CORPORATE ‘SPEECH’ IS DROWNING OUT CITIZEN ACTIVISTS
And Congress stands poised to make it nearly impossible for mere citizens in Western Pennsylvania and around the country to put proposals before corporate shareholders, explains financial journalist
At the more than 10hour “public hearing” on the construction of the Shell petrochemical plant in Potter Township last December, I waited eight hours to speak for five minutes about the plant’s environmental risks. The meeting was so long and grueling that one of my colleagues at Allegheny County Clean Air Now collapsed and had to be helped by emergency medical technicians. She didn’t get to testify, nor did many local Beaver County residents who left in frustration before they had the chance.
The reason for the meeting’s length was that Shell’s lawyers and expert witnesses spoke for six and a half hours prior to the floor being opened to the general public. Meanwhile, Potter supervisors restricted ordinary citizens to five-minute statements. At the time, I noted in my testimony that Royal Dutch Shell isn’t a citizen of Western Pennsylvania or even a person, but a corporation domiciled in the Netherlands. Why should its freedom of speech take precedence over ours at a public hearing?
This experience is not isolated but illustrative of a nationwide trend. As the parameters of corporate speech have expanded, individuals’ First Amendment rights have shrunk.
Consider that in the 2010 Citizens United decision, the Supreme Court ruled that corporate campaign contributions are a form of constitutionally protected speech. The decision gave rise to 2,400 primarily corporatefunded Political Action Committees, or “Super PACs,” that collectively spent $1.1 billion on campaign advertising in 2016. If you picture the weeks of political attack ads that money purchased, you understand how easy it is to drown out individual voices. Is that chorus of corporate lobbying any different from Shell’s filibuster at Potter?
It gets worse. In June, the U.S. House of Representatives passed the ironically named Financial CHOICE Act. Aside from rolling back the financial regulations of the 2010 Dodd-Frank Act, the bill, if also approved by the Senate, would revoke a primary means citizen activists have of voicing their disagreements with corporate actions.
Currently, an investor who holds more than $2,000 worth of stock of any U.S. corporation can file a shareholder proposal calling for a vote on corporate policies or decisions. The CHOICE Act would raise that investment minimum to the value of 1 percent of a company’s outstanding shares. At a large company such as Apple, that would set the minimum to offer a shareholder proposal at $9 billion, up from $2,000. This would mean only big institutional shareholders, such as other corporations or giant investment funds, would have any say in Apple’s corporate governance.
Shareholder proposals are an essential tool to check corporate power and for citizens to influence corporate behavior. Environmental activism, in particular, would be dramatically curtailed.
In 2017, activists filed 76 environmental shareholder proposals at major corporations, many related to measuring the impact of companies’ businesses on climate change. And there were some crucial victories.
The day before President Donald Trump announced that the United States would withdraw from the Paris climate agreement, 62 percent of Exxon Mobil shareholders voted to have the company evaluate the long-term business impacts of meeting the Paris initiative’s climate goals. That proposal was filed by one of Exxon’s smaller shareholders.
Also of vital importance in 2017 were 68 resolutions requesting reports detailing companies’ political contributions. The aim was to measure the effects of Citizens United on both the expansion of corporate political “speech” and the crowding out of citizens’ political speech.
The CHOICE Act would kill shareholder activism at most companies because it is exceedingly rare for mega- shareholders to file such resolutions. “The law would effectively stop all firms from doing meaningful shareholder advocacy,” says Leslie Samuel rich, president of Green Century Capital Management, a small socially responsible investment firm that filed 12 environmental resolutions last year.
Nor is the CHOICE Act the only impediment. “The Business Roundtable and the U.S Chamber of Commerce are actively advocating changes in [Securities and Exchange Commission] rules that would obliterate shareholder resolutions, just like the CHOICE Act would,” says Tim Smith, director of ESG Shareowner Engagement at Walden Asset Management. “It’s ironic that these rule changes are being pressed while shareholder resolutions and shareholder advocacy are becoming more effective.”
These attacks on shareholder rights would greatly impair the environmental movement in Western Pennsylvania.
Allegheny County Clean Air Now is now in the process of helping a shareholder of DTE Energy file a resolution to have the company assess how building a solar farm on the defunct Shenango Coke Works on Neville Island would affect its business. Getting this resolution included on DTE’s proxy statement to be voted on in 2018 will be extremely difficult. Most resolutions of this type are rejected by the SEC because companies challenge their relevance. We hope to prove that DTE’s bottom line would benefit if the company is a good environmental steward, which we believe we can do.
At this point, we at least have a chance to start a genuine dialogue with DTE. If the Financial CHOICE Act passes, we’ll have no voice at all.