Now unions are turning to shareholder proposals to limit political speech.
WSJ Editorial, December 29, 2011
Since the Supreme Court's 2010 Citizens United decision restored the First Amendment rights of businesses and unions, "disclosure" has become the watchword for Democrats hoping to muzzle political speech by corporations. The latest gambit is to intimidate companies via the shareholder proxy process.
Under a Securities and Exchange Commission rule, any shareholder who holds more than $2,000 in stock can introduce shareholder proposals. That provision, unused by most shareholders, has become a tool for activists, who this year introduced a record number of shareholder proposals on political spending.
According to the Manhattan Institute's Proxy Monitor, 92% of these proposals were sponsored by social investing funds or, surprise, labor union pension funds. We'll go out on a limb and guess these outfits don't rank increasing shareholder value as a top priority. For unions and their allies, the goal is to limit corporate spending on political causes while unions endure no such restraint.
The political spending proposals have all failed so far, but the vote itself is meant to send a message that a company should shut up or face more political harassment. Two huge California union pension funds, Calpers and Calstrs, recently voted to change their corporate governance policies to require disclosure of political contributions by companies they invest in.
The George Soros-funded Center for Political Accountability and social investing groups like Walden Asset Management are also pushing for kitchen-sink disclosures. In a form letter to corporations in September, Walden's Senior Vice President Timothy Smith said shareholders should know all details of "direct or indirect lobbying" by a corporation as well as the "decision-making and oversight processes related to direct, indirect and grassroots lobbying activity."
Bruce Freed, who runs the Center for Political Accountability, has gone so far as to create a list of companies that are complying with what he calls "best practices" on corporate spending. Those practices, you will not be surprised to learn, include measures straight off the wish list of campaign finance scolds who want to roll backCitizens United.
Mr. Freed wants corporate boards to know that if they don't toe this line they'll face a proxy fight. The targets of recent shareholder disclosure resolutions include Occidental Petroleum, Schwab, Northrop Grumman, Home Depot and Procter & Gamble, among others.
In the latter two cases, the proposal came from Boston's NorthStar Asset Management, a left-wing investment shop that specifically objected to political donations by the companies. NorthStar objected to P&G's support for the campaigns of Ohio Senator Rob Portman and Representative Steve Chabot because NorthStar didn't like their positions on gay issues.
NorthStar is essentially saying that P&G can't donate to two Republicans who hail from its headquarters city of Cincinnati because of their views on an issue that won't affect P&G's bottom line. Never mind that the two Republicans might agree with P&G on issues like reducing the corporate tax rate that would enhance its shareholder value and employment.
As for Home Depot, NorthStar claimed new disclosure rules are needed to reduce the "risk to the firm's reputation and brand through possible future missteps in corporate electioneering." Reputational risk due to an attack by NorthStar and its union allies?
Such a campaign was launched last year against Target Corp., when the retailer dared to exercise its free-speech rights in Minnesota. Target donated to Republican candidate Tom Emmer because of his fiscal positions relevant to the state's business climate. But the left assailed Target because Mr. Emmer opposed gay marriage.
Target has a history of supporting equal rights and benefits for gay employees, but that didn't stop the attacks by MoveOn.org. Target's donation was disclosed under a Minnesota campaign-finance law that Democrats hope to make a model for other states and Congress. As it is, 57 of the S&P 500 companies already either don't spend on politics or disclose their political spending on their websites.
These columns have supported disclosure by all political donors as a trade-off for unlimited contributions. But this is a position that needs to be reconsidered as the political left tries to vilify business and individual donors who disagree with their agenda. Recall the attacks on Mormons who donated to the anti-gay marriage proposition in California in 2008. Disclosure is a worthy public value, but it doesn't trump the right to free political speech and assembly.
The proxy movement to curtail corporate giving is an abuse of corporate governance to shut up political opponents.