Dollars, democracy and disclosure Should investors demand better disclosure from Canadian corporations on political spending?

A discussion paper from the Shareholder Association for Research & Education Author: Kevin Thomas, Director of Shareholder Engagement, SHARE Research Assistants: Zoë Yunker and David Norwell, School of Environmental Studies, University of Victoria Editing and review: Peter Chapman, Shannon Rohan, Anne Wittman

Cover photo: © Devonyu, dreamstime.com Icon images (pages 4,5, 8, 10, 12, 15, 18): ©Stoyanh Haytov, dreamstime.com

Published by the Shareholder Association for Research & Education (SHARE), January 2015

SHARE is a Canadian leader in responsible investment services. SHARE pro- vides policy development, proxy voting and shareholder engagement services to investment managers, public and multi-employer pension funds, founda- tions, and faith-based organizations, as well as investment and governance ed- ucational programs for pension trustees and other investment decision-makers, and practical research on important and emerging responsi- ble investment issues.

This paper is the second in a series of papers to be released as part of a three- year project to encourage dialogue among capital market participants about how Canadian corporations’ influence on public policy debates and decision- making affects the interests of long-horizon investors. SHARE would like to thank the British Columbia Government and Service Employees’ Union, the Canadian Union of Postal Workers, the Columbia Institute, the Glasswaters Foundation, the J.W.McConnell Family Foundation, the Muttart Foundation and the School of Environmental Studies (University of Victoria) for their sup- port of this project. SHARE is solely responsible for the content of this report.

For more information on SHARE, please visit: www.share.ca

Except where noted, this work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. Table of Contents

Introduction ...... 2

A. How do corporations spend to influence public policy in Canada?...... 4 1.Direct political contributions...... 5 2.Direct lobbying...... 8 3.Trade associations ...... 10 4.Funding third-party organizations...... 12 5.Advertising and public relations...... 15

B. Discussion Questions...... 17 1. Can we differentiate between appropriate and inappropriate corporate political spending?...... 17 2. Should Canadian companies have policies on political spending and disclose them to shareholders?...... 19 3. Should corporate political spending in Canada be disclosed?...... 20 4. What is the appropriate mechanism for disclosure?...... 22 5. What information should be disclosed and what should be the threshold for disclosure? ...... 24 6. How often should information be disclosed?...... 25 7. Are there risks or costs for investors from disclosure?...... 27

C. Conclusion ...... 28

Endnotes...... 29 If a few groups are able to flood the electoral discourse with their message, it is possible, indeed likely, that the voices of some will be drowned out … Where those having access to the most resources monopolize the election discourse, their opponents will be deprived of a reasonable opportunity to speak and be heard. Supreme Court of Canada, Harper v Canada (Attorney General)1

To ensure transparency and fairness, Canadian taxpayers should be fully aware of which local and foreign interests are funding Canadian groups and to what level with the goal of hindering development of economically beneficial, yet environmentally sustainable projects in Canada. – Canadian Chamber of Commerce2 Introduction

oncern about the some federal Cabinet Ministers3) cess to political representatives, effect of money on point to the influence of “foreign which undermines political par- politics is perennial. money” on environmental cam- ticipation. As Alison Loat, Execu- CAside from the obvi- paigns in Canada. tive Director of Samara Canada ous concern about outright From a public policy and wrote recently in a summary of corruption and/or illicit ex- democratic perspective, political workshops on political participa- penses and bribery, there is a contributions, lobbying and po- tion held with young Canadians, broader concern about the in- litical advertising by corpora- “Those who felt that the political fluence of private interests on tions, or other associations can power deck was stacked against the development of policy and tilt the playing field towards them seemed to feel it was a regulation, as well as on the politicians, parties and policies waste of time to even try to influ- content and tenor of public po- that better serve those interests, ence political decisions.”4 litical debate. regardless of whether those in- This discussion paper outlines The influence of money on terests represent the wishes of some of the ways Canadian cor- elections, leadership contests, the majority of citizens. porations engage in political public policy decisions, media Even where that influence is spending – broadly defined in and public debate is contested not truly present, the widespread this paper as spending to influ- equally from across the political perception of undue influence ence the public policy process spectrum. While some commen- from political spending can be through direct campaign contri- tators raise concerns about the damaging if it increases the sense butions, lobbying, advertising influence of oil companies on amongst citizens that the system and support for public policy re- environmental policies, other is weighted against them and search and advocacy by trade as- commentators (and, indeed, that “big players” have better ac- sociations and think-tanks.

