Tag Archives: business

The Political Project of MCRC v. EPA, Revisited

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Judge Robert Holmes Bell dismissed the Marquette County Road Commission’s case against the EPA back in May, and last week the Road Commission’s attorneys at Clark Hill PLC filed a motion to alter and amend that judgment. They complain that the Court’s dismissal for failure to state a claim is not only mistaken on points of law but, more dramatically, it allows the “EPA and the Corps to wage a war of attrition on local governments seeking to protect the health and welfare of their people.”

I was struck by this inflammatory piece of political rhetoric about federal overreach for a couple of reasons. First, because it’s just the sort of hyperbolical language Michigan State Senator Tom Casperson and StandUP, the 501c4 dark-money organization funding the Road Commission lawsuit, have used to frame the case for County Road 595 and advance what, in a series of posts (1, 2, 3, 4) last summer, I called the political project of MCRC v. EPA. Second, because the motion here tacitly admits that mining activity on the Yellow Dog Plains has put “the health and welfare” of people in Marquette County at risk. Rio Tinto and then Lundin Mining proceeded with their plans to mine copper and nickel at Eagle Mine and truck it to Humboldt Mill without a clear haul route. They not only went ahead; they were permitted by the state to do so. The risk was transferred to the public.

This is a familiar pattern, but the story it tells is not about federal overreach or intrusive oversight. Quite the opposite: it’s a story about mining companies rushing projects into production without due consideration for the communities in which they are operating, regulatory capture or lax oversight and enforcement, and elected officials who all-too-easily and all-too-conveniently forget where their real duties lie.

The June 13th motion doesn’t often have recourse to this kind of language. For the most part, the motion deals with fine points of administrative law, citing a few cases that it claims the court misread or misapplied. Probably the most important of these is the Supreme Court’s discussion of the Administrative Procedure Act in a May 2016 opinion, United States Army Corps of Engineers v. Hawkes Co.. (Miriam Seifter explains Hawkes over at ScotusBlog. Even with her very clear analysis in hand I can only hope to make a layman’s hash of things.)

In Hawkes, a company that mines peat for golf-putting greens — a process that pollutes and destroys wetlands — sought an appeal of “jurisdictional determinations” by the Army Corps of Engineers that wetlands on their property were subject to the Clean Water Act.

The “‘troubling questions’ the Clean Water Act raises about the government’s authority to limit private property rights” came up for some brief discussion in Hawkes, notes Seifter, but that was not the main focus of the Supreme Court opinion. The case instead revolved around the question whether jurisdictional determinations are “final,” which in this context means they constitute an action “by which rights or obligations have been determined, or from which legal consequences will flow.”

The Army Corps in Hawkes maintained that appeals of the Corps’ jurisdictional determinations should not be allowed, because the determinations of the Corps are still subject to review and are not “final” or binding. The court found unanimously in favor of the peat-miners, saying that determinations by the Corps were final — they would put legal constraints on the peat-miners, who would have to stop polluting or face penalties — and therefore could be reviewed in court.

In MCRC v. EPA, the Road Commission now seeks a decision along similar lines. “The Court erred,” the motion complains, “by holding that EPA’s veto was not ‘final’ because Plaintiff could submit a new application to the Corps.”

In other words, the court held that the EPA’s objections to County Road 595 weren’t the last word: they didn’t constitute “final agency action” and did not entail legal consequences or impose obligations the Road Commission didn’t already have. The Road Commission can even now take EPA’s opposition to the road under advisement, go back to the Corps and seek a new permit. They can continue to work with the EPA, whose objections to the road are “tentative and interlocutory”: there is still room for conversation.

The attorneys for the Road Commission don’t deny that the Road Commission could have gone back to the Army Corps of Engineers; but they say that it would have been time consuming, burdensome and ultimately futile, as the Corps had joined the EPA in its objections to the road, and the EPA’s objections had the effect of a veto.

This brings us back to the arguments advanced in the original complaint. The EPA didn’t just object to the Road Commission’s proposal; they unfairly vetoed the new road, in a “biased and predetermined ‘Final Decision’.” The Final Decision, according to the motion, took the form of a December 4, 2012 objection letter from the EPA to the Marquette County Road Commission, to which the Road Commission replied on December 27th. They did not receive a reply, and the EPA’s failure to reply was tantamount to a “refusal.”

The EPA’s refusal (or failure) to reply to the Road Commission’s December 27th letter indicated that their objections had “crystalize[d] into a veto,” according to the motion. “Unequivocal and definitive,” a veto is a final agency action, “akin” to jurisdictional determinations made by the Corps. What legal consequences flowed from the veto? For starters, the EPA’s Final Decision divested the state, specifically the Michigan Department of Environmental Quality, of any further authority in the matter.

While this is not a new position for the Road Commission, the way the motion lays it out is nonetheless clarifying. The discussion of Hawkes, especially, brings into focus the question before the court — a question of administrative law concerning the “finality” of the EPA’s objections to CR 595. Of course that question entails others: whether the EPA’s failure to reply to the Road Commission’s letter of December 27th amounts to a refusal of the Road Commission, whether that refusal, in turn, crystalized their objections into a veto, and whether EPA vetoes are really “akin” to jurisdictional determinations by the Corps.

