Chevron (CVX), the successor defendant following its purchase of Texaco has filed a series of appeals but lost the latest round last week when an Ecuadorian court upheld an $18 billion judgment against the company. It was Chevron's decision to have the case litigated in Ecuador instead of the United States.  Both sides have accused the other of corruption. 

Pablo Fajardo, an Ecuador-based lawyer representing the 30,000 plaintiffs suing over environmental damage in the Amazon region, said: “It’s not going to be easy to enforce this judgment, but even if hell freezes over we’re going to do it.”

An independent report released last year criticized the financial, operational, and reputational risks of Chevron's response to the suit. It will be dismissed by some because it was commissioned by Amazon Watch and Rainforest Action Network, who are frank about their own point of view. (Their website is called ChevronToxico: The Campaign for Justice in Ecuador.)   But it is hard to dispute the findings by Simon Billenness and Sanford Lewis that the company's admissions about its liability risks in court documents are inconsistent with its financial reports and that its legal and public relations strategy poses an unacceptably high risk. It isn't only the "Chevron-Toxico" logo that is leaking toxic material.

Three shareholder proposals filed by Chevron investors reflect these concerns.

1. Environmental Director

This is a re-filing by New York State of last year's resolution with some updated language.  New York State is the lead.  Amnesty International USA and Zevin Asset Management are co-filers.

2. Independent Chair

This is a new resolution asking Chevron to separate the positions of CEO and Chair.  It uses standard language for a corporate governance resolution of this kind with added language on Ecuador.  The lead filer is the Unitarian Universalist Association Common Endowment Fund and Zevin is a co-filer.

3. Calling Special Meeting of Shareholders

Lead filed by Investor Voice, this resolution calls on the company to amend its bylaws to give shareholders new powers to call a special meeting.  It contains language on Ecuador and Burma.  Zevin co-filed as well.

Management of environmental risk — including the risk of litigation — is increasingly being seen as an essential element of investment risk and shareholders are increasingly recognizing the importance of initiatives to respond to poor management of that risk. 

The post Chevron, Hit by $18B Judgment, Faces Three Shareholder Proposals appeared first on GMI Ratings.

He finds that in non-regulated industries, personal political ambitions can be a more significant factor in determining and directing corporate political contributions than benefiting the company and its shareholders.  

The paper finds that before and after Citizens United the data are consistent with companies engaging in a mix of shareholder-oriented and non-shareholder-oriented political activity. In regulated industries (e.g., banking, telecommunications) and in government-dependent industries (e.g., defense), political activity is nearly universal, and does not strongly correlate with measures of shareholder power, managerial agency costs, or value. In these industries, at least, where business strategy or revenues are directly linked to political decisions, it seems hard to imagine that shareholders of any given firm would benefit from unilateral political disarmament.

But the same intuition does not extend to most large public companies. A review of the career paths of a sample of CEOs in 2000 points to another possible motivation for CPA: more than one in ten ex-CEOs later obtain political positions, including Cabinet-level appointments. This finding suggests that the extent or nature of the political activity of firms managed by those CEOs – as well as by other CEOs who have not yet left their CEO positions, or who died while CEO, or left under a cloud of scandal – could have at least partly been influenced by personal ambitions. In the majority of industries (e.g., apparel, retail, equipment), political activity is common but varied, and it correlates negatively with measures of shareholder power (shareholder concentration and shareholder rights), positively with signs of managerial agency costs (corporate jet use by CEOs), and negatively with shareholder value (industry-relative Tobin’s q). The negative value-politics relationship is particularly strong for firms making large capital expenditures, and is stronger in firm fixed-effects regressions than in cross- sectional regressions.

He notes that "The causal relationships between political activity and value likely run in both directions: politics may be one route for a troubled or stumbling firm to pursue to regain profitability, even as politics may distract senior managers and result in business investments that lack focus or are poorly fitted to a firm’s core business strategy."   Unfortunately, regaining profitability via political maneuvering rather than focusing on improving operations, product mixes, and sustainable cash flow.

I like Coates' indicators for evaluating the alignment of political expenditures with shareholder interests, with one example use of corporate jets (relying in part on data provided by GMI).   The most significant findings include:

• CPA correlates negatively with two different measures of shareholder power, which are themselves uncorrelated – ownership concentration and greater shareholder rights – and CPA correlates positively with measures of managerial agency costs – greater use by CEOs of corporate jets.
• CPA correlates positively with the significant fraction (11%) of large firm CEOs who gain post-CEO political office.
• CPA’s relationships with shareholder power and managerial agency costs are weakest (or even reversed) in heavily regulated or government-dependent industries, and strongest in other industries.
• CPA correlates negatively with measures of corporate value – industry-adjusted Tobin’s Q – and that relationship, too, is weakest (or even positive) in heavily regulated or government-dependent industries, and is stronger in other industries, even after controlling for other factors in various ways, including with firm fixed effects.

This is important work and I hope it will inspire further study by Coates and others.

The post Corporate Political Spending After Citizens United appeared first on GMI Ratings.

"Knock knock!" he shouted out to the crowd.

