Green Century Urges International Business Machines to Disclose all Lobbying Spending

April 23, 2012—Tomorrow, at the company’s annual meeting in Charlottesville, SC , International Business Machines Inc. (IBM)* shareholders will vote on a shareholder resolution filed by the Green Century Balanced Fund (Green Century), that calls on the company to comprehensively disclose its direct and indirect spending on lobbying. This spring, over 20 companies will face similar proposals. In addition, IBM investors will vote their shares on a companion resolution sponsored by Walden Asset Management focusing on the company’s role in trade associations including the U.S. Chamber of Commerce. 

“Shareholders have the right and responsibility to understand how company resources are being spent in efforts to influence both elections and public policy,” said John Keenan of The American Federation of State, County and Municipal Employees (AFSCME) who co-coordinates the shareholder effort on this issue with Walden Asset Management.  “As investors, we believe that enhanced lobbying disclosure will provide us necessary information to evaluate any business risk associated with the company’s efforts to influence the regulatory and legislative processes,” he continued.

According to the Center for Responsive Politics, IBM spent $31.1 million on federal lobbying between 2007 and 2011, a significant figure in itself but one that does not include state level lobbying. IBM does not directly disclose its dues payments to trade associations that engage in lobbying nor does it directly disclose the portion of those payments that are used for lobbying even though such entities are a major force in shaping public policy.  For example, in 2010 the U.S. Chamber of Commerce, where IBM sits on the board, spent more than $132 million lobbying, making it the country’s largest lobbying group.  

“We commend IBM for its strong policies preventing corporate funds from being used to make political contributions aimed at impacting elections, but without full transparency around its lobbying spending, shareholders are unable to fully determine how the company is engaging in the political process,” said Larisa Ruoff of Green Century Capital Management, the investment advisor to the Green Century Funds.  “Furthermore, as an environmentally responsible mutual fund, we are also pleased that IBM has made such a strong commitment to environmental sustainability.  But we are concerned that the company is a member of trade associations such as the Chamber of Commerce that, at times, actively lobby for policy positions that run counter to IBM’s business interests. We encourage IBM to become a leader once again and reduce business risk by joining the growing number of companies that provide shareholders with comprehensive disclosure of their lobbying spending,” she continued.

According to a recent report by the Sustainable Investment Institute, in 2010, S&P 500 companies spent a total of $1.1 billion on political contributions and lobbying, with $979.3 million in federal lobbying expenditures comprising 87 percent of this spending. Out of the S&P 500, 64 percent of companies make no mention of lobbying activities, policies or oversight according to the report.  As a result, shareholders are missing key information regarding how the companies they invest in are influencing elections and public policy.  

“Clearly, trade associations and other tax exempt organizations are a major force in shaping public policy, yet the role and payments of corporate members of such associations is often shielded from public view,” said Tim Smith of Walden Asset Management.  “For example IBM is a member of the U.S. Chamber of Commerce and their General Counsel sits on the Chamber Board.  IBM is widely known and respected as a leader on governance, social  and environmental issues yet the Chamber uses around 50% of their dues to attack the EPA, fight against investor rights and weaken legislation banning bribes overseas, thus undercutting IBM’s very own ethical stands  ” he continued.

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Resolution Text:

Request for Disclosure of Lobbying Policies and Practices

Whereas, businesses, like individuals, have a recognized legal right to express opinions to legislators and regulators on public policy matters.

It is important that our company’s lobbying positions, as well as processes to influence public policy, are transparent.  Public opinion is skeptical of corporate influence on Congress and public policy and questionable lobbying activity may pose risks to our company’s reputation when controversial positions are embraced. Hence, we believe full disclosure of International Business Machines’ (IBM) policies, procedures and oversight mechanisms is warranted.

Resolved, the shareholders of IBM request the Board authorize the preparation of a report, updated annually, disclosing:

  1. Company policy and procedures governing the lobbying of legislators and regulators, including that done on our company’s behalf by trade associations. The disclosure should include both direct and indirect lobbying and grassroots lobbying communications. 
  2. A listing of payments (both direct and indirect, including payments to trade associations) used for direct lobbying as well as grassroots lobbying communications, including the amount of the payment and the recipient. 
  3. Membership in and payments to any tax-exempt organization that writes and endorses model legislation. 
  4. Description of the decision making process and oversight by the management and Board for

a.  direct and indirect lobbying contribution or expenditure; and
b.  payment for grassroots lobbying expenditure.

For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation, (b) reflects a view on the legislation and (c) encourages the recipient of the communication to take action with respect to the legislation.

Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.

The report shall be presented to the Audit Committee of the Board or other relevant oversight committees of the Board and posted on the company’s website.  

Supporting Statement

As shareholders, we encourage transparency and accountability on the use of staff time and corporate funds to influence legislation and regulation both directly and indirectly as well as grassroots lobbying initiatives. We believe such disclosure is in shareholder’s best interests. Absent a system of accountability, company assets could be used for policy objectives contrary to a company’s long-term interests posing risks to the company and shareholders. 

IBM spent approximately $9.9 million in 2009 and 2010 on direct federal lobbying activities, according to disclosure reports (U.S. Senate Office of Public Records). This figure may not include grassroots lobbying to directly influence legislation by mobilizing public support or opposition. Also, not all states require disclosure of lobbying expenditures to influence legislation or regulation. 

Such expenditures and contributions can potentially involve the company in controversies posing reputational risks. 

We encourage our Board to require comprehensive disclosure related to direct, indirect and grassroots lobbying.

 

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, IBM comprised 3.29% of the Green Century Balanced Fund and 4.21% of the Green Century Equity Fund. 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.

You should consider the Funds' investment objectives, risks, charges, and expenses carefully before investing.  To obtain a Summary Prospectus and/or Prospectus that contains this and other information about the Funds, please click here, email info@greencentury.com, or call 1-800-93-GREEN. Please read the Summary Prospectus and/or Prospectus carefully before investing. 

Stocks will fluctuate in response to factors that may affect a single company, industry, sector, or the market as a whole and may perform worse than the market. Bonds are subject to risks including interest rate, credit and inflation.

The Green Century Funds are distributed by UMB Distribution Services, LLC. 4/12

 


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