Stronger accusations are only being held at bay here. For example, it would be difficult to read the EPA’s failure to reply to the Road Commission’s December 27th letter as a deliberate refusal to reply without accepting the original complaint’s charges of bias and allegations of conspiracy at the EPA, or indulging its witch hunt for “anti-mining” attitudes and its demonizing of “activists.” But even if we are not willing to follow the plaintiff down that dark road, it would also be difficult, now, to overlook the serious dysfunction and administrative incompetence exposed by the Flint Water Crisis, which cost the head of EPA Region 5 her job, and which showed the world just how broken the system of environmental governance is in Michigan.

The Political Project of MCRC v. EPA, 1

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First in a Series

oretrucksAAA

Ore trucks from Lundin Mining’s Eagle Mine make their way down the Triple A road.

No Labels

I’ve just gotten around to reading the complaint filed on July 8th in the U.S. District Court for the Western District of Michigan, Northern Division, by the Marquette County Road Commission against the EPA. The complaint alleges that the EPA’s repeated objections to County Road 595 — that the road will threaten and destroy wetlands, streams and protected wildlife in its way — are “arbitrary and capricious” and in violation of Section 404(J) of the Clean Water Act. The Road Commission asks the court to set aside the EPA’s Final Decision against the building of County Road 595, restore Michigan Department of Environmental Quality’s authority to permit the road, and bar the EPA from further interference in the matter.

While it may take the court some time to decide whether MCRC v. EPA has any legal merit, the complaint is written to serve other ends as well: political objectives. The complaint is aligned with efforts in Michigan, Wisconsin and elsewhere, to ease regulations, subvert the legal authority of the EPA and whip up anger against the federal government; and the plaintiffs appear to be connected, through their attorneys, to one of the most powerful Republican party fundraisers and a network of ultra-wealthy political donors.

The MCRC complaint directs ire against a familiar cadre of enemies — environmental “activists,” overreaching federal bureaucrats and the area’s indigenous community; and it pretends to discover a dark conspiracy, in which these groups meet “surreptitiously,” write “sarcastically” about mining interests, and collude to block economic development. In fact, it’s often hard to decide whether the arguments and evidence assembled in this complaint are meant to serve as legal fodder or support political posturing. So I thought I would try to sort through them in a short series of posts on the CR 595 lawsuit.

There is the tiresome pretense throughout the complaint that CR 595 would serve as something other than a haul route from the Eagle Mine to the Humboldt Mill, and that the road will benefit the public as much as the mining company. While the mining company says it is committed to making do with current infrastructure, the public clearly deserves some relief: trucks hauling ore on a makeshift route from Eagle have already been involved in a few scary accidents, and it remains a question whether cars can safely share the same road, especially an icy winter road, with ore trucks trying to beat the clock. People are understandably concerned, too, about big trucks loaded with sulfide ore barreling through the city of Marquette.

The public has another cause for grievance, and it makes for some angry foot stomping in the complaint: the MCRC spent millions to prepare for EPA reviews of the CR 595 application and failed repeatedly to win approval. Both time and money were wasted, the complaint says, not due to incompetence, stubbornness or denial, but because the EPA was never going to give the Road Commission a fair hearing. It’s in this connection that the complaint tries to lay out an “anti-mining” conspiracy between the EPA and environmental activists and the indigenous community in the Great Lakes Basin, and where the arguments become specious and contorted.

In subsequent posts I’ll address some of the ways MCRC v. EPA constructs this anti-mining strawman in order to mount a political offensive; and throughout this series, I’m going to be asking whether the “anti-mining” label correctly characterizes the evidence brought by the MCRC. I think it’s fair to say from the outset that it does not accurately represent the priorities and commitments of people and groups concerned about the construction of CR 595. It’s reductive, and turns road skeptics into industry opponents. To be against this particular haul road — or hold its planners to the letter of the law — is not necessarily to pit yourself against the entire mining industry.

The anti-mining label deliberately confuses haul-road opposition with opposition to the mining industry in order to coerce people into going along with the haul road or risk losing their livelihood, or at least the jobs and economic prosperity promised when mining projects are pitched. The MCRC complaint goes even further: it conflates mining with economic development — or reduces all economic development in the region to mining — and so runs roughshod over the thoughtful arguments of people like Thomas M. Power, who has studied the ways mining can restrict and quash sustainable economic development.

The anti-mining label fences ordinary people in, distorts and exaggerates their legitimate concerns, and does not recognize that people might come to the CR 595 discussion from all different places. Most don’t arrive as members of some anti-industry coalition; they are fishermen, residents, property owners, teachers, hunters, parents, hikers, snowmobilers, birdwatchers, loggers, parishioners, kayakers, merchants, and so on. Some are many of these things all at once.

The label is fundamentally disrespectful: it refuses to meet people on their own terms and fails to ask what any of the people who oppose CR 595 actually stand for. What do they want for the area? What do they value and love? What do they envision for the future? Where do they have shared interests? Where do they have real differences? How can we work together? The anti-mining label forecloses all those questions. Instead, people are divided. The label demands that everybody take one side or the other (and, as I learned in the course of my work on 1913 Massacre, in the Upper Peninsula that demand has deep historical roots in the labor conflicts of the early twentieth century; but, no worries, in this series of posts I’ll try to stay focused on the present).

