The Disclosure Police Target Walmart
3:38 PM, Jun 5, 2014 • By MICHAEL WARREN
Poor Walmart. The Arkansas-based retail giant just can’t catch a break. On Wednesday, employees began striking across the country, demanding higher wages. The move is the latest in a long-standing battle between the company and labor interests. And on Friday, labor’s allies in the world of activist investment are hoping to open up another front by convincing Walmart to disclose its membership with trade groups.
On June 6, Walmart shareholders will convene on the campus of the University of Arkansas for their annual meeting. As they do with publicly traded companies across the country, activist shareholders will be there as well to propose an innocuous-sounding “request for annual report on lobbying.” The proposal, if adopted by the shareholders, will require Walmart’s board to produce a report disclosing the money it spends on “direct or indirect lobbying” or “grassroots lobbying communications” as well as any of Walmart’s membership in tax-exempt organizations. The activists say they simply want “transparency and accountability”--and who can argue with that? No true shareholder-minded company would oppose such a proposal, right?
Walmart’s response urging shareholders to vote against the proposal is almost desperate. “Walmart already discloses information about its lobbying activities and procedures … as required by existing law, regulations, and Walmart policies,” it reads. The subtext: What more do you disclosure people want?
A lot more, as it turns out. Shareholder proposals like the one before Walmart aren’t intended simply to create transparency. The goal is to snuff out corporate political spending completely—to candidates, campaigns, and especially civic and trade organizations that engage in political activity. That’s the argument in a new paper from the Center for Competitive Politics, a think tank founded by a former commissioner of the Federal Elections Commission that says it works to “promote and defend First Amendment rights to free political speech, assembly and petition.”
The CCP’s paper highlights a focused campaign by an alliance of activists, progressive lawyers, labor unions, socially- and environmentally-conscious investment funds, and left-wing media to push corporations to disclose their political spending and, ultimately, abandon all or most of that spending entirely. Take it from one of the activists himself. During an online seminar with like-minded activists earlier this year, Tim Smith of Walden Asset Management pointed out how efforts to get more disclosure from companies has encouraged those companies to drop their support for the American Legislative Exchange Council, which advocates for pro-business and conservative causes. Here’s Smith:
At the heart of the movement is the Center for Political Accountability and its founder, Bruce Freed. (Read more about Freed in a May 2013 article in THE WEEKLY STANDARD.)
In general, the process works like this: Activist shareholders like those at Walmart urge their fellow shareholders to support proposals that require the company to disclose its political spending. If the proposal fails, the activists ramp up the public relations campaign by organizing letter-writing campaigns and promoting boycotts or rallies through friendly media, demanding to know why a company refuses to disclose. Activists will often point to the negative publicity they help generate as reason for the company to be more transparent. Bad publicity hurts the bottom line, after all.
But even if activist proposals succeed and shareholders vote to adopt stricter disclosure rules, the companies aren’t any better off. Affiliated activist groups and media outlets now have the ammunition they need to demand the company stop funding organizations that engage in (usually pro-business and conservative-leaning) political activity. The organizations are trade groups like the Chamber of Commerce, the National Association of Manufacturers, the American Petroleum Institute, and others that lobby for business and industry interests in Washington. More negative press reduces shareholder value. Really, it’s for the good of the company to pull out of the political spending business altogether. (Unsurprisingly, activists don’t appear interested in the disclosure of labor union political spending.)
In 2014 alone, companies like AT&T, Chevron, ConocoPhillips, JPMorgan Chase, Verizon, UPS, and IBM have all had transparency proposals like these presented at their shareholder meetings. The proponents and co-filers are a who’s who of left-wing investment funds and labor groups pension funds: the AFSCME pension plan, Walden Asset Management, Domini Social Investments, the United Steel Workers of America, and others. Leading the charge this year is Zevin Asset Management, who has filed or co-filed 11 proposals at 9 major corporations in 2014. Zevin calls itself “pioneers of socially responsible investing,” and Walmart is just the latest to end up in the fund’s crosshairs.
“Walmart is the largest employer in America yet is far behind other large companies on what it discloses about its lobbying activities,” said Zevin official Sonia Kowal in a press release this week. “A company that is such a large part of the American economy should not be seeking to impact legislation behind closed doors. Shareholders need better, more complete disclosure of how Walmart uses its resources to affect legislation including on issues such as raising the minimum wage or food stamp cuts.”
Walmart’s board protests that characterization of its membership in retail and trade organizations. “Although lobbying is not the primary purpose of these associations, the membership dues paid by Walmart and other members may be part of the funds they use to engage in lobbying activities,” reads the company’s statement. “Walmart may not agree with every lobbying action taken by such associations. Accordingly, the Board believes that additional disclosures regarding the specific payments made to these trade associations would not necessarily present an accurate reflection of Walmart’s positions of certain public policy issues.”
But that misses the point. It’s not that Zevin actually objects to Walmart’s political positions. Long the target of labor unions and liberals, the company has tried to placate its opponents by donating more to Democratic candidates and causes. Last month, President Obama even spoke at a Walmart store in California about the need to address one high-profile progressive agenda item: climate change. Obama touted the company’s efforts to use more energy-efficient buildings and vehicles.
All the ideological olive branches in the world shouldn’t give Walmart or any other corporation any confidence the disclosure police won’t keep coming after them. Anti-political spending activists have other weapons in their arsenal to achieve the same goals. The DISCLOSE Act (which stands for “Democracy Is Strengthened by Casting Light On Spending in Elections”) died in the Senate in 2010, but it remains the holy grail for those who want to put into federal law the stricter disclosure requirements. When Democrats eventually take back control of the House of Representatives, expect an updated version of the DISCLOSE Act to be at the top of the party’s list of priorities. There’s also a movement afoot to encourage the Securities and Exchange Commission to adopt a rule that would “require public companies to disclose to shareholders the use of corporate resources for political activities.” So far, the SEC hasn’t moved on the rule (much to the chagrin of liberals), and Republicans in Congress have been encouraging the agency not to adopt it.
And if all else fails the activists, there’s always next year’s shareholder meeting.
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