2 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA There is an important role for closed to the company’s share- and disclosure for corporations in corporations and trade associa- holders? What role do sharehold- Canada. We discuss the risks that tions in advocating for laws, poli- ers have in approving political this spending can create for in- cies and regulations that help spending by the company? vestors. We then ask questions build the economy, that are ef- These questions are at the about the appropriate voluntary fective, and do not have unin- heart of this discussion paper. or regulatory mechanisms for ad- tended consequences. Lobbying, dressing those risks, specifically: public education and support for SHARE’s political public policy research by corpo- spending project n Can we differentiate be- rations can be an important part The Shareholder Association for tween appropriate and inap- of political discourse. Research and Education (SHARE) propriate corporate political However political spending is is engaged in a three-year proj- spending? not without risks, and investors ect to encourage dialogue n Should Canadian companies in particular are beginning to among capital market partici- have policies on political take stock of political spending pants about how Canadian cor- spending and disclose these by publicly-traded corporations porations’ influence on public to shareholders? in order to understand and eval- policy debates and decision- n Should corporate political uate those risks. making affects the interests of spending in Canada be dis- For investors, the issue of po- long-horizon investors. closed? litical spending by publicly- This is the second in a series n What is the appropriate traded corporations does not of publications analyzing Cana- mechanism for disclosure? depend upon one’s political dian corporate political spending n What information should be viewpoint; it is not about and legal and policy options to disclosed and what should be whether we promote a bal- the threshold for disclosure? “like” the politi- “It could be argued that in- anced role for n How often should information cal activity or formational input is a social corporations, be disclosed? not. Rather, it is responsibility of business, from an in- n Are there risks or costs for in- foremost a ques- vestor perspec- vestors from disclosure? tion of gover- particularly where there is tive. The first nance. What important corporate paper, pub- As a follow-up to this paper, board oversight knowledge about issues or lished in Octo- SHARE will engage in discussions exists regarding ber 2014, with companies, investors, and technologies that can help spending by examined policy-makers in Canada about management on to inform intelligent legis- spending by these questions and the various influencing elec- lation and public policy” Canadian pub- policy options for addressing the toral politics and International Corporate licly-traded cor- concerns they raise. We will also Governance Network3 public policy- porations in the publish further reports address- making? How US 2014 mid- ing specific examples of political does the board ensure that politi- term elections.5 spending relevant to investors to cal spending is in the interests of better illustrate how this spend- the company, its shareholders, This discussion paper ing does or does not align with and its stakeholders? What risks This discussion paper starts with shareholder interests. does political spending create for a look at the scope of political We welcome your participa- investors, and how is the board spending by Canadian publicly- tion in this discussion. Please managing those risks? How is this traded corporations as well as see page 28 for ways to join the spending, and related risks, dis- the rules governing spending conversation.

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 3 How do corporations

Section A spend to influence public policy in Canada?

Political spending by cor- porations is a broad term. While the most obvious type of spending is direct financial contributions to political parties, candidates or leadership campaigns, political spending also in- cludes resources expended in lobbying politicians, con- tributions to third-party think-tanks, advocacy or- ganizations and trade asso- ciations, and advertising and editorial contributions intended to influence pol- icy debates.

4 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA 1. Direct political contributions

Unlike some countries, Canada Saskatchewan, PEI) and has limited opportunities for di- do not. rect political contributions by currently caps contri- corporations, and yet donations butions (in an election year) at New Brunswick, which does not to political parties, candidates $19,950 to the party, $13,300 to appear in the table below. and leadership contestants are candidates and $13,300 to con- Forty-six of the companies in not universally banned. stituency associations. the TSX60 index made political Federally, unions and corpo- caps contributions at $30,000 to contributions to major political rations are both banned from a party and $10,000 in total to a parties in one or more provinces contributing directly to ’s candidates in an election in 2013.8 Of those, only eleven candidates, political parties, lead- campaign, and $5,000 in total to report the total sum of their ership contestants or nomination a party’s constituency associa- Canadian political contributions contestants. Provincially, how- tions (although not during cam- to investors, and of those none ever, there are different rules. paigns). New Brunswick caps reports the individual amounts Seven of the ten provinces donations at $6,000 per year. and recipients of company dona- and all three territories allow Within the provinces that do tions. Of the companies in the corporate contributions, while not place caps on corporate do- TSX60 index, the top five direct three provinces (Quebec, Mani- nations, the size of donations is political donors in 2013 (by sum toba and ) do not.6 still relatively low. The largest do- total of donations) are set out in Amongst those seven nations in any recent provincial Table 2 (next page). provinces, Alberta, Ontario and election cycle by a publicly- Municipalities, like provinces, New Brunswick place financial traded corporation are set out in vary in their approaches. The City limits on the size of contribu- Table 1, below. of , Canada’s largest city, tions. The other four provinces Most provinces make dona- does not allow corporate dona- (British Columbia, Newfound- tion reports publicly available on tions. However they are allowed land and Labrador, the web, with the exception of in Vancouver.