"Who's there?" they responded.

“Unlimited union and corporate campaign contributions,” said Colbert.

“Unlimited union and corporate campaign contributions who?” the crowd asked.

“That’s the thing, I don’t think I should have to tell you.”

In the post Citizens United world, it's a free for all in political contributions.  Corporations are evading disclosure rules by funneling the money through groups like the national Chamber of Commerce and ALEC.  Unlimited and often undisclosed payments have already resulted in outrages like Chesapeake Energy's recent purchase of entrenching legislative protection from its justifiably angry shareholders.  Recognizing that the Supreme Court's decision in Citizens United was explicitly premised on an accountability to shareholders that is more theoretical than real, the SEC has ruled that shareholder proposals calling for approval of political spending must be included on the company's proxy card and put to a shareholder vote.

But that is a one-at-a-time approach.  Bills introduced this week in both the House and Senate would respond to the Citizens United decision by making sure that the now-unlimited and often undisclosed political contributions made by corporations reflect the views of the providers of those funds, the shareholders.

The bills, introduced by Rep. Michael Capuano (D-Mass.) and Sens. Robert Menendez (D-N.J.) andRichard Blumenthal (D-Conn.), would give shareholders the right to vote on corporate political expenditures.

• Authorization from a majority of shareholders on an annual basis before a corporation can spend money from its general treasury on political activities; 

• A Board of Directors vote to authorize all expenditures over $50,000 within the overall budget approved by shareholders; 

• Individual board member votes and the details of approved expenditures will be disclosed online within 48 hours and to shareholders and the SEC on quarterly basis. 

The post Colbert’s Knock Knock Joke is Funny Because It’s True….Unless appeared first on GMI Ratings.

When presented with the problem of forcing dissenting shareholders to fund speech that does not represent their views, Kennedy wrote, “the remedy is not to restrict speech but to consider and explore other regulatory mechanisms.” The SEC’s ruling on the NorthStar proposal is the first of these regulatory responses to bring more transparency and accountability to corporate political spending.

The post SEC Approves Shareholder Proposal on Political Contributions appeared first on GMI Ratings.

That's pretty bad!  Or it would be, if it were true.

Fortunately, Elisberg decided to investigate.  He began with the website listed on the fliers, a state-sponsored listing of registered lobbyists. None of the people on the flier were lobbyists.  Those the fliers described as "representing "big oil, drug and insurance companies" were actually on the other side.  They included the

Southern California Director of the Clean Power Campaign.

 

 Another heads an environment analysts group, and recently lectured in Europe on climate change for the U.S. State Department.

There also is the head of a foundation "dedicated to fighting global poverty," who advises on "environmental sustainability and social responsibility." Another supporter is Regional Director of the Health Care Leadership Council.

And this "Sacramento special interests" supporter shown with Ms. Butler is the political director of Consumer Attorneys of California, which says that

any person they will represent must face "an opponent with far more power and access to resources: polluters, governments, insurance companies, automobile manufacturers, and banks. CAOC members take cases they view as worthy," adding "and are paid only from those cases which are successful."

As Elisberg says, voters may or may not support these groups.  But they are not lobbyists.  And they are not what most people think of as "special interests."  Butler is endorsed by the Child Abuse Prevention Center, Los Angeles County Fire Fighters Association, California Nurses Association, Planned Parenthood, and the Consumer Federation of California.

Who is on the other side, then?  One of the fliers showed that it was paid for by the "Cooperative of American Physicians Expenditure Committee."

Going to their website, they write that the "core product" of their organization is called Mutual Protection Trust, and MPT "is a market leader in the California medical professional liability arena."

In other words, insurance.  Which is much closer to what most people think of as special interests.  They are actually trying to defeat Ms. Butler by telling voters falsely that she supports people like them.

The Supreme Court's decision in Citizens United gave free rein to corporate "speech" in politics but it did not require them to tell us who is behind it.  That kind of "free speech" is going to prove very expensive for democracy.

Nell Minow – Editor

The post Citizens United and Its Impact appeared first on GMI Ratings.

The Texas Tribune reports on the first effort at political speech by a local corporation, a real estate company called KDR Development Inc.

The ads in the Jacksonville Daily Progress, the Tyler Morning Telegram and the Panola Watchman took issue with the Republican bona fides of state Rep. Chuck Hopson of Jacksonville, a Democratic incumbent who jumped to the GOP in November and ran in a three-way race in the Republican primary this month.

What interest would a real estate company have in a Republican primary contest for state office?   It turns out the KDR CEO is "Republican Larry Durrett, lost to Hopson in 2006, when Hopson was still a Democrat."  It is hard to imagine that there is any justification in this expenditure of corporate funds than the sour grapes of its chief executive.  

KDR and its affiliate company, a fast food franchisee also run by Durrett, are privately held.  So Durrett can spend the corporate funds as he wishes and answer only to whoever else owns a portion of the companies.  But this is an indicator of what we are likely to see as corporations use the corporate treasury to take sides in political contests.

Nell Minow – Editor

The post What Does Corporate Political Free Speech Look Like? appeared first on GMI Ratings.