I have always had trouble with the idea that “anti-” and “pro-” mining positions should govern the way we talk about the environmental regulation of mining. I myself can easily slip into this way of talking. But as I tried to explain in an exchange on this blog with Dan Blondeau of Eagle Mine, that way of thinking impedes and short-circuits important conversations about the ethics of mining. Playing the anti-mining card reduces the questions of whether and how mining can be done responsibly — in this place, by that company, at this time — to mere pro and contra. It’s a dangerous ruse: instead of identifying risks and addressing responsibilities, it generates social conflict.

The First CEO: A Political Revolution?

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I’ve been associating the cultural icon of the CEO with big changes in America, most of which were well underway in the 1970s, when the acronym “CEO” first comes into wide use: the collapse of manufacturing, the financialization of the economy, the emergence of the neoliberal order. David Graeber offers yet another way to characterize these changes: “total bureaucratization.”

An excerpt from Graeber’s new book in the latest issue of Harpers lands us in familiar territory:

What began to happen in the Seventies, which paved the way for what we see today, was a strategic turn, as the upper echelons of U.S. corporate bureaucracy moved away from workers and toward shareholders. There was a double movement: corporate management became more financialized and the financial sector became more corporatized, with investment banks and hedge funds largely replacing individual investors. As a result, the investor class and the executive class became almost indistinguishable. By the Nineties, lifetime employment, even for white-collar workers, had become a thing of the past. When corporations needed loyalty, they increasingly secured it by paying their employees in stock options.

What Graeber at first characterizes as “a strategic turn” and the merging of the corporate and financial sectors, he then goes on to call “a political revolution”:

At the same time, everyone was encouraged to look at the world through the eyes of an investor — which is one reason why, in the Eighties, newspapers continued laying off their labor reporters, while ordinary TV news reports began featuring stock-quote crawls at the bottom of the screen. By participating in personal-retirement and investment funds, the argument went, everyone would come to own a piece of capitalism. In reality, the magic circle only widened to include higher-paid professionals and corporate bureaucrats. Still, the perceived extension was extremely important. No political revolution (for that’s what this was) can succeed without allies, and bringing along the middle class — and, crucially, convincing them that they had a stake in finance-driven capitalism — was critical.

The parenthetical affirmation — “(for that’s what this was)” — asks us to pause and really take the point. Having read only this excerpt, I don’t know whether Graeber goes on to explain why what he elsewhere calls a “shift” or “turn” counts as a “political revolution,” or how exactly he thinks this overturning of the political order was brought about. No doubt there was fraud, collusion and conspiracy, and “everyone was encouraged” to believe they were included; but the passive verb here leaves way too much unsaid. For one thing, the triumph and establishment of  the new order at home and abroad was really not so bloodless as Graeber (here, at least) makes it out to be.

The celebration and glamorization of the CEO — as a leader, a rule-maker and a rule-breaker, the agent and steward of shareholder value — was one of the things that duped ordinary, middle-class Americans into thinking “they had a stake in finance-driven capitalism.” It deserves a chapter in the story Graeber’s out to tell. The acronym “CEO” itself belongs to what Graeber calls the “peculiar idiom” of “bureaucratic techniques” and meritocratic myths — a language with origins in self-actualization movements of the 1970s, “full of bright, empty terms like ‘vision,’ ‘quality,’ ‘stakeholder,’ ‘leadership,’ ‘excellence,’ ‘innovation,’ ‘strategic goals,’ and ‘best practices.’” It’s good to see this language held up for scrutiny, especially since, as Graeber rightly points out, it still “[engulfs] any meeting where any number of people gather to discuss the allocation of any kind of resources.” To the victors go the spoils, and that’s not likely to change as long as we are speaking their language and playing by their rules.

A Third Note on The First CEO

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In a comment on one of my posts about the rise of the acronym “CEO,” a reader named Hugo reports some early Australian illustrations. I thought I’d lift Hugo’s notes from the comments and share them here, because the examples he’s found all pre-date the 1970 illustration of the acronym from the Harvard Business Review, which up until now I had taken to be the earliest. One dates back to 1914.

Time, again, to notify the dictionaries.

I found some earlier 1968 and 1950 examples in Australian newspapers, where chief executive officers were found at hospitals. I also found a 1917 [sic, but the source is from 1914] from a story about a town hall.
—
The Canberra Times, 27 July 1968, page 22:
[Begin]
Applications are invited for the above positions at the Hillston District Hospital.
…
Applications and enquiries to the undersigned or Matron Fairchild, Box 1, PO, Hillson, NSW, 2675.
R. I. Cross,
C.E.O.
[End]
—
The Sydney Morning Herald, 29 March 1950, page 30:
[Begin]
PARRAMATTA DISTRICT HOSPITAL.
Wanted. Experienced Sister to take
charge of the Out Patient Department
at this hospital.
…
N. B. FILBY,
Secretary and C.E.O.
[End]
—
Independent, 7 November 1914, page 3:
[Begin]
BEHIND THE SCENES
BY A TOWN HALL FLY
…
Of course I am the chief executive officer but I only execute by instructions.
…
“What a pity,” said the M.M., the C.E.O.
…
“Not at all, my dear young lady.” the C.E.O.’s voice was tear laden too.
[End]

Also uses G.H.U. a few times for Great High Understrapper.

I don’t think these earlier Australian instances should invalidate what I’ve said previously about the widespread use of the acronym CEO in the 1970s and 1980s. Those observations concern the use of “CEO” as an important marker of corporate power, social status and cultural celebrity in America, from roughly 1970-2010.