Table 1: Largest donations by publicly-traded corporations in most recent provincial election period

Province Amount Party Company Year British Columbia $200,000 Goldcorp Inc. 2013 Alberta $25,500 Cenovus 2012 Saskatchewan $51,200 Saskatchewan Party7 Crescent Point Resources 2011 Ontario $9,975 Liberal Party Numerous publicly-traded 2014 (max allowed) companies Ontario $9,975 PC Party of Ontario Numerous publicly-traded 2014 (max allowed) companies PEI $7,998 Liberal Party Scotiabank 2011 Newfoundland $10,000 Progressive Shoppers Drug Mart 2011 Conservative party Yukon $1000 RBC, Scotiabank, TD Bank each 2011 gave $1000 to both parties

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 5 Table 2: Top five direct political donors, 2013 (TSX60 index)

Company Direct campaign Recipients Reported to contributions investors? Goldcorp Inc. $210,000 BC Liberal Party Aggregate sum Teck Resources Limited $125,900 BC Liberal Party Aggregate sum $57,500 BC Conservative Party Encana Corporation $100,475 BC Liberal Party No $13,422 Alberta Conservative Party No $9,800 Alberta Wildrose Party No $3,000 No Canadian National Railway Company $53,150 BC Liberal Party No $21,000 BC Conservative Party No $9,300 Ontario Conservative Party No $7,875 Alberta Conservative Party No $4,350 No $1,995 Saskatchewan Party No Canadian Pacific Railway Limited $55,738 BC Liberal Party No $10,500 BC Conservative Party No $7,875 Alberta Conservative Party No $3,326 Saskatchewan Party No

Note: the prevalence of donation to BC political parties reflects the fact that 2013 was an election year in that province, unlike in the other reporting provinces.

Does size matter? Party Leadership campaigns Eight provinces allow corpo- None of the amounts donated above are large from the perspective of rate donations to leadership con- corporate cash flows. Corporate spending in Canada on direct political tests within political parties. contributions is clearly not as large as corporate spending in US elections. (Alberta, British Columbia, PEI, At the same time, total expenditures by political parties are much smaller in the Canadian context, due to legal limits on campaign spending. The Saskatchewan, Nova Scotia, New Liberal and Conservative parties each spent approximately $19.5 million Brunswick, Ontario, Newfound- in the last federal election, compared to the average of $912 million land & Labrador15). Federal par- spent by each of the Democrats and Republicans in the 2014 US congres- ties are not allowed to solicit sional elections9 – almost 47 times higher. corporate contributions to lead- At the provincial level, the winning Liberal Party spent $11.7 million in ership contests and there is a the last British Columbia election, approximately 33% of the amount $1,200 limit for individual dona- spent by the winner of the Kentucky senator’s seat in 2014, a state with a tions.16 Parties are required to similar size population. If we include outside advertising spending by publicly report contributions to third parties in Kentucky, the BC Liberals’ election spending amounts to leadership contests at the federal 19% of what was spent to win Kentucky.10 level, as well as in Alberta, On- So how do corporate contributions compare, as a percentage of that tario, BC, and Manitoba. spending? Goldcorp’s $200,000 donation to the BC Liberals in 2013 repre- No legislated limits are set on sented 1.7% of the party’s total campaign spending. The winning Ken- tucky Senator’s largest direct donor (the Blackstone Group) contributed donations to leadership contests US$213,400 or 0.7% of the candidate’s direct spending.11 in Alberta, although financial re- ports now must be filed with . The Alberta Progressive Conservative Party

6 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA Breaking the rules Where it is illegal for a corporation to make a campaign contribution, it is also illegal for a corporation to reimburse its employees for individual campaign donations. In 2013 a SNC Lavalin executive testified that a group of approximately 50 company employees lent their names for party donations in Quebec and that their donations were reimbursed through annual bonuses, in contravention of Quebec campaign financing laws.12 SNC Lavalin was also investigated by CBC News for a set of donations made by twelve executives and two family members to a Conservative candidate, all but one at the maximum allowable amount. The donations, made in a single day in the 2011 federal election, accounted for 2/3 of the candidate’s war chest. Thirteen SNC Lavalin executives and family members made similar donations to a Conservative candidate in the 2009 election.13 Several SNC Lavalin executives face charges for fraud in connection with government contracting, but have not been charged under campaign finance laws.14

