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Pension Funds

stock-marketRecent studies show that corporate political spending rarely benefits corporations or their shareholders. In fact, the shares of companies that engaged in political spending consistently underperformed those of companies that eschewed political contributions. Corporations that spend on politics divert resources from important investments in research and development and other business enhancing activities that will actually help their bottom line and thereby increase shareholder value.

Pension funds, as shareholders, have a duty to maximize the value of the investments entrusted to them and minimize risk.   While there is a momentum of general shareholder support toward disclosure – support of such resolutions has doubled over the past 10 years – pressure needs to be kept on companies to increase transparency and oversight in corporate political spending .

Model Pension Fund Policy in Support of Corporate Disclosure and Oversight:

The following is a model resolution for pension fund boards to adopt that affirms the board’s duty to manage the fund’s assets responsibly by investing in corporations that have a policy of transparency and management oversight of political spending.  It also states that the board will support or submit shareholder resolutions calling for transparency and oversight of political contributions for corporations without a written policy.

♦   Click here to download (.pdf)

Model Shareholder Resolution to Strengthen Disclosure and Oversight:

Pension funds can support transparency in corporate political spending by submitting a shareholder proposal for consideration and by voting in favor of shareholder resolutions on disclosure and oversight of political spending when they are presented in corporate proxy statements.  Through their holdings in publicly-traded companies, pension funds can move the needle in the right direction for disclosure and oversight of political spending by voting in favor of these shareholder resolutions, rather than abstaining.

The following is the model shareholder resolution drafted by the Center for Political Accountability. It calls on companies to: report soft money contributions, independent expenditures, and payments to trade associations and other tax exempt organizations that are used for political purposes; identify the titles of the individuals involved in the expenditure decisions; disclose their political spending guidelines; and require the board of directors to conduct oversight of the company’s political spending.

♦   Click here to download (.pdf)

Model Language to Amend RPFs or Contracts for Disclosure or Oversight:

The following document provides model language for institutional investors, such as pension funds, to include in RFPs or contracts with third-party service providers or contractors.  It requires contractors to submit a report disclosing the contractor’s policies and procedures for political spending and certify that the contractor’s board of directors conducts oversight of political spending, and the contractor publicly discloses its spending guidelines and political spending reports.

♦   Click here to download (.pdf)

Model Policies for Corporations to Strengthen Disclosure and Oversight:

To assist corporations in strengthening their political spending policies, CAPS has assembled a series of four model policies which include options for restraint, disclosure and board oversight.

♦   Click here to download (.pdf)

  • The first model policy follows the precedent set by Colgate-Palmolive which is often described as a “Gold Standard” for political spending policies. Colgate-Palmolive has a strict policy against making direct and indirect political contributions to political parties and candidates. It also prohibits indirect spending through not-for-profit organizations, electioneering communications and independent expenditures. In addition, the company has no political action committee. Dues and other payments made to trade associations may not be used for political purposes and all trade associations must ensure that no part of any payments to them will be used for political purposes.
  • The next model policy takes an approach similar to IBM, which has a strict policy against making direct and indirect political contributions to political parties and candidates. It also prohibits indirect spending through not-for-profit organizations, electioneering communications and independent expenditures. Although IBM does not have a political action committee, it engages in public advocacy. This model policy contains language disclosing both lobbying and political action committee expenditures. Dues and other payments made to trade associations may not be used for political purposes and all trade associations must ensure that no part of any payments to them will be used for political purposes.
  • The third policy in this guide is modeled on Microsoft. The policy allows direct political spending, but with maximum disclosure on their website with management and board oversight of the political giving. This model policy prohibits indirect spending through not-for-profit organizations, electioneering communications and independent expenditures. The company will inquire and make reasonable efforts to determine what portion of their dues or other payments to trade associations are used for lobbying expenditures or political contributions.
  • The last model policy presented is for companies, such as Chevron, who wish to pursue unfettered political spending in all areas legally available to a corporation, while providing management oversight and full disclosure of all political spending on the company’s website.

RESOURCES:

Center for Political Accountability
The Center for Political Accountability (CPA) can help file shareholder resolutions and support direct engagement strategies. CPA also releases a yearly report ranking the corporate spending policies of the top S&P companies.
Address: 1233 20th Street, NW, Suite 205. Washington DC, 20036
Phone: 202-464-1570
Website: http://www.politicalaccountability.net/

Harvard Shareholder Rights Project
The Shareholder Rights Project (SRP) works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies in which they are shareowners, as well as on research and policy projects related to corporate governance.
Website: http://srp.law.harvard.edu/

The Council of Institutional Investors
The Council of Institutional Investors (CII) is a nonprofit association of pension funds, other employee benefit funds, endowments and foundations with combined assets that exceed $3 trillion. CII educates its members, policymakers and the public about the importance of corporate governance, shareowner rights and related investment issues, and advocates on their members’ behalf.
888 17th Street NW, Suite 500. Washington, D.C. 20006
Phone: 202.822.0800
Website: http://www.cii.org/

Sustainable Investment Institute
The Sustainable Investment Institute (Si2) provides online tools and in-depth reports that enable investors to make informed, independent decisions on social and environmental shareholder proposals. It also conducts related research on special topics of interest to its members and the general public.
Address: 21122 Park Hall Road. Boonsboro, Maryland 21713 USA
Phone: 301.432.4721
Website: http://www.siinstitute.org/

Investor Responsibility Research Center Institute
The Investor Responsibility Research Center Institute (IRRC Institute) serves as a funder of environmental, social and corporate governance research, as well as the capital market context that impacts how investors and companies make decisions. The IRRC Institute ensures its research is widely available to investors, policymakers, the news media, and all interested stakeholders.
Address: 40 Wall Street, 28th Floor. New York, NY 10005
Phone: 646-512-5807
Website: http://www.irrcinstitute.org/

Research and Relevant Reports:

 

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