Still, it’s interesting to consider these early examples. The first two are abbreviations used in newspaper advertisements (maybe just to save money) for positions at hospitals, where the CEOs are clearly in charge of correspondence if not of hiring. Nothing too glamorous. [Update: And one reader, in a comment on this post, suggests that CEO in this context may mean “Catholic Education Officer,” adding that at this time in Australia, “nurses and religious orders go together.”]

The illustration from 1914 offers a satirical, behind-the-scenes account of a municipal office thrown into bureaucratic confusion by a report of 24 cows eating all the flowers and shrubs in the park. Underlings and citizens address the Chief Executive Officer by such honorifics as “Your Chief Executiveness” and “Most Magnificent” and, then, “CEO.” It is an empty title; he seems unable to execute anything at all: “Of course I am the chief executive officer,” he insists, “but I only execute by instructions.” When he finally understands the gravity of the situation, he acts: “I will tell somebody to tell somebody else to tell the inspector as soon as he comes in the morning at nine. I’m sure 24 cows won’t eat all the shrubs in that time.” He is very much the Chief, very much an Officer, but not much when it comes to Execution.

Is Respect Really All That Simple?

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Last week, John Ruggie addressed the UN Global Compact Leaders Summit, where a “new global architecture” for corporate sustainability was unveiled and celebrated. Ruggie started out by talking about the special challenges — the “problems without passports” — that the world’s “tightly-coupled” systems present, and the inadequacy of our “largely self-interested politics” to address them. This was not, however, the brief he’d been given, so he had to move on; and I hope he’ll have more to say on the topic in the future. Instead, Ruggie had been asked, he said, “to say a word about respect,” and — not surprisingly — he took the opportunity to talk about the UN Guiding Principles on Business and Human Rights, and how the framework helps companies meet their obligations to respect human rights.

I have been asked to say a word about respect, specifically about respecting human
rights. Its meaning is simple: treat people with dignity, be they workers, communities in which you operate, or other stakeholders. But while the meaning is simple, mere declarations of respect by business no longer suffice: companies must have systems in place to know and show that they respect rights. This is where the UN Guiding Principles on Business and Human Rights come in. [pdf.]

Fair enough, but I found myself pausing here, and wondering whether the meaning of “respect” is really so simple as Ruggie makes it out to be, or at least whether “treat people with dignity” is sufficient guidance.

I understand that Ruggie’s intention here is largely rhetorical: we all know what respect means, but we need more than fine words, declarations and definitions. We need practical and consistent ways of acknowledging, checking and demonstrating human rights commitments — “systems” like the UN Guiding Principles.

Still, there are good reasons to start unpacking — and challenging — this simple definition, if only to ward off misconceptions.

First, to say that “[to] respect” human rights means “[to] treat people with dignity” (and leave it at that) invites confusion, because it passes the semantic buck from respect to dignity. If we are to treat people “with dignity” — if that’s our definition of respect — then we had better have a good working definition of dignity to govern or temper our treatment of others.

Of course, the word “dignity” is a staple of human rights discourse, so we’ve got to make allowances for shorthand here. If we don’t — if we want to take the long route and spell things out — we will most likely find our way back to Kant’s moral theory. I’m not going to attempt a summary here except to say that for Kant, dignity imposes absolute and non-negotiable constraints on our treatment of other people. Our dignity derives from our moral stature as free, rational and autonomous agents — ends in ourselves — and cannot be discussed in terms of relative value (or usefulness, or any other relative terms). It must be respected: in other words, dignity imposes strict and inviolable limits, absolute constraints, on how we treat others and how others treat us.

Most obviously people may not be treated merely as means to our ends; and that caveat is especially important when it comes to business, where, for starters, people are valued and evaluated as priced labor or “talent,” in terms of services of they perform or as “human resources.” To respect the dignity of people — “be they workers, communities in which you operate, or other stakeholders” — is to recognize them as persons (or ends in themselves) and not just mere functions in an efficiency equation.

This is hasty pudding, but suffice it to say that in the Kantian idea of dignity there is the suggestion that respect follows from our recognition of others as persons: this is an idea suggested by the word “respect” itself, which comes from the Latin respicere, to look back, to give a second look. Every person deserves a second look — or I should say, demands it. Recognition is something we demand of others and others demand of us.

I like to put it this way: respect is always the first, and sometimes the only thing we ask of each other. How we respond to this demand will depend in all cases upon whether we understand that our dignity as persons makes us mutually accountable or answerable to each other in the first place. So before we can talk about how we “treat” others — before we jump, with Ruggie, to considerations of behavior — let’s take a couple of steps back, and make sure that when we talk about respect we are also talking about recognition as well as accountability.

Of course all of this may be implied in Ruggie’s definition, and I wonder if recognition and accountability are just other ways of saying that companies must “know and show” that they respect human rights. My concern is that when you gather business leaders at the UN and tell them that to respect human rights is to treat people with dignity, you may leave them with the mistaken impression that dignity is something they have the power to confer on others, rather than something that makes them answerable to others. Dignity is not something the mighty can grant or deny the meek, and respect is not another word for benevolent gestures companies might make toward communities, workers and other stakeholders. Where people stand, business must yield.

God and Mr. Dimon

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While protestors at the JP Morgan Chase annual shareholders meeting in Columbus, Ohio braved the rain and faced off with police, inside the McCoy Center there was a remarkable exchange.