instituted a $30,000 cap on do- the Insurance Bureau of Canada Hudak and $10,000 to his rival nations to its 2014 leadership (an industry association of .20 contest.17 Similarly, while no leg- which most publicly-traded in- Notably, a percentage of On- islated limits on the size of lead- surance companies are mem- tario leadership campaign dona- ership campaign donations exist bers).19 Former Ontario tions is typically forwarded to the in BC, contributions do have to Progressive Conservative leader party, but is not counted in the be reported publicly. Manitoba ’s 2009 leadership contributor’s total allowable an- and Quebec do not allow corpo- campaign received $10,000 from nual donation – providing a rate donations and cap individ- Canaccord Capital Corporation, means by which a contributor can ual contributions at relatively while Rogers Group of Compa- donate more than the normal an- low amounts. nies donated $15,000 to Mr. nual allowable total to the party.21 Ontario requires disclosure of donations to leadership races but has no limits on the size of The takeaway donations and allows corporate While the rules for direct political contributions donations.18 l vary, even where Canadian corporations are allowed Onex Corporation, for exam- to donate freely to political campaigns or leadership con- ple, was the largest donor tests the amounts currently being donated are relatively amongst publicly-traded corpo- small for investors. However, even small political contribu- rations and one of the largest tions can create risks for the company: donors overall to Ontario Pre- n the corporation may become associated with political po- mier ’s leader- sitions and personalities that create reputational risks for ship race in 2013 with a $10,000 the company; contribution. (The company n the public may perceive the corporation as buying influ- subsequently gave the maxi- ence, which could hinder genuine and positive relation- mum allowable donation to ships between the corporation and the government if the both the Liberal Party and the company is forced to back away from those relationships PC Party in the 2014 election as for reputational reasons; and well as the maximum annual do- n relationships with legislators may be harmed if the com- nation to each party.) The largest pany has backed the opposing party. donation, of $25,000, came from

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 7 2. Direct lobbying

Canadian corporations actively cludes efforts to win government lobby political office-holders and contracts or concessions that the civil service. Lobbyists di- favour the company’s operations. rectly employed by for-profit cor- Companies also lobby, at times, porations are the second largest to keep policy-makers abreast of portion of the approximately their industry’s general concerns, 8,500 registered lobbyists at the and/or to develop relationships from industry associations or or- federal level, after non-profit as- with regulators. Other lobby ef- ganizations representing compa- sociations (which may, in turn, forts may be part of an effort to nies, and 352 were consultants be associations serving for-profit respond to the government’s pol- hired by corporations. Although corporations, as we will discuss icy initiatives or to propose one in-house corporate lobbyists filed below). Consultant lobbyists of their own. only one quarter of lobbyist com- (often hired by corporations) are The influence of lobbying, in munications in that month, al- a smaller proportion of federally- Canada, is thought to be more 22 most 60% of the monthly registered lobbyists. important than that of financial communications reports were on As an example, in the month contributions. Of the top 20 behalf of private interests.23 of November 2014, of the more companies lobbying the British The content of lobbying ef- than 1800 communications Columbia government (regis- forts frequently relates to specific recorded in the federal lobbyist tered as of April 1, 2014), only projects or provisions that affect registry, 301 were in-house lobby- one company (Encana) was a company directly. This often in- ists from corporations, 380 were amongst the top 20 donors to the BC Liberal Party.29 Not surprisingly, then, Cana- Tip of the iceberg? dian publicly traded corpora- Lobbyists registered in the federal database represent a fraction of tions are actively engaged in the contact between government officials and corporations. When a lobbying governments at nu- federal official initiates the communication (i.e. by phoning the com- merous levels. A review of active pany rather than the company phoning them) there is no require- lobbyists registered in provincial ment to register the communication unless a financial benefit was and federal databases in Canada involved.24 These types of communications are common. reveals that 80% of the TSX60 For example, Canadian company representatives are regularly in- corporations have active lobby- vited to participate in policy discussions including: • the Finance Minister’s annual summer policy retreat25 ists in at least one jurisdiction, • the Finance Minister’s Economic Advisory Council (which currently and more than half are lobbying includes ten members from boards or management of publicly- in multiple jurisdictions.30 There traded corporations)26 are 956 lobbyists currently regis- • the since-disbanded “Oilsands Clean Energy Coordinating Commit- tered to TSX60 companies in tee” (which appears to have been coordinating international oil- publicly-available provincial and sands promotion efforts by the Canadian government)27 federal databases,31 an average • Natural Resources Canada’s “Pan-European Oilsands Team” which of 16 lobbyists per corporation. coordinated lobbying of European governments on behalf of Cana- Two-thirds of the TSX60 compa- dian oilsands exports (and notably produced a list of “allies” includ- nies directly lobbied federal offi- ing Shell and BP, and “enemies” – including “NGOs”, “Competing cials in 2014, collectively industries i.e. biodiesel industry” and “Aboriginal groups”).28 initiating almost 1,100 meetings.

