Statement from ChangetoWin:
In a critical first test of the its new guidance on shareholder proposals, the Securities and Exchange Commission (SEC) denied Citigroup Inc.’s (NYSE: C) request to block shareholders from voting for more transparency on political spending. Citigroup tried to omit the proposal from this year’s ballot using a new interpretation of the SEC shareholder proposal rules issued last November.
Dieter Waizenegger, Executive Director of the CtW Investment Group said: “We commend the decision to reaffirm shareholders’ right to seek additional disclosure on lobbying activities from companies to fully assess potential reputational risks. We are encouraged that the agency chose to uphold the standards of shareholder democracy.”
Shareholder votes on corporate political disclosures have been common in recent years. However, in November 2017 the SEC staff issued new legal guidance suggesting that the staff could be more sympathetic to corporate arguments for omitting proposals from proxy statements. In response many companies, including Citigroup, objected to proposals that previously would not have prompted such a response. In Citigroup’s case, the company argued that lobbying was not a significant part of the company’s business, and therefore Citigroup’s lobbying practices were not important enough to warrant a shareholder vote. In a letter dated March 6, 2018 the SEC’s Division of Corporation Finance disagreed.
Citigroup only discloses a partial record of its political spending, which has not kept up with the growth of donation to nonprofit organizations that can receive unlimited donations from undisclosed donors. For example, Citigroup is a member of the Chamber of Commerce, which has spent over $1 billion on lobbying since 1998. In contrast to Citigroup’s claims that combating climate change is a priority, the Chamber has consistently opposed legislation and regulation to address it. This duplicity could pose significant reputational risk for Citigroup.
Moreover, Citigroup spent over $36 million on federal lobbying from 2010-2016. While this number represents a tiny fraction of the company’s total revenue, the reputational risk it poses should that spending run counter to the company’s stated values is high. For instance, last year Citi received significant public scrutiny for its lobbying in support of rules barring consumers from entering class action lawsuits. Should it pass, the shareholder proposal would pressure Citigroup to disclose details of direct lobbying and indirect lobbying, including those made through trade associations like the Chamber of Commerce.
Since 2013, the CtW Investment Group has been successful in getting the proposal on the proxy at a number of companies. Past support for the proposal demonstrates that lobbying transparency is of critical importance to Citi shareholders, with the proposal garnering an average of 30% support over the last five years. In comparison, similar proposals on social and political issues get on average 22% support.
The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win to enhance long-term shareholder value through active ownership. These funds have over $250 billion in assets under management and are substantial Citigroup shareholders.