“As a person of faith, my God believes you shouldn’t take advantage of people when they are down,” said Dawn Dannenbring, of the community group Illinois People’s Action, addressing CEO Jamie Dimon. “Do you believe in the same God I believe in?”
Dimon answered: “That’s a hard one to answer.”

Of course, whether Jamie Dimon believes in a merciful God is a matter for him to decide and settle with his own conscience. Whether he believes in the same merciful God Dawn Dannenbring believes in is probably impossible to answer, or would, at least, require an extended theological discussion. And neither Dimon nor Dannenbring seemed ready to have that conversation. The JP Morgan Chase CEO obviously wanted to get on with the business of the shareholder meeting. And Dannenbring was less interested in knowing the secrets of Mr. Dimon’s heart than in playing Portia to his Shylock and shaming him.

Dannenbring’s motives aside, her question echoed other recent criticism of Mr. Dimon. On the blog Credit Slips, Adam Levitin attacked Dimon a couple of weeks ago for having no concept of mercy after Dimon said, in an exchange with CNBC’s Maria Bartiromo, that some people find themselves in better financial circumstances after foreclosure, and that, moreover, foreclosure is a form of debt relief: “Giving debt relief to people that really need it, that’s what foreclosure is.” Levitin was baffled:

For real?… “Debt relief” requires a forgiveness of debt. It’s a gift, not an exchange. There’s no quid pro quo….I can’t fathom how Dimon conceives of foreclosure as an act of mercy.

Over at Naked Capitalism, Yves Smith picked up on Levitin’s criticism: “the Dimon moral calculus is fascinating. If foreclosures are kind, is it even kinder to restore debtors’ prisons? After all, those people who lose their homes would be assured of getting shelter.” If today’s bankers believe in God, Smith says, they must believe in the angry God of the Old Testament, the same God who strips Job of his possessions and reduces him to sackcloth and ashes.

That Jamie Dimon is now being put in the company of Goldman’s Lloyd Blankfein and other tight-fisted ministers of vengeance is all the more remarkable because Dimon is regularly held up in management literature (like this Introduction to Leadership[pdf]) and in the business press as an example of great leadership.

“Outspoken, profane, fearless,” as one CNN Money profile describes him, Dimon is regularly praised for having steered JP Morgan Chase away from the subprime crisis, exiting the business of securitizing subprime mortgages at the height of the boom and forgoing both Structured Investment Vehicles and Collateralized Debt Obligations, or CDOs. Notably, neither New York Attorney General Eric Scheiderman nor Senator Carl Levin, who are independently investigating criminal wrongdoing in the subprime crisis, have named Dimon or JP Morgan Chase as a target of their investigations. Even Matt Taibbi has focused his pieces for Rolling Stone on Goldman, not JP Morgan Chase.

For some, no doubt, it is a question of degree: while certain CEOs led their banks into criminal activity, others offered little relief to those caught up in the mortgage crisis. Perhaps both are to blame, and thanks to Levin and Schneiderman at least some of the criminals will now face justice.

But rather than expect the CEO of a global bank to forgive debts, or bear witness to his faith in a merciful God, I would prefer to know what constructive steps, if any, the banks are taking now to help the American middle class regain its footing and rebuild trust – not necessarily in God, but in the everyday workings of the American economy.

In other words, why ask for mercy when you can demand responsibility? I wish Maria Bartiromo would press Mr. Dimon in their next interview to talk specifically to this point, and to articulate clearly the obligations his company has, and the steps his bank will take, to help restore — what else to call it? — the common wealth. The exchange might be one for the leadership books.

From Zero to 32.73 at Bank of America

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First, a correction. In my last post about the 2011 proxy season, I wrote that shareholder resolutions requiring disclosure of grassroots political spending brought by AFSCME to Prudential and Bank of America had met with zero support. That is incorrect.

ProxyMonitor reported the zero vote tally because the votes had not yet been cast. The two AFSCME proposals regarding grassroots lobbying were listed on ProxyMonitor with other, fully tallied 2011 results, including one AFSCME proposal to IBM that received nearly 30 percent support; and I wrongly assumed that that meant the Prudential and BofA proposals had already been voted on. Instead, ProxyMonitor included them simply to show – I guess — that they had been filed and were on the docket. At the time I wrote my last post, zero results had been reported, because the shareholder meetings hadn’t yet been held.

Serves me right for relying solely on the numbers in the “Votes” column on the database. Common sense would dictate that with AFSCME in the room a tally of zero would have been unlikely, unless (as I thought) some agreement to table the proposal had been reached before the meeting; and I should have checked the reported data against other news stories and the companies’ own sites. It’s a little odd that ProxyMonitor indicates a pending vote by reporting a tally of zero, and I’ve written to the Manhattan Institute asking about this point. But now I understand that the ProxyMonitor database is not strictly historical, and that should be taken into account when looking at emerging trends or patterns in 2011.

In any case, votes on those resolutions have now been cast, and the site has been updated with the results.

The proposal to Prudential won a modest 8.03 percent of the vote — no big surprise there.

The proposal to Bank of America – which held its shareholder meeting on Wednesday of last week, amid protests over its mortgage and foreclosure practices — was another matter altogether. 32.73 percent of BofA shareholders voted in favor of grassroots lobbying disclosures. That is well past the conservative 30 percent threshold set by Ernst & Young. BofA’s board of directors can’t put off this issue much longer.

