Magni’s Position on Proxy Proposals for Lobbying Disclosure 

October 29, 2018
 

Magni votes company proxies on behalf of clients and is guided in its votes by applying corporate governance best practices as described in Magni’s Sustainable Value Creation principles. 

Company proxies often have a shareholder proposal regarding better lobbying disclosure. Company boards tend to resist increased disclosure, and often the boards declare that existing disclosures are adequate. 

Disclosure is an important part of good governance. Lobbying disclosure is about both the board’s stewardship of company assets and the political implications from lobbying activity. Magni’s decision on how to vote rests on two key questions:  

  1. is the company’s existing disclosure of lobbying activity provided in a manner that is easily accessible to shareholders?  
  2. is the specific request in the shareholder proposal consistent with good governance? 

If the company already provides lobbying disclosures in a format and location that is easily accessible to shareholders (e.g., the Investor Relations portion or the corporate responsibility materials in the ‘About US’ portion of the company website), the specific proposal needs to be assessed. If the disclosures are not readily available, Magni tends to vote for the shareholder proposal almost regardless of the specific request. If the shareholder proposal identifies shortcomings consistent with good governance, Magni tends to vote for the shareholder proposal. 

If the shareholder proposal does not identify meaningful shortcomings with the existing disclosures (e.g., boilerplate language used in the supporting statement that can be found on proposals in proxies from many companies), Magni tends to vote against the shareholder proposal. If the shareholder proposal focuses on politics that are not specific to the company, Magni tends to vote against the shareholder proposal. Putting a company in the middle of a divisive political discussion where the topic is not relevant to that company increases the risk that it will be pulled needlessly into that debate and hence hurt the brand and/or level of sales. 

The 2018 annual proxy from ExxonMobil (XOM), an oil and gas company, contained proforma proposals from the board and also a shareholder proposal on lobbying disclosure. ExxonMobil receives a relatively high score from Magni for its corporate governance, and Magni voted for the proforma proposals. ExxonMobil does provide lobbying disclosures, though the content is materially less complete than other companies. Opaqueness is detrimental to good governance so Magni voted for the shareholder proposal. 

The 2018 annual proxy from Aetna (AET), a managed health care company, contained proforma proposals from the board, as well as a shareholder proposal on lobbying disclosure. Beyond already disclosing more information than required by laws and regulations, Aetna won an award for its level of disclosure. Aetna receives a relatively high score from Magni for its corporate governance, and Magni voted for the proforma proposals. Magni voted against the shareholder proposal given award-winning disclosure. 

Magni considers existing company practices and materiality of the proposal (from a governance perspective) to determine when it votes in favor of additional lobbying disclosure. All of Magni’s votes on proxies are available at www.magniglobal.com/insights/magni-proxy-vote-commentary/. 

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