8 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA However even this public dis- Example: Projects closure may not reflect the full Approaching government for approval or assistance for a particular proj- extent of a company’s lobbying ect is a frequent subject of lobbying activity. For example, officials from in Canada, since not all jurisdic- Enbridge, Cenovus, Suncor and MEG Energy met with the Deputy Minis- tions require lobbyist registra- ters of Aboriginal and Northern Development Canada, Industry Canada, tions. Further, not all lobbyists are Finance Canada, and Natural Resources Canada on August 29th, 2013 to equal: one registered lobbyist discuss future plans for Enbridge’s Northern Gateway pipeline project. may conduct dozens of meetings This was prior to a decision by the Government of Canada to approve the with government officials, while pipeline. Details of the contents of the meeting were excised from the another may meet just once; and, minutes that were released under an Access to Information request.33 the level of access to high-level officials afforded to these lobby- ists may differ. Lastly, companies Example: Policy initiatives may lobby in many international Approaching government for changes to policies and regulations is an- jurisdictions that do not have other common subject of lobbying efforts. For example, the Canadian As- stringent rules about lobbying or sociation of Petroleum Producers met with the Deputy Minister of Natural public disclosure. Resources Canada and with the Clerk of the Privy Council in May 2013 Half of the companies in the urging the federal government to renew a joint federal/provincial/territo- TSX60 index make mention of rial initiative to develop “goal-oriented regulation” for offshore oil and their involvement in lobbying gas exploration, which sets general goals but gives industry “flexibility” governments in their public re- in how it meets those goals and relies on third-party certifications rather porting, but of those only one – than government inspectors to monitor compliance. Telus Corporation – reports sub- CAPP also lobbied for devolving environmental assessment powers to 34 stantially on the scope and con- federal/provincial Offshore Petroleum Boards (OPBs), joint bodies that tent of its lobbying efforts. are mandated to promote oil and gas development while also protecting the environment.35 A briefing note prepared for the Deputy Minister of Natural Resources The take-away agreed with devolving those powers to the OPBs.36 And, in November of lConsiderable financial 2013, the federal government announced that environmental assess- and human resources ments will be required only for the first well drilled in “an area set out in one or more exploration licences” – which will be defined by the OPBs.37 are devoted to lobbying by This was requested by CAPP at its May 2013 meetings. Canadian corporations. While some details on the amount and content of lobbying activ- ity may be available through Example: Canadian corporations’ government registries, share- overseas influence holders have no way of know- Even if public lobbyist registries were complete and consistent in Canada, ing the full extent of the sheer number of jurisdictions would make compiling an accurate pic- expenditures on lobbying or ture of a company's activities nearly impossible for shareholders. With the the positions taken by their addition of overseas lobbying by companies with global operations, the companies. While some of this picture becomes even more opaque. For example, Yamana Gold was re- lobbying may well benefit in- cently the subject of an uproar in Argentina when a local Yamana man- vestors, without additional ager was revealed to be exchanging text messages with an Argentinian disclosure neither the benefits legislator during a government debate on the country’s new mining law. nor the risks resulting from Yamana’s manager texted proposals for changes to the law. This revela- such activity can be evaluated. tion drew calls for a veto of the new bill.38

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 9 3. Trade associations

Top 5 lobbyists: Corporate lobbying often takes place not individually but Canadian through trade associations or 32 third-party organizations act- Corporations ing on behalf of a large number of corporate members. In The top five Canadian Canada, for example, there are publicly-traded thousands of trade organiza- tions, from regional or local corporations lobbying net Ministers) over the same pe- Chambers of Commerce to riod to represent its members’ in- in 2014 were: larger industrial organizations terests.40 CAPP has a total of 70 like the Canadian Forestry As- staff registered to lobby in Cana- u CN Rail sociation and cross-sectoral or- dian provincial and federal juris- ganizations like the Canadian dictions. The Canadian Bankers v Telus Council of Chief Executives Association, which represents w Shaw (CCCE). Most of these are regis- the country’s largest banks, has tered as non-profits, and they 49 lobbyists registered in every x Suncor collectively make up the major- provincial and federal jurisdic- ity of registered lobbyists at the tion that currently maintains a y 39 Blackberry federal level. lobbyist registry. Table 3 shows the trade asso- Corporations fund trade asso- ciations in Canada that lobbied The top five Canadian ciation political activity through the federal government most both membership fees and spe- publicly-traded frequently in 2014. Almost half of cial allocations. Although they corporations lobbying the companies in the TSX60 sometimes assess “special levies” index are members of one or Ottawa (when lobbying on members for particular pur- more of these five trade associa- poses,41 the application of gen- by trade associations to tions. Of the companies in the eral membership fees to support which they belong is TSX60 index, however, only nine political activity poses a difficulty included): report fully on the memberships for a company that may wish to they hold in trade associations. hold a membership in a trade as- u The CCCE is a frequent lobby- sociation for any number of rea- Royal Bank ist on a range of issues on behalf sons (networking opportunities, v Suncor of their membership. Between membership benefits and pro- December 2013 and November grams, educational opportuni- w Bombardier 2014, the CCCE initiated 53 ties) but also wants to manage x SNC-Lavalin meetings with federal officials the risk of being linked to politi- and/or politicians, according to cal positions taken by that asso- y Teck Resources the federal lobbyist registry. Sim- ciation on its behalf where those ilarly, the Canadian Association positions conflict with its own. of Petroleum Producers (CAPP) For example, in 2013 CAPP initiated 128 meetings with fed- lobbied the Alberta government eral officials (including ten Cabi-