This outcome is in keeping with the trend toward political disclosure I’ve discussed previously, with shareholders pressuring companies to report on where they spend their lobbying dollars, and lobbying now considered part of a company’s risk profile. The question is what Bank of America’s board will do about it: will they show leadership, or try to hide out for another year?

It’s unlikely they will do all that the proposal requires. AFSCME asked Bank of America to provide an annually updated report disclosing 1) policies around lobbying contributions and expenditures; 2) payments, “both direct and indirect, including payments to trade associations, used for direct lobbying and grassroots communications.” The kicker was a third request, requiring the bank 3) to identify — for each payment — the person who decided to make the lobbying expenditure and those who participated in the decision to make payments to grassroots lobbying campaigns. Now that sounds like accountability.

John Keenan, the champion of the proposal and a strategic analyst for AFSCME, seems braced for a long tough slog. “We have concerns over our company’s sincerity when it comes to commitment to transparency and accountability,” he said in his remarks at the shareholders’ meeting [Keenan’s remarks start at around 1:29 in this webcast]. Keenan noted that “last year, BofA agreed to disclose its political contributions on its website, including accounting for political contributions made by the Bank’s PACs,” but the reporting was so “anemic” that the “company and the board should be embarrassed by this weak effort.” The bank pointed interested parties to a federal database and left them to figure it out for themselves.

And though Keenan and others were able to determine that BofA “spent about 7.4 million in 2009 and in 2010 on Federal lobbying activities,” he noted “incomplete disclosure at the state level as state lobbying disclosure is not comprehensively required by law.” Keenan and his colleagues were able only to paint a “partial picture,” which showed BofA spending “more than 2.3 million” in 17 states. As for the rest? Even Bank of America itself may not have the whole picture.

It gets murkier. As I noted in a previous post, the area where it is most difficult to document these expenditures is in contributions to industry trade associations. Keenan cited an April 23, 2011 article in the LA Times documenting “a parallel, opaque system of political giving” in which the leading, politically active trade associations – the U.S. Chamber of Commerce chief among them – “took in more than $1.3 billion, more than the state of Vermont collected in taxes. These groups, in turn, spent some $500 million on lobbying and other political activity such as television advertising.”

How deep this goes is anybody’s guess. The LA Times report found that “substantial corporate political spending remains in the dark, leading to an incomplete, and at times misleading, picture of companies’ efforts to influence legislation and elections.” Keenan began to make the same point at the BofA shareholders’ meeting, but a testy and “impatient” CEO Brian Moynihan interrupted him repeatedly, told Keenan that his time was up, and then, finally, just cut him off.

In the wake of Citizens United, Keenan and others like him are trying to do what Congress has so far failed to do. We probably should not expect the appointed guardians of our republic to step up anytime soon. The news in mid-April that President Obama had drafted an executive order requiring disclosure of political spending — including contributions to third parties — from companies contracting with the federal government met with immediate denunciations from Republicans, who complained about Orwellian oversight and muttered things about the First Amendment. They did not offer a better proposal. Nor did the Democrats. In fact, just last week, The Hill reported, a growing number of Democrats repeated the Republican criticisms of the President’s executive order, and urged the administration to drop the plan, for fear that it might “politicize” the Federal contracting process.

To keep politics out of business, they oppose any measure to keep business out of politics.

Citizen Investors and Citizens United

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Home Depot’s Spring 2011 proxy report will include a proposal seeking shareholders’ say on political spending done by the corporation. This proposal is the first of its kind. Chances are it will not be the last.

If shareholders approve the resolution, where and how Home Depot funnels money into the political process and influences elections will be subject to shareholder approval.

Home Depot did not exactly welcome this development. According to documents filed with the SEC[pdf], the company resisted the proposal, arguing that such a resolution would impinge upon and restrict “ordinary business of the company.”

More specifically, Home Depot took three legal tacks, all involving various clauses of SEC rule 14a-8, governing proposals of security holders. First, they invoked SEC rule 14a-8(i)(3), “that the proposal is [too] inherently vague or indefinite…to determine with any reasonable certainty exactly what actions or measures the proposal requires.” Second, they tried rule 14a-8(i)(7), that the proposal seeks “to micromanage the company.” Last, they tried invoking rule 14a-8(i)(10), “that Home Depot has substantially implemented the proposal.”

These are hardly original arguments – we don’t know what you’re asking, you’re trying to tie our hands, we’re already doing this — and they did not carry the day. Writing on behalf of the SEC, Attorney Bryan J. Pitko found all three arguments to be without merit.

“In ruling in favor of allowing the proposal,” writes Sanford Lewis, an attorney who defended the proposal on behalf of Northstar Asset Management, “the [SEC] has essentially determined that after Citizens United, corporate political spending is a significant social policy issue and shareholders can seek to have input on management’s decisions.”

How this will all turn out remains uncertain. As Lewis admits, “a majority of institutional investors typically support whatever the management of a company thinks is appropriate.” But in the absence of any new law restraining corporate speech, “citizen investors” like those Lewis represents may be able take back some of the ground that was lost – or given away by the courts — in Citizens United.

3 Big Reasons Why Boards (Say They) Don’t Back Human Rights Proposals

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Last week the Manhattan Institute launched ProxyMonitor, a site tracking shareholder proposals submitted to publicly traded companies via the annual proxy process. Right now, the site is limited to proposals made to Fortune 100 companies. Data goes back three years, to 2008. The site already offers some great features, including links to SEC filings around each proposal as well as the ability to filter and sort search results and export them to Excel.

