The Oregon Investment Council (OIC) on Wednesday heard an annual update from Glass, Lewis & Co., the San Francisco-based firm hired by the OIC to manage Oregon’s proxy voting program. The voting priorities for 2013 include supporting efforts to require disclosure of spending on political campaigns and lobbying activities.

 

The focus on political spending in this year’s annual meeting calendar comes on the heels of the record-setting financial blitz in the 2012 campaign cycle, in which more than $6 billion was spent, much of it from business donors. The 2010 U.S. Supreme Court decision in Citizens United v Federal Election Commission, opened the door to unlimited political giving by companies.

 

“Companies have a right to engage in political persuasion, but it costs money and shareholders of those companies should have the right to know,” said State Treasurer Ted Wheeler, a member of the Oregon Investment Council. “We want corporations to succeed, and we also want them to act in the best interests of beneficiaries like Oregon schoolchildren and workers.”

 

A Glass Lewis & Co. analysis says as many as 80 percent of companies in the S&P 500 index appear to have spent some money on political campaigns. Many large companies reveal their political activity to shareholders: More than two-thirds of S&P 100 corporations disclose political spending to some degree, according to research cited in the analysis.

 

Robert McCormick, chief policy officer for Glass, Lewis & Co., told the OIC that proposals to require reports on companies’ political spending were the most frequent shareholder proposals on U.S. ballots during the 2012 proxy season.

 

“Glass Lewis believes that thoughtful disclosure and a robust oversight policy regarding a company’s political contributions are important components of corporate accountability,” McCormick said. “In our view, a rigorous oversight process can minimize a company’s exposure to legal, reputational and financial risk by ensuring that donations are made in accordance with federal and state laws, consistent with a company’s stated values and the long-term interests of the company and its shareholders.”

 

Few shareholder proposals actually garner a majority of votes, but the attention is causing many companies to increase transparency, McCormick said.

 

Wheeler was the first State Treasurer in the country to call for the U.S. Securities and Exchange Commission to require corporations to tell shareholders about political-related spending, in a letter in 2011. Fiduciaries elsewhere also are seeking heightened disclosure. In January, the New York State comptroller filed suit against wireless technology company Qualcomm to force it to report spending on political advocacy.

 

In addition to corporate political activity, shareholder proxy votes cover a gamut of so-called “corporate governance” topics including executive compensation policies, improving shareholder ability to nominate board members to corporate boards, linking compensation to company performance, and reducing conflicts-of-interest.  

 

Through its proxy voting agent, Oregon trust funds participated in a total of 5,690 shareholder meetings of public companies in 2012, up from 2,323 in 2008. OIC policy says the quality of a corporation’s governance can affect long-term value. Proxy votes are a tool to ensure that corporations follow practices that advance economic value.

 

The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury.