Tag Archives: Citizens United

Three Reasons Why the Election is Running on Empty

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It’s fitting that a freakish storm (or fears of a freakish storm) should interrupt a presidential campaign that has shied away from discussing climate change. As the New York Times noted after last week’s third and final debate, neither candidate broached the subject in the course of the debates; nor did the vice-presidential candidates or moderators or the model citizens in the made-for-TV town hall.

Those who fear some conspiracy of silence on this issue, or think our candidates are cowards only when it comes to climate change, should be reminded that on nearly every issue before the country, the 2012 campaign has been almost entirely devoid of substance. Both sides have offered nothing more than zingers, soundbyte-sized bromides and unprincipled pandering.

You know things have gotten really bad when the TV pundits – who trade in platitudes and talking points – start complaining about the lack of substance in the campaign. That’s starting to happen, at least in the pseudo-serious world of public television. Last Friday on Newshour, Judy Woodruff asked Mark Shields and David Brooks why they thought the campaigns had been so lacking in real substance and so unwilling to engage on the issues. Neither correspondent gave the most obvious response – which is that this hollowing out is inevitable when you conduct politics on TV.

Instead, David Brooks fixed the blame squarely on the “consultants,” who have “taken over,” he said. This wasn’t much of answer, but – since this was TV – it sufficed; the segment was soon over and the discussion closed. Brooks could have easily implicated people like himself, the press and the punditry. He also could have added that what most of these consultants do, in one way or another, is package the candidates for TV audiences and attention spans.

At the very least, Brooks failed to go far enough. Consultants aren’t the only ones to blame. Off the top of my head I can name at least three other reasons why this election is running on empty.

First and above all, Citizens United: this is the first election held after the Supreme Court ruled, in 2010, that unions and corporations could spend without restriction in political campaigns, because they were entitled to the same free speech considerations as human persons. The consultants are simply following the money. So far, the glut of ads – someone the other day estimated that it would take 80 days to watch all the ads currently airing on TV in Ohio – has made even the candidates wince. The ads are superficial and offensive to anyone with a modicum of intelligence because they are always a ruse: they make up a cover story so that big money can pursue its aims through the electoral process.

Second, we’ve had no meaningful participation by third party candidates in the political process or the presidential debates. The two-party show airs without interruption and without challenge. This partly has to do with the control exercised over the debates by the Presidential Debate Commission, which produces the debates for TV. Run by lobbyists and sponsored by major corporations, the Commission approves questions, debate topics and moderators, and disapproves of outsiders who want something other than Coke or Pepsi, Red or Blue, Obamney or Romama. As Jill Stein (who is suing the Commission for keeping her out in 2012) remarked when she was arrested outside the debates: “It was painful but symbolic to be handcuffed for all those hours, because that’s what the Commission on Presidential Debates has essentially done to American democracy.”

Third and finally I would point to the deliberate, regular and daily conflation of the election with the popular vote. This helps perpetuate the illusion of a tight race and distorts people’s choices. It also makes the election a choice between candidates rather than an opportunity to talk about issues on a local, state and national level. The emphasis ought to be on the issues people bring to the election – which is where democratic elections begin – and not exclusively on the candidates or even their platforms. Polling focuses on how people feel about the candidates from one day to the next instead of providing data and insight about changing attitudes toward the enduring and emerging questions we, as a people, face. Who’s going to win? is the last question we should be asking ourselves in an election year. Or in any year. And it only gets worse the closer we get to election day.

The list could go on. But when all is said and done, the consultants and the pundits and the pollsters aren’t really to blame: we are. That may not be something you can say on TV, but if there’s a real battleground this election year, or in any year, it’s American democracy itself. It’s something we have to fight for and claim for ourselves and for every citizen, against politicians, powerful forces and against all odds. That’s not just highfalutin talk. Ben Franklin was right: we will have a republic, if we can keep it. I wonder if we can. I know the consultants have taken over only to the extent that we have surrendered.

Bank of America Shareholder Meeting – A Failure

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The Bank of America Board of Directors was on the defensive yesterday. There were protestors gathered outside the annual general meeting; security was high; inside, the mood was testy. In his opening remarks, Chairman of the Board Chad Holliday flubbed an announcement about question and answer time, prompting a shareholder to interrupt the preliminaries; and when Q & A on shareholder resolutions began in earnest, CEO Brian Moynihan stuck to terse, one-sentence, boilerplate answers to most questions, until one stockholder stood up and asked for “more nuance and explanation” and “a more thoughtful response” to the owners’ questions. General applause ensued, but the dialogue did not really improve. In that respect, the meeting felt like a lost opportunity: the Board simply refused to engage.

There were six shareholder resolutions but (as the Q & A revealed) really just three big issues on shareholders’ minds: executive compensation, predatory mortgage and lending practices, and political contributions.

One shareholder seemed to sum up the feelings of many in the room when he said that “it’s a comedy” to be a Bank of America shareholder, given the gap between the stock’s performance and the compensation of its executives. Several people directly asked Brian Moynihan to forgo (or, as one shareholder put it, “deny”) his raise for the coming year. This came to a head in an exchange with one shareholder, who said that the issue really came down to where Moynihan’s “heart” is. “Do you love your neighbor as yourself? Are you going to turn down your raise?” Like a boy at his catechism, Moynihan parsed the question and said that he had been raised to love his neighbor as he loves himself (how could he say otherwise?), but when it comes to turning down his raise the answer is simply “no”; and then he repeated a few prepared phrases about how his own compensation is “aligned” with the Bank’s strategic goals. That was his gospel.

Still, shareholders urged the bank to consider the “injustice” in the world, and Bank of America’s part in it. Activist shareholder Dawn Dannenbring (whose appearance at a JP Morgan shareholder meeting I blogged about here) asked the Board to think about why they need to have heightened security at their shareholder meetings: “If you were a better corporate neighbor,” she remarked, “you wouldn’t have to be so scared.” To charges that it had “decimated” the communities where it did business, the Bank responded with a bland assertion: “the success of communities is equal to our success”; at one point Moynihan even muttered the phrase “good for America,” but it sounded as if he had never really warmed to that talking point, and his voice trailed off.

Some tried to appeal to the bank’s business sense: if Bank of America is seen “not as part of the solution but as causing the problem,” it runs a “reputational risk.” That’s putting it mildly. Others were not so restrained: “You’ve got to stop foreclosing on families,” exclaimed one shareholder; and a number of people rose during the Q & A and told their own stories about how the bank – their bank – had ruined them. Moynihan was patient and even compassionate with these share-owning customers, and told them they could talk to a B of A “teammate” on the spot, that very day, about their problems. But the crowd was repeatedly reminded that these individual cases – their own cases or the cases of family and friends – did not bear on the proposals they had assembled to vote on. This was a myopic response at best, as if behind each of these proposals there were not thousands, hundreds of thousands, millions of individual stories that need to be told, and that make up the big picture of the bank’s role in America.

While the bank is reluctant to open a dialogue on its role in society, it is aggressive in its bid for political power and social influence. And in the wake of Citizens United, the battle lines around political spending are being drawn. A proposal to prohibit all political spending from the corporate treasury – which I wrote about in a previous post — received just 4 percent of the vote, but the resolution still counts as an important first step. Another political spending proposal, requiring Bank of America to disclose all grassroots lobbying, fared much better, garnering about 30 percent of the vote (right around the 32.73 percent it gained last year).

Calls for disclosure of political spending are getting harder to ignore. And though prohibitions and other checks on spending still face an uphill battle, the resolution to stop political spending at least gave shareholders a chance to say a few words about the risks and uncertain outcomes of profligate political spending. Shareholders cited research (by Hadani and others) to support their position; but it is hard to say whether this made any impression whatsoever on the Board. If so, they weren’t going to let it show. They just seemed to want to get the whole thing over with. They had not come to deliberate, or listen or learn. They had come to defend. And that is why the 2012 Bank of America shareholders’ annual meeting should be reckoned a failure.

The Delta Response to Gamma Rats and Sociopaths

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Doug Casey may not believe, along with Margaret Thatcher, that there’s no such thing as society, but he seems to have given up on ours. An investor and a self-styled libertarian, Casey thinks the country is done: “All the institutions that made America exceptional – including a belief in capitalism, individualism, self-reliance and the restraints of the Constitution – are now only historical artifacts,” he wrote in a post this past week. The “moral rot” runs so deep, Casey argues, that there is no fixing the institutions; the rot has become institutionalized.

How did things get so bad? Casey has a simple answer, one that doesn’t require much reading of history or economic analysis: sociopaths. Sociopaths “are now fully in control of major American institutions. Their beliefs and attitudes are insinuated throughout the economic, political, intellectual and psychological/spiritual fabric of the US.” These “really bad actors” – Casey estimates that they make up about 4 percent of the population –“are drawn to government and other positions where they can work their will on other people and, because they’re enthusiastic about government, they rise to leadership positions. They remake the culture of the organizations they run in their own image.”