People who have read my blog posts about business and society won’t be surprised that I went immediately to the “Social Policy” filter, which turns up 266 results.

Of these, thirty are human rights proposals made to the boards of twenty-one corporations: Abbot Laboratories, Archer Daniels Midland, Bank of America, Boeing, Caterpillar, Chevron, Cisco, Citigroup, Coca-Cola, E. I. du Pont de Nemours, Google, Honeywell International, IBM, JPMorgan Chase, Microsoft, Morgan Stanley, Motorola, News Corp, Philip Morris, United Technologies and Wells Fargo.

I’ve been sorting through those 30 proxy proposals, to see what they say about the way shareholder proponents and Boards of Directors deal with proposals around human rights.

It’s a fairly narrow range of investors putting forward these resolutions, and I wonder if this limits their chances of success. Proponents include churches and religious orders — the Sisters of Charity of St. Elizabeth, the Domestic and Foreign Mission of the Episcopal Church, the Province of St. Joseph of the Capuchin Order and the Presbyterian Church — as well as socially responsible investment funds: Christian Brothers Investment Services (who invest for Catholic institutions) and New Covenant (dedicated to advancing the Presbyterian mission through investment) along with independent, socially conscious investment firm Trillium Asset Management. Among the thirty proposals is one from Amnesty International; a handful of individual investors submit their own proposals. So far, no big surprises. The only standout entry in the list of human rights proponents is the New York City Comptroller’s Office, shareholders in Archer Daniels Midland.

It’s no surprise, either, that shareholder support for these proposals is usually weak, ranging from around 3-8 percent. There are a few notable exceptions. The NYC Comptroller’s Office proposal to ADM — requesting “that the company commit itself to the implementation of a code of conduct based on…ILO human rights standards and United Nations’ Norms…by its international suppliers and in its own international production facilities” — garnered 20 percent and 25 percent of the vote in 2008 and 2009 respectively. A 2010 proposal would have required Caterpillar to “review and amend, where applicable, Caterpillar’s policies related to human rights” and to post “a summary of this review…on Caterpillar’s website by October 2010”; that gained 20 percent support. And a proposal put forward by Chevron shareholders — that the Board “adopt a comprehensive, transparent, verifiable human rights policy and report to shareholders on the plan for implementation by October 2008” – won almost 28 percent support.

Why these proposals fared so much better than others is a question for another day. Why they didn’t ultimately succeed merits discussion as well. Despite impressive levels of support, they met with the same objections as all the other human rights resolutions in the ProxyMonitor database.

Why do Boards of Directors oppose these resolutions and recommend that shareholders vote against them? Or, at least, why do they say they can’t get behind human rights resolutions? What reasons do they offer?

Board opposition falls roughly into three categories.

First, the proposals are opposed because they are restrictive. The argument here is that the proposal would limit the company’s autonomy and blanket policies will hamper the company’s ability to operate. As JPMorgan Chase notes in its response to a 2008 human rights proposal, these matters are “complex” and “fact-specific,” so they need to be taken on a case-by-case basis. Good judgment deals in particulars, without having to check each call against abstract measures; and since “opportunities for engagement” on these issues “vary greatly,” blanket policies might prevent the company from responding to a particular case in an appropriate way; and they might also hinder the company from pursuing “objectives and policies” they are charged with.

Second, they are opposed because they are burdensome. Putting human rights proposals into practice can be expensive, and it can place other burdens on company resources. Some companies make it sound as if they would simply be overwhelmed. This argument is taken to an absurd extreme by Wells Fargo in a 2008 filing.

Proponents were moved by the example of Sudan to put forward a resolution to “authorize and prepare a report to shareowners which discusses how our investment policies address or could address human rights issues.” The report was to specify “appropriate policies and procedures to apply when a company in which we are invested, or its subsidiaries or affiliates, is identified as contributing to human rights violations through their businesses or operations in a country with a clear pattern of mass atrocities or genocide.” Wells Fargo took refuge in its position as “a diversified financial services company”:

we invest on behalf of clients and customers in thousands of domestic and foreign companies, many with complex and far-reaching global operations. The effort required to screen thousands of individual companies, as the Proponents would seem to advocate, would be a task of tremendous scope requiring in-depth research and detailed evaluations of the nature and extent of each company’s global operations. We simply do not have appropriate resources or access to adequate and accurate information to make informed judgments on these complex issues.

So the argument that won the day came down to this: Wells Fargo can’t really track its own investments. The world is just too complex. Unable to do the research required to clarify its positions in “thousands of individual companies” and to make “informed judgments,” Wells Fargo simply can’t account for all the places it puts its clients’ money. This is not exactly reassuring. Still, the argument seems to have served its intended purpose. The proposal only received 6.81 percent support.

The third and by far the most common objection to human rights proposals is simply that the resolution is unnecessary or redundant. We see this argument made again and again in the SEC filings: the company already has a human rights framework or a code of conduct in place; the proposal, as one Chevron filing says, would “merely duplicate…current efforts” – an “unnecessary and inefficient use” of company resources.

