As owners and consumers, shareholders have moral responsibility to take action on three important fronts: corporate taxes, financing of political elections, and accounting.
By Bob Monks
There are three things that must become priorities for shareholders. Three things we need to work on, shape and demand, and they affect all the issues important to activists and governance proponents: shareholder rights, responsible endowments and ESG.
These are newsworthy topics but are only now beginning to get attention in shareholder resolutions while still being overshadowed by say on pay. They are:
- Disclosure of ownership in subsidiary companies and offshore accounts.
- Disclosure of campaign money and a say in how political money is spent by corporations.
- Holistic accounting that incorporates all the costs of making, distributing and using a product – all of the externalities.
I won't lie -- these are tough items.
They require digging for information, educating shareholders and an uphill battle during proxy season-- but they could have an important impact on corporate issues, our economy, our political system and even to our way of life.
Disclosure Of Ownership In Subsidiary Companies & Offshore Accounts
Did you read the excellent book by Nicholas Shaxson, Treasure Islands, that detailed the problem and its affect on economies worldwide? It’s not just a matter of some rich person having a bit of money hidden away; it’s detrimental to the country and the values we believe in as a democracy. And yet, despite a lot of news coverage and outrage about offshore tax havens in the past couple of years, very little has been done about it.
Responsible owners must champion this issue. If we expect to further ESG principles we must have companies that pay their fair share to support the American way of life. There can be no representation without taxation, no benefit without paying into the system.
And by that, I mean the diplomacy conducted on their behalf to open or keep open foreign markets, the civic and education infrastructure that allows companies to operate safely and efficiently in this country, and of course, the subsidies, assistance and contracts provided by our government to industries and corporations so that they can strengthen and further their business interests at home and abroad. Corporations happily take these benefits and then look for ways to shirk their tax duties.
Legal loopholes or not, hiding money to avoid taxes doesn’t support democracy.
This country is built on a compact: that we get to reap the benefits of a strong and great democracy because we all contribute. Our contribution comes through voting and through taxes. Corporations put plenty of money (deemed speech by the Supreme Court) into the political system but very little into taxes.
We, as owners, need to fix this.
Disclosure Of Campaign Money: A Say In How Political Money Is Spent By Corporations
Since Citizens United, this issue has grown in importance and shareholders are steadily trying to address it. According to Anthony Kammer and Liz Kennedy of the public policy organization Demos, resolutions addressing political spending are the fasting growing type of proxy proposal. The Sustainable Investments Institute reports that there were 120 resolutions on this issue in 2013, twice the number in 2010 when the Citizens United decision was handed down.
Predictably, these were largely precatory proposals but the initiative is there.
As Kammer and Kennedy tell us, corporations are not required to tell us what they are doing with our money. The CEO and management decide on which candidates and which issues to support, and if they are in opposition to our views and values – too bad.
What can we do?
This is where I think we need to be both a responsible owner and a responsible consumer. As owners, we must continue to propose resolutions that call for full disclosure of political spending and then we must make that information public. We must work with other shareholders so every owner is engaged on this issue.
We may not all agree on political issues but we should know where the corporations we own are putting our money. As consumers, we can make decisions based on our own values and this has proven effective. Once we know how corporations are spending on political issues and candidates we can decide whether or not to buy the products and services they offer. And that is exactly why they don’t want us to know.
Of course we all invest to make money, but we also want a clean, healthy and safe society. If we as owners and consumers can do something to promote this we must. Are there costs? Yes… and that brings me to:
Holistic Accounting: Incorporating All The Costs Of Making, Distributing & Using A Product
Okay, no one wants to talk about accounting.
It’s dull and complicated. But holistic accounting (or integrated reporting) incorporates the idea that corporations report on the full cost of their products and services. What does it truly cost to manufacture a product? Ideally, the cost of energy used, the true cost of the labor used and the full cost of the impact on society would all be accounted for and reported by corporations.
We’ve all heard of buying and eating local – the idea that, to reduce carbon emissions, we buy from local producers so our goods don’t have to be shipped as far. It’s good for the environment and good for us, right.
But what if I want to buy a television here in Maine? They aren’t made here so it’s shipped from far away. Are the full environmental factors of all that travel reported in the company’s bottom line? What about the effects of carbon emissions that cause health problems or make for polluted rivers and air? Who pays for those?
It’s unlikely that it’s the corporate reports – and, as we discussed above, they aren’t paying for it in taxes.
But in the end, you and I pay for it.
Instead of the company accounting for the full cost of that TV and maybe passing the costs onto the consumer, we are all paying for any and all of the impact caused in shipping that product to me.
Could this make the cost of goods higher? Maybe.
But what are health and the environment worth to us? With cigarettes we decided that corporations needed to take responsibility for making an unhealthy project. Cigarettes are pricier now and shareholders in manufacturers took a hit. But we must begin to look at the full price as the True Cost. We pay one way or the other, and as responsible owners we need to call for truthful and full accounting that incorporates all the costs of whatever our corporations make.
Okay, so we’ve got an uphill battle and some work to do.
But we must start this conversation now, hash out the details and take the work into next proxy season. Who’s with me?
Part II: If We Want Responsible Corporations We Need To Be Responsible Owners
Part I: A Simple Solution to Runaway Corporate Power