Casey is hardly the first to claim that sociopaths have taken over. The movie The Corporation popularized the trope. If in the wake of Citizens United corporations are persons, then (runs the argument) they are the kind who belong in a straitjacket. Since then, and especially since things went bust in 2008, it’s become popular to characterize CEOs and Wall Street investors as sociopaths; it borders on cliché. Casey’s simply transferred the argument to government: no surprise, really, that it is as dysfunctional and destructive as the other centers of power in twenty-first century America.

Casey recommends flight over fight. He argues that it makes better sense than ever to become an International Man (the initial caps are his: the International Man appears to have achieved an iconic status in his mind), and find a safe haven to keep one’s assets and one’s life out of the reach of the sociopaths. Casey sees this flight from society not as the act of a misanthrope, but a “gamma rat”:

You may recall the ethologist’s characterization of the social interaction of rats as being between a few alpha rats and many beta rats, the alpha rats being dominant and the beta rats submissive. In addition, a small percentage are gamma rats that stake out prime territory and mates, like the alphas, but are not interested in dominating the betas. The people most inclined to leave for the wide world outside and seek fortune elsewhere are typically gamma personalities.

I have to admit that the fantasy of becoming an International Man holds its attractions – a hoard of wealth, prime real estate, the finest mates (check their teeth and gums, just to make sure). But it is, ultimately, a fantasy of power and control that betrays a feeling of powerlessness and a loss of control.  The International Man would have us believe that he is a refugee, fleeing persecution, but he doesn’t ask for pity or succor; he demands privilege and exemption from all that is common.

He is shrewd and selfish, not heroic. Odysseus, arguably the first international man, was wily, but he suffered heroically because he longed for home. The gamma cannot be nostalgic; home is where he finds or makes his fortune, until the taxman catches up. He fancies himself a hobo or tramp, but he has investment assets, property and multiple passports. He wants to own but not owe – not nothing to nobody, nohow. He accumulates wealth but, it would seem, cares nothing for common wealth; that may make him rich, but it also makes him the enemy of prosperity.

If the International Man is iconic, he would appear to be an icon of idiocy, in the classical sense of that word. Arendt puts it this way in The Human Condition: “a life spent in the privacy of ‘one’s own’ ([in Greek,] idion), outside the world of the common, is ‘idiotic’ by definition.”

What else should we call a person who sees bad actors taking control, institutions failing, society collapsing, and decides to get out while he still can? What would be his motto? Ask not what you can do for your country, but what you can grab for yourself?

More importantly, what would it take to go beyond gamma – to delta, let’s say, where you can apply yourself to meaningful work, and to building the next society?

The delta understands social collapse and institutional failure not simply as a crisis, but as an opportunity to create something new. The delta wards off doom by doing humble work, tinkering, fixing and reclaiming. As I conceive it, delta is all about tikkun — doing the difficult work of “world repair,” not throwing one’s hands up in despair. It takes imagination. Poets, painters and teachers can be deltas; they give us new models to work with. So can inventors and entrepreneurs. In fact, I would put social entrepreneurs and socially responsible investors at the forefront of the delta group. And delta is on the rise: B-corporations, which work to produce public benefits, have won legitimacy in seven states; legislation in pending in seven others.

Deltas work at a remove from the dysfunctional centers of power, on the edges of organizations, independently and within small groups, where they can experiment and learn from each other. The delta looks for alternatives to the destructive power dynamics of the alphas and the betas – flatter organizations, fair dealing, transparency and collaboration. If the gamma is entirely self-directed, even to the point of idiocy, the delta is other-directed, altruistic, a maker of community. Deltas stay networked, because they recognize the limits of the self, and know that our lives and our liberty take on meaning only with and in relation to others, no matter how much we may fantasize about going it alone.

Can CEOs Ever Get The Political Fix They Need?

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There have recently been plenty of shareholder proposals asking companies to disclose political spending. In fact (as noted in an earlier post), the share of proposals to the Fortune 100 focusing on political spending increased 84 percent in 2011 from the three previous years. Last week, to mark the second anniversary of the Citizens United decision (on January 17th), Trillium Asset Management and Green Century Funds took things up a notch.

Urging “corporate leaders to heed the call of shareholders and citizens,” the two social investment firms filed shareholder resolutions at Bank of America, 3M, and Target Corporation asking those companies to stop political spending altogether. This was the first time institutional shareholders have formally asked corporations to refrain from political spending.

The chances of these resolutions winning approval are slim to none, of course – at least right now. The hope is that over time support will build around these proposals, until they reach a threshold where boards of directors can no longer ignore them. (That’s around 30 percent of shareholder approval.) That day seems a long way off. Still, a slim chance is better than no chance, and — let’s face it — there is simply no chance of legislative remedies to Citizens United, especially from the current Congress, and definitely not in an election year.

