Green Century Urges CVS Caremark Corporation to End Political Secrecy
May 9, 2012—Tomorrow, at the company’s annual meeting, CVS Caremark Corporation (CVS)* shareholders will vote on a resolution that calls on the company to comprehensively disclose and have its board oversee its political spending. The Green Century Equity Fund filed the shareholder proposal to end the secrecy that hides the company’s direct and indirect political spending with corporate funds.
“We believe that CVS shareholders face significant financial and reputational risks as a result of the company’s failure to provide comprehensive transparency and disclosure of its political contributions,” said Larisa Ruoff, Director of Shareholder Advocacy for Green Century Capital Management, the investment advisor to the environmentally responsible Green Century mutual funds. “In this election year, it is more important than ever for companies to have strong policies governing their decisions on political spending and to ensure such spending is transparently disclosed,” she continued.
Currently, CVS does not provide comprehensive disclosure of its direct or indirect political spending, including its payments to trade associations and other tax exempt organizations that are used for political purposes. Companies are not required under current law to report their soft money political donations or the portion of their payments to trade associations that are used for political purposes. Moreover, trade associations, which are often employed as conduits for corporate political spending, are not required to report funds they receive that are spent on political activity, including advertisements supporting or opposing candidates. Many do not even disclose the names of their corporate members.
The resolution was filed in conjunction with the ongoing work of the Center for Political Accountability which recently announced that 100 companies have now agreed to increase transparency and disclosure around their political spending.
“Hitting the century mark in the drive for corporate disclosure and accountability is tremendously significant,” said Bruce F. Freed, CPA president. “It reflects growing acceptance of the need to address the heightened risks posed by political spending, and reinforces voluntary disclosure and oversight of political spending as a mainstream practice,” Freed continued.
This is the fifth time CVS shareholders have had the opportunity to vote on this proposal and it has received support of around 40 percent** of the vote each year—a notable amount of support because, unlike electoral campaigns which require a majority vote, shareholder proposals require a much smaller threshold to make an impact . But even with this strong support from shareholders, Green Century contends that the company has not responded in a meaningful way. This stands in stark contrast to other companies where similar proposals received this level of support. Last year proposals at RR Donnelly*, Halliburton* and State Street* all received around 40 percent of the vote**. This season, proposals were re-filed at all four companies and were withdrawn at the three companies other than CVS after they agreed to take action and improve their disclosure and accountability structures. The company’s lack of disclosure earned it a zero on the recently released Center for Political Accountability-Zicklin Index on Political Accountability and Disclosure.
“The company’s existing disclosure not only fails to provide investors sufficient information but it also significantly lags behind that of similarly sized companies. We believe this low score should be a wake-up call for the company,” said Ruoff. “Shareholders have expressed strong support for this proposal at the company’s four prior annual meetings, demonstrating significant investor interest in increased transparency and disclosure. It is time for the company to respond,” she continued.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability.
* As of March 31, 2012, CVS Caremark comprised 1.00% of the Green Century Equity Fund and 0.00% of the Green Century Balanced Fund; R.R. Donnelly comprised 0.04% of the Equity Fund and 0.00% of the Balanced Fund; State Street Corporation comprised 0.38% of the Equity Fund and 0.00% of the Balanced Fund. As of the same date, neither the Green Century Equity Fund nor the Green Century Balanced Fund held Halliburton. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
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