10 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA TABLE 3: Top five trade association lobbyists (federal) and their TSX60 members

Lobbyist Communication Trade Association Reports, 2014 TSX60 Members Alliance of Manufacturers & Exporters 275 RBC, SNC-Lavalin, Bombardier, (only reveals Board Canada members) The Mining Association of Canada 154 Agnico-Eagle Mines, Barrick Gold, Cameco Corporation, Eldorado Gold, First Quantum Minerals, Kinross Gold Corporation, Suncor Energy, Teck Resources Canadian Association of Petroleum 128 ARC Resources, Canadian Natural Resources Ltd., Producers Canadian Oil Sands Ltd, Crescent Point Energy, Encana Corporation, Enerplus Corporation, Husky Energy, Imperial Oil, Penn West Petroleum, Suncor Energy, Talisman Energy, Teck Resources Canadian Bankers Association 95 Bank of Montreal, Bank of Nova Scotia, CIBC, Canadian Tire, Manulife Financial, National Bank of Canada, Royal Bank of Canada, TD Bank, Food & Consumer Products of Canada 77 None

to delay greenhouse gas emis- Chamber of Commerce sions regulations (specifically, in- creases in a provincial carbon pipeline advocacy levy), arguing the proposed reg- In September 2013, the Canadian Chamber of Commerce released a ulations were “very likely” to “im- report arguing for more pipelines and energy infrastructure to trans- pact production and revenue” port hydrocarbons to foreign markets, arguing that the lack of trans- and “could lead capital to flow portation causes $50 million a day in lost revenues for oil and gas from Alberta to other projects in companies, and that “failing to export Canadian energy products will have little impact on global greenhouse gas emissions …. If Canada North America and abroad.”42 43 does not export Canadian oil and gas, the world will not stop using Yet there is reportedly “little con- hydrocarbons, but Canada will have missed the opportunity to invest sensus” amongst CAPP members the proceeds of its energy resources back into Canadian society.”46 44 on the issue, and, notably, The study was sponsored by Enbridge, TransCanada, Shell, Nexen and some member companies such Suncor and others. Perrin Beatty, the Chamber’s president, led a as Teck Resources already factor speaking tour in support of new energy infrastructure in the fall of in a much higher carbon price in 2013.47 In July, 2014, the Chamber released another report suggest- their internal projections.45 ing the risks from shipping oil from the BC coastline are “extremely On the other hand, compa- low” and that we “can’t ignore the benefits” to the economy.48 nies may participate in trade as- Does this more active advocacy on behalf of the oil industry by the sociations specifically so that the Chamber of Commerce reflect the views of all Chamber members association can advocate collec- (which include green energy companies)? Do shareholders of its tively without any one company member companies believe that their portfolio’s long-term value is served by this advocacy? bearing the full costs or reputa- tional risk associated with the as- sociation’s position.

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 11 The takeaway Example: Disagreeing with lSome political posi- your own association tions taken by a trade The UK-based Carbon Disclosure Project (CDP) has, since 2013, association may pose risks for been asking corporations to report not only on their own political the reputations of corporate engagement on climate policy, but also on whether they were members or for those corpora- members of relevant industry associations, whether the com- tions’ investors. In general, pany’s position on climate policy is “consistent with” the associa- shareholders should be care- tion’s stance, and how the company is attempting to influence the ful to assess the degree to association’s position. which a corporation is associ- According to a report by the Center for Science and Democ- ated with a trade association racy, in 2013 57% of companies reporting publicly to the CDP ac- knowledged that the industry associations they belong to or ’s lobbying and influence climate policy, and 40% recognized that they “could di- advocacy activities. Indicators rectly or indirectly influence policy on climate change” by more of closer association may in- substantial involvement (e.g. board membership, funding). That clude the presence of a corpo- said, 95 companies (5%) responding to the CDP noted that one or ration’s representative on the more of the trade groups to which they belong held positions on board of the organization, climate policy that differed from their own, yet companies may special allocations or sponsor- remain as members when the trade association does represent ships for particular projects or their views on other matters.49 events, or direct involvement with the organization’s offi- cials in lobbying or public ad- vocacy efforts.

