Activists Push Vanguard on Political Spending Transparency

Stay current on changes and developments in corporate law with a wide variety of resources and tools.

By Che Odom

March 11 — As shareholder proponents ramp up their campaign for companies to disclose how much they spend on political activities and lobbying, they're setting their sights on a new target—the Vanguard Group.

A group of shareholder activists is calling on Vanguard to support political spending transparency this proxy season.

The investment company is being singled out because it is the largest manager of retirement savings in the U.S., said Chris MacKenzie, communications director of U.S. Public Interest Research Group (PIRG), which is leading the effort to put pressure on Vanguard.

Shareholder proposals on political spending disclosure “frequently face opposition and abstention from institutional investors like Vanguard, who we’re petitioning to change their stance on disclosure votes,” MacKenzie told Bloomberg BNA in an interview March 11. “If Vanguard or other mutual funds agree to side with their customers on the issue of disclosure, many of these resolutions could easily pass.”

A study by the Center for Political Accountability found that mutual funds, in general, voted for such disclosure resolutions 42 percent of the time last year, an increase from 40 percent in 2014.

According to the study, Vanguard last year voted against or abstained from voting on all such resolutions.

Vanguard representatives didn't return calls seeking comments.

Companies Targeted

This proxy season, 99 shareholder proposals calling for political spending disclosures were submitted to U.S. companies, according to a Bloomberg BNA review of securities filings.

The proponents, including the Center for Political Accountability, are targeting companies such as Allstate Corp., Alphabet Inc. (formerly Google), American Airlines Group, CarMax Inc., CenterPoint Energy Inc., Cintas Corp., Coca-Cola Enterprises, Corning Inc., Covanta Holding Corp., First Solar Inc., J.M. Smucker Co., Johnson & Johnson, Lincoln National Corp., Marathon Petroleum Corp., Nordstrom Inc., Range Resources Corp. and Southern Co.

A trade association representative suggested that the proponents of such resolutions are not always open about their motivations.

“I think it is a concerted effort to silence the business community in the political process,” Linda Kelly, senior vice president and general counsel for the National Association of Manufacturers, said March 11 during a panel at Georgetown University Law Center's Corporate Counsel Institute conference in Washington.

Joint Investor Effort

Stefan C. Passantino, a partner at Dentons and head of its political law practice, said March 11 during the conference that investors are pushing for disclosures not required by law, and that sends a message that companies are hearing.

Boeing Co., for example, meets with its large shareholders to gauge support for such measures, the company's chief counsel, Jennifer B. McIntyre, said at the conference. If 30 percent of large investors appear inclined to support a resolution, Boeing may make changes, she said.

“We have changed our behavior and disclosed more about our political spending activity” as a result of investor pressure “in an attempt to make that go away,” McIntyre said. She added that Boeing decided a few years ago to establish a political action committee to handle contributions, preventing the company itself from making further donations.

Responding to Investors

When a shareholder proposal is submitted, companies must be able to explain to stockholders what they're doing with regard to political spending and make decisions on the best way to react, taking into consideration the necessity to make political contributions and what other issuers are doing in the sector, Jan Witold Baran, a Wiley Rein LLP partner who specializes in campaign finance and elections law, said during the conference.

“Over the last three or four years, I think there has been more voluntary measures by companies,” which include disclosures and assigning a person to oversee compliance, he said.

Meanwhile, MacKenzie said PIRG and other advocates have made major progress on the issue in recent years, as more than 300 companies now disclose some or all of their political spending.

The issue also has gained steam outside of the investor community. A recent study revealed that a majority of corporate directors think the Securities and Exchange Commission should develop rules requiring corporations to disclose their political contributions .

A group of senators is urging the SEC to continue working on a draft rule to mandate such disclosures , and the nonprofit Campaign for Accountability has petitioned the U.S. Court of Appeals for the District of Columbia Circuit to order the SEC to proceed on rulemaking .

On the whole, shareholder efforts don't discourage companies from making political donations, but they may persuade them to be more transparent, Baran said.

Businesses are going to voice their concerns through the political process to avoid being drowned out by other opposing viewpoints and interests, he said. “I think the business community is handling it very well overall.”

To contact the reporter on this story: Che Odom in Washington at

To contact the editor responsible for this story: Yin Wilczek at

Request Corporate on Bloomberg Law