“We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do… whatever it takes in order to keep the game going and their stock price moving upward,” David Stockman tells Bill Moyers in an interview that will air this weekend. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

That sounds about right, though I would ask whether Stockman and others who take this view have really put their finger on what’s novel or unique about the present moment. Entitlement and cronyism are not exactly new in America; some would say the game has been rigged all along.

But that’s a historical discussion. The more pressing question is one these new shareholder resolutions would have us address. Is corporate political activity good for business? Is the corporate plan to capture government sound? Are corporations really getting what they pay for? Can those entitled CEOs and Wall St. financiers win the game, or are there rules to the game they don’t understand? In other words, how well does crony capitalism work? Those broad questions frame the question posed in the title of this post.

There’s some compelling evidence to suggest that corporate political activity is not only bad for democracy but also bad for business. The Trillium and Green Century announcements cite the research of Michael Hadani, who sets out to “question the standard narrative that political spending is an unmitigated good for firms.” Hadani, a Professor of Management at Long Island University, concludes that despite spending extravagant amounts of money – AT&T, for instance, “officially” spent over 219 million dollars between 1998 and 2008 “on achieving political success” (and that was before Citizens United!) — corporations are not achieving the political outcomes they want.

What’s worse, corporate political activity generally does not appear to increase shareholder value.

This chart tracks a negative correlation between firm market value and PAC activity:


And that is just one lens. The research Hadani presents tells a pretty consistent story: the profligate pursuit of illusory goods, usually without the requirement to disclose where the money goes, or what companies and their investor-owners get for it (apart from heightened risk and reduced transparency). It should therefore alarm all shareholders – not just socially-conscious ones — that Citizens United makes it possible for executives to plunder the corporate treasury in pursuit of those same uncertain ends, without any limits or any real accountability. A new kind of barbarian may already be inside the gates: the CEO in search of the ever-elusive political fix.

On the Heroics at Home Depot

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A video making the rounds on YouTube and on progressive blogs features the American Family Association’s Buddy Smith telling the story of his run-in with Home Depot Chairman and CEO Fred Blake at the annual shareholders meeting on June 2nd.

Smith, whose organization also runs a site called BoycottTheHomeDepot.com, came to the shareholders meeting to present a petition asking Blake to “stop sponsoring gay pride parades and making direct contributions to gay activist organizations.” “A corporate company like Home Depot,” he complains, “is just not being a good citizen,” because they are “spreading the word” about a “lifestyle that is just a trap of Satan.” Good corporate citizenship, in Smith’s view, requires “standing for God’s truth” out of “love” for “our neighbors.”

How’s that for a theory of corporate social responsibility?

To Smith’s dismay, Fred Blake wasn’t having any of it. The Home Depot CEO responded “very briefly” to Smith. Blake went on, in Smith’s account, to say that he “was very proud of Home Depot’s diversity”; and the CEO “made a recommitment just to continue down the very track that they’re going.” So Blake sent Smith packing.

Whether this showed “some real backbone,” as blogger Cory Doctorow puts it, is up for debate: how much courage does it take to dismiss a crazy old coot like Smith, or double down on diversity policies for which there is a strong business case? Discrimination unnecessarily limits the labor pool and risks offending potential customers.

If the buzz on Twitter is any indication, the issue seems settled; and Blake is a champion of diversity and a model of socially responsible corporate leadership. Most people were retweeting @RightWingWatch’s tweet: “AFA brings boycott to Home Depot board meeting & CEO tells AFA to take a hike, reiterates commitment to diversity.” One poster, a Lady Gaga fan, called Blake “bad ass”; others said they now preferred Home Depot to its competitor, Lowes. @biggkhalil took up AFA’s theme of corporate citizenship: “Dear AFA, Home Depot is a great citizen. I pledge to continue shopping there. You people are pathetic.” Yet another poster thanked the company “for standing up for equality! Let’s send a Village People construction worker with a gift basket!” Others used more colorful language to denounce Smith and praise Blake.

Everybody agrees Blake made the right call; nobody seems too concerned that he made an easy call. I guess people like to see these holy-rollers get their comeuppance. But it’s worth noting that there was another item on the agenda at the Home Depot meeting that deserves more attention than Blake’s rebuff of Smith. It has to do not with Home Depot policy but Home Depot politics – specifically with the money Home Depot gives through its PAC to candidates and their refusal to give shareholders a say in how that money gets spent.

It turns out some of the company’s spending doesn’t jive with their much-celebrated commitment to diversity. As Andy Kroll reports in Mother Jones:

in 2006, the PAC donated $1,000 to Kansas Republican Sam Brownback, now the state’s governor and a supporter of a constitutional amendment banning same-sex marriage, and gave $10,000 to help Bob McDonnell’s gubernatorial campaign in Virginia. McDonnell is a staunch opponent of workplace protections for LGBT state employees.