4. Funding third-party organizations

Alongside trade associations, ternational Council, the Mon- Canada’s public policy environ- treal Economic Institute and the ment is influenced by other MacDonald Laurier Institute are types of third-party organiza- all examples of third party or- tions, such as think tanks that ganizations whose goal is to in- produce materials aimed at in- fluence the policy debate and all nia publishes an annual list of fluencing policy-makers. Some receive funding from publicly- the most influential think tanks have strong corporate represen- traded corporations. In addition, globally, with regional sub-lists.50 tation on their boards and Canadian corporations may fund The university’s list of top Cana- among their donors. third-party organizations or dian think tanks is included in For example, the CD Howe In- campaigns in the United States Table 4, ranked by the university stitute produces regular research or elsewhere that produce ma- in order of influence, along with papers and conferences on pol- terials and/or advertising es- a sample of their funding sources icy matters, and solicits dona- pousing positions on matters of and the presence of executives tions from corporations. The public policy. from publicly-traded companies Fraser Institute, the Canadian In- The University of Pennsylva- on the think-tank’s board.

12 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA Table 4: Top Canadian think-tanks and funding from publicly-traded companies

Board members affiliated with Organization Identified publicly-traded funders Trade Association Funders publicly-traded companies

Fraser Institute no information no information Canaccord Capital, Brookfield Properties, FirstEnergy Capital, Goldcorp

Centre for International Encana, Power Corporation, Scotiabank no information Governance Innovation

CD Howe Institute A large list of major corporations Canadian Association of Petroleum GE Canada, Intact Financial, Ford Producers, Canadian Federation of Canada, Manulife, Potash, Open Independent Businesses, Canadian Text, Brookfield Renewable Bankers Association, others. Power, CIBC, Enbridge, BMO

Canadian Defence and no information no information RBC, IAMGold, Aviva insurance Foreign Affairs Institute

Institute for Research on no information no information Public Policy

Canadian International Council Power Corporation, RBC, Teck Resources, no information Sun Life Financial, Barrick Gold, AGF Management, BMO, Scotiabank, TD

MacDonald Laurier Institute BMO, Google Canada, Martinrea, TD, Canadian Association of Petroleum Martinrea, Aecon RBC Foundation, Arc Resources, Producers, Canadian Fuels Association, Spectra Energy Mining Association of Canada

Atlantic Institute for Clearwater Fine Foods, Astra Zeneca PLC, Canadian Petroleum Products Clearwater Fine Foods Market Studies Bank of Montreal, Empire, Google, Intact Institute, Rx&D Financial, Merck Frosst, Pfizer, Questerre Energy, Scotiabank, TD Bank, the Shaw Group, CST Brands

International Institute for Enbridge, Shell, Transcanada no information Sustainable Development

Conference Board of Canada funded through fees for services no information Rogers Communications, GM Canada, CGI Group, Transalta, RBC Financial, Shell Canada, Xerox Canada, Sasktel

Montreal Economic Institute 27% of its budget comes from corporations, no information Garda World Security but no information on funders Corporation, BMO, Schiff International, Fiera Capital, Groupe Canam, Reitmans

Public Policy Forum Apache Canada, ATCO Group, BMO Financial Canadian Association of Petroleum RBC, Cenovus Group, Capital Power Corporation, Cenovus Producers, Canadian Bankers Energy, CIBC, CISCO, CN Rail, Enbridge, Association, Canadian Energy General Electric Canada, Loblaw Companies, Pipeline Association, many others Manulife Financial, Microsoft Canada, Power Corporation of Canada, RBC, Sun Life Financial, Suncor Energy Inc, TD Bank Financial Group, TransCanada

Frontier Centre for Public 18% of its budget comes from corporations, no information Policy but no information on funders

Queen's Centre for no corporate funding no information International & Defence Policy

