Proxy season report: The door is open for continued engagement on lobbying disclosure and oversight at key Canadian companies

By May 24, 2018News

Kevin Thomas, Director of Shareholder Engagement

Not every company will land in as much hot water over political spending as AT&T (NYSE:T) did recently when its US$600,000 payments to Trump attorney Michael Cohen to secure political access to the President came to light. Cohen is currently under investigation by federal prosecutors for possible election law violations, as well as for payments made to former porn actress “Stormy Daniels” from the same account that AT&T paid into. The company’s CEO has admitted it was a “mistake” and the executive in charge has been pushed out.

However the issue should not have come as a surprise to AT&T. Shareholders have been asking the company to address oversight of the company’s more than US$16 million annual lobbying budget and to improve disclosure of its political activity, in an effort to create a level of accountability at the telecommunications giant. At its most recent AGM, just prior to the Cohen scandal breaking, 34% of shareholders voted in favour of a resolution asking the company to address oversight and transparency in lobbying.

The AT&T board opposed the resolution.

AT&T, of course, is not alone. In Canada, SHARE helped its clients file resolutions at Imperial Oil (TSX:IMO), Bombardier Inc. (TSX:BBD), Encana Corporation (TSX:ECA), and SNC-Lavalin Group Inc. (TSX:SNC) this year asking for the same type of oversight and disclosure of their own lobbying activity.

Both Bombardier and SNC-Lavalin have themselves faced considerable controversy in their overseas lobbying activity, and the proposals were, like the one at AT&T, an attempt to ensure that the company establishes effective oversight and accountability for that activity before the companies face further negative repercussions. Annual public disclosure of political activity is one way to provide accountability to shareholders and to ensure that the company’s board and management continue to be attentive to the issue.

After discussions with SHARE, both Encana and SNC-Lavalin Group agreed to provide enhanced oversight and disclosure of lobbying activity, which substantially addressed shareholder concerns, and the proposals were withdrawn. We commend both companies for working with SHARE and the institutional investors we represent to develop appropriate and effective disclosure to investors.

The proposal at Bombardier was submitted to a vote at the company’s annual meeting in May. Since Bombardier has unequal voting shares, the proposal only received 12.25% of the overall shareholder vote, but that represents 48.5% of the independent shareholder vote, a significant showing which will encourage Bombardier’s board and management to work with us towards a resolution in the coming months.

At Imperial Oil, the same proposal received support from 40% of the independent shareholders (Imperial is majority-owned by Exxon-Mobil).

In both cases, the significant vote results allow for continued engagement towards a resolution that will help assure shareholders that the company’s money and reputation is being well-managed, and that (hopefully) AT&T-style controversies will not be forthcoming.