Chevron has The Chevron Way. Caterpillar has its Worldwide Code of Conduct. ADM “believes that our company’s Business Code of Conduct and Ethics and our existing business practices address the substantive areas covered by the proposal.” Coke and Motorola say that when it comes to human rights, they already have it covered. Microsoft “continues to take steps we believe are appropriate” in the area of human rights and requires no additional prodding or cajoling. Citigroup has “implemented best practices regarding human rights,” so “a report concerning the company’s investment policies with respect to human rights issues would provide no meaningful benefit” to shareholders.

So much for scrutiny. In nearly every response to human rights resolutions, we are asked to believe that the company’s good faith, code of conduct and current efforts will be sufficient. Over and over again, companies assert against human rights proponents that they are perfectly capable of monitoring themselves and governing their own behavior. They have already incorporated existing human rights frameworks, such as the non-binding UN/Ruggie framework, into their deliberations, or developed their own codes of conduct with reference to those frameworks. Additional human rights reporting would be meaningless and probably just interfere with business operations. What could a report possibly turn up, these companies ask, that we ourselves have not already seen?

Call it arrogance, but these Fortune 100 companies are now confidently asserting their own human rights competence. They refuse to be held accountable because in their own estimation they are already socially responsible.

Doing Business With Bad Regimes: Vodafone in Egypt

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Last Friday, Access Now put out a link to a petition urging Vodafone, Orange and all ISPs and mobile operators in Egypt to “get Egypt back online.”

We call on you to immediately open the Egyptian telecommunications networks. We ask that you stand firm against the Egyptian government and allow the people, and your customers, to communicate freely and openly at this vital time.

On the face of it, putting pressure on ISPs and telecoms companies operating in Egypt seems to make good sense. One might assume that appealing to Western companies might be more effective than putting pressure on Mubarak, which is what President Obama tried to do last week when he urged the Egyptian government “to reverse the actions that they’ve taken to interfere with access to the Internet, to cell phone service, and to social networks that do so much to connect people in the 21st Century.” (The President failed to persuade Mubarak, but inspired Steve Denning to float the idea in a column on Forbes.com that Internet access may be “a basic human right.”)

It’s unclear, however, how much the ISPs and mobile telephone companies operating in Egypt can do. On Saturday, for example, Vodafone Egypt announced that they had resumed services but expected further interruptions, and they explained their decision to take the network down as a pre-emptive move:

Statement – Vodafone Egypt
Saturday 29 January 2011. Vodafone restored voice services to our customers in Egypt this morning, as soon as we were able.
We would like to make it clear that the authorities in Egypt have the technical capability to close our network, and if they had done so it would have taken much longer to restore services to our customers.
It has been clear to us that there were no legal or practical options open to Vodafone, or any of the mobile operators in Egypt, but to comply with the demands of the authorities.
Moreover, our other priority is the safety of our employees and any actions we take in Egypt will be judged in light of their continuing wellbeing [sic].

Salil Tripathi at the Institute for Human Rights and Business takes issue with this official statement, saying that Vodafone could have done more before “instantly” complying. Why didn’t they “push for answers” by asking the Egyptian state to provide instructions in writing and explain its rationale? Why didn’t they more forcefully argue the case for keeping service uninterrupted? At the very least, he says, they should have warned their Egyptian customers before shutting down.

These recommendations would seem sensible enough, but for the fact that the Egyptian authorities, according to Vodafone, have the “technical capability” to shut down the mobile network. (I am unclear why it would be even more difficult for Vodafone to restores service after a government shutdown, but I imagine it has to do with the fact that a government shutdown would not exactly proceed in a careful and methodical way.) If this is true, and Vodafone is not just taking refuge in technical hocus pocus, then no amount of protesting or arguing or pushing for answers would really matter, when push came to shove. It’s easy to imagine that defying the Mubarak government, refusing to comply, or delaying would put Vodafone employees at risk. Affiliation with a Western company is no guarantee of safety or immunity; consider the fate of Google’s @Ghonim.

John Morrison, Executive Director of the London-based Institute, followed up on Tripathi’s remarks with a letter to the Financial Times in which he pointed out that Vodafone’s “dilemma could hardly have been unexpected,” and telecoms and ISPs should exercise due diligence before doing business in a place like Egypt (or China, Iran or Sudan). “The clash between local law, albeit that of an authoritarian regime, and international law will be a key theme for the information and communication technologies sector for years to come,” he writes.

These companies will need to exercise comprehensive human rights due diligence before signing contracts with the governments or joint venture arrangements with national companies. The risks need to be managed as effectively as possible in the wording of the contracts themselves, something that is rarely the case at the moment. Without such action by the industry, some will say that UK or European Union law should be amended to require them to do so.

It is not too much to ask a company wishing to do business with an authoritarian regime to balance concerns about human rights and international law with its business interest. But that balance may be very difficult to strike, and due diligence should also take into account the crucial role mobile telephony and information technology have already played in opening closed societies.

Let’s say, for example, that Vodafone did human rights due diligence before signing a contract with the Egyptian government, and decided that the risks were too great – or that it could not include meaningful human rights agreements in its contract with the Egyptian government. Would it then have been better for the company to decide not to do business in Egypt? Would Egyptians really be better off today if Western mobile operators had decided, long before the events of January 25th, that it was just too risky, or too difficult, to do business in Egypt?

To ask the question is not to apologize for Vodafone. But it is worth asking what sorts of compromises are acceptable, especially since mobile telephony and mobile-based services like SayNowhave stepped into the breach now that Egyptian ISPs are offline, allowing Egyptians to communicate – albeit not without interruption – with each other and with the outside world.