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 13 While a company may be in- ing from numerous publicly- after it was revealed that they volved in a trade association to traded companies, has advo- supported the controversial access a range of benefits and cated for school voucher sys- American Legislative Exchange not necessarily to engage in pol- tems,52 private provision of Council (ALEC), a group that icy debates, special funding pro- health care53, against Canada drafts and promotes legislation. vided to think tanks is usually Pension Plan expansion,54 and in ALEC has advocated the expan- more directly linked to specific favour of moving public sector sion of “right-to-work” laws,56 policy or research objectives. workers from defined-benefit and has been accused of cli- For example, the Fraser Insti- pension plans to defined-contri- mate-change denial.57 Although tute solicited corporate dona- bution plans.55 Whether or not little information is available on tions from a range of tobacco these controversial positions its membership or corporate companies by promoting publi- align with the values and pur- supporters, TransCanada has re- cations and conferences that pose of the individual publicly- cently been identified as a spon- question the re- traded sor of ALEC’s activities.58 lationship of Whether or not these corporations that second-hand- controversial positions sponsor the Insti- smoke and can- align with the values and tute, they may be The takeaway cer, decrying problematic for Although companies purpose of the individual l government the shareholders may wish to support regulation of publicly-traded in those compa- organizations that contribute the tobacco in- corporations that nies, which in- research to public policy dis- clude the pension cussions, companies that pro- dustry and ask- sponsor the Atlantic ing for support plans of teachers, vide funding to these in further re- Institute, they may be nurses, and other organizations should be clear search on “risk problematic for the public sector about the purpose of this and regulation”. shareholders in those workers. funding and how it aligns with The Institute Not surpris- the company’s interests – and companies, which claimed credit ingly, then, some that of their shareholders. for the Parlia- include the pension shareholders have mentary Fi- plans of teachers, nurses, reacted negatively to news that their nance and other public sector Committee be- companies pro- ginning to as- workers. vide funding to sess the cost of policy-oriented regulations on third-party organi- the economy.51 zations. For example, US compa- The Atlantic Institute for Mar- nies like Google and Facebook ket Studies, which receives fund- were challenged by investors

14 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA 5. Advertising and public relations

At the federal required. In Canada, consider- in the oil sands are your neigh- level, third ably more is spent by trade asso- bours, your colleagues, the peo- parties can ciations and publicly-traded ple your children play minor spend up to corporations to influence policy baseball with. They are just like $150,000 na- and/or the policy environment you and I. They go to work every tionally on advertising in an elec- between elections. day as dedicated individual em- tion period.59 In the last federal Canadians will be very famil- ployees.”67 election (2011), however, third iar, for example, with advertising Figures for the cost of these party reports showed no contri- by Suncor, Cenovus and the media campaigns are not pub- butions to third-party advertis- Canadian Association of Petro- licly available nor are they re- ing from publicly-traded leum Producers (CAPP) regard- ported to investors in the corporations in Canada.60 The ve- ing the benefits of oilsands companies footing the bill, but hicle of third-party advertising development in Canada. Ads Janet Annesly, Vice President of was used much more frequently with slogans like “See what Yes Communications at CAPP, has by trade unions and civic organi- can do” that make claims about said ad campaign costs are “in zations. A total of just over the environmental and eco- the millions of dollars, all funded $1,250,000 was spent in total on nomic benefits of oilsands proj- by the industry.”68 third party election advertising ects run frequently in Canadian The ad campaigns by CAPP in the 2011 election.61 movie theatres, on television, and other oilsands industry play- Provincially, third party adver- and in newspapers. In addition, ers do not advocate for or tising during election periods is new “Advertorial” content (ad- against a particular politician or not officially limited in Ontario, vertising designed to look like public policy, but they are an im- PEI, and Newfoundland and news reporting) with similar pos- portant part of framing the pub- Labrador, as well as the three ter- itive messages about the indus- lic policy discussion on oil ritories. Other provinces either try is now appearing regularly in industry regulation and creating prohibit third party spending en- newspapers and websites a supportive atmosphere for po- tirely (Saskatchewan, Manitoba) owned by Postmedia – some- litical lobbying. “Our research or place financial and time limits times without notifying readers shows that the longer the ads on spending, ranging from a that it is paid advertising – are on, the more effective they mere $300 in Quebec to through a special deal between become,” Annesly says.69 $150,000 in British Columbia.62 the media conglomerate and At the same time, they may Nova Scotia allows third party CAPP.65 be considered legitimate public advertising by corporations, but “We’ve done a lot of advertis- relations efforts by companies any group that spends more ing on oil sands,” says CAPP’s that face a serious reputational than $500 must register as a President, David Collyer, “and I and/or regulatory risk to their third party and can spend up to think the public opinion polling business. $10,465.63 However few third that we do suggest that they are, Investors have not typically parties registered in the most re- overall, effective, in terms of called for disclosure of public re- cent (2013) election.64 moving the middle.”66 lations spending by companies. Third party spending outside Syncrude’s VP of Government However there is an investor in- of election campaign periods (i.e. and Public Affairs Kara Flynn, terest in careful board oversight before the writ is dropped) is not says the ads deliver “The mes- of these public relations cam- limited by law, nor is reporting sage … that the folks who work paigns, as they can cross the line

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 15 into political advocacy and also sCanada to “play offense” by “Energy East Action Network” have the potential to create their “work[ing] with third parties to featuring an online petition di- own, additional reputational risks pressure Energy East opponents” rected at political leaders and for companies and undermine and “add