Arguing that Blake and his executive team at Home Depot “were giving to candidates who were actively rolling back the rights of GLBT people in the states in which they did business” and that this put the company’s reputation at risk, Julie Goodridge and Northstar Management brought a resolution to give shareholders an advisory vote on corporate political spending.

I’ve written about this resolution in a previous post. It is at best a first step, but it’s a step in the right direction. Some people believe that requiring full disclosure and giving investors a say may help check corporate political spending in the wake of the Citizens United ruling.

That’s the hope. In fact, CEO Fred Blake and the Home Depot management team opposed the Northstar resolution from the very start. It gained a place on the annual meeting agenda only after an SEC ruling required the company to include it. And at the June 2nd shareholders meeting, the resolution (not surprisingly) went down in defeat.

Fred Blake has promised to announce the final tally soon. It would be a sign of real courage, or at least consistency, if he took the occasion to distance himself and his company from the bigotry of Brownback, McDonnell and their ilk.

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.

2011 Proxy Season: Social Investment at the Threshold

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Ernst & Young estimates in a new publication [pdf] that half of all shareholder proposals in 2011 will deal with environmental and social issues, and support for these proposals is growing. In fact, “83 percent of investors now believe environmental and social factors can have a significant impact on shareholder value over the long term.”

Last year, E & Y finds, approximately one quarter such social investment proposals won 30 percent support –which E & Y calls a “threshold” number, where “many boards take note.”

Perhaps they’d better. Typically, when proposals reach a second threshold — garnering 50 percent support– directors who oppose them start losing their seats.

Things may not yet have reached a tipping point, but these are promising developments. With the enactment of Dodd-Frank in 2010, mandatory say on pay provisions became law; that means fewer executive compensation proposals are on the table, and it’s easier to introduce social issues into the conversation.

There are even some early indications of the trend toward social investment in the 2011 data reported so far on ProxyMonitor.org. (ProxyMonitor – the Manhattan Institute database I relied on in a previous post about why boards say they don’t back human rights proposals — is keeping a “scorecard” of the 2011 proxy season.)

Now the ProxyMonitor data is special, and there might be reason to expect it to tell a unique story. ProxyMonitor documents only proposals made to Fortune 100 companies. Can we reasonably expect Fortune 100 shareholders to set the trend or lead in the area of social investment? On the one hand, investors in the Fortune 100 might tend to be more conservative –and risk averse — than the average shareholder. On the other, these high-visibility public companies with strong brands are likely to attract activist investors and funds with a social agenda. The likely outcome is more proposals, less traction.

Be that as it may, so far, a clear majority of shareholder proposals made to Fortune 100 companies in 2011 target social investment issues.

And there is another encouraging trend here. More and more shareholder proposals ask boards of directors to report on corporate political spending and contributions. The Findings page on ProxyMonitor notes that among Fortune 100 companies, “the share of social policy proposals focusing on political spending has increased 84 percent in 2011 from the three previous years (2008-2010)” [emphasis mine].

A few examples give some sense of where things are heading. Two proposals requiring Valero Energy Corporation to report on its political contributions received 26 and 27 percent support, edging closer to the 30 percent threshold of boardroom visibility. A proposal by AFSCME asked IBM to disclose “direct and indirect spending to influence legislation as well as grassroots lobbying communications to influence legislation”; it received 28.5 percent support in the 2011 vote. It will be hard for the IBM board to ignore or resist this much longer.

All is not sunshine. It’s worth noting that when AFSCME advanced similar proposals with Prudential and Bank of America, both proposals met with zero support. [Update 5/16/11: this is incorrect. Please see this post.] Prudential made the case that the information is already available; Bank of America complained that it would be burdensome and redundant, and, besides, “our company does not engage in grassroots lobbying.”

Make of that statement what you will. It’s clear that forcing disclosure of so-called “indirect” and “grassroots” spending will be an uphill battle, in part because it is difficult to define or track grassroots spending, or distinguish it from legitimate trade association activity.

But the focus now on corporate political spending brings welcome relief. As I suggested in an earlier post, some social investors are trying to do what Congress is unable or too cowardly or too compromised to do: take back some of the ground that was lost or – as I prefer to put it – given away by the courts in Citizens United. The boldest of these proposals, requiring Home Depot not only to disclose its political expenditures, but also to submit those expenditures to a shareholder advisory vote, will come to a vote on June 2nd. Maybe this measure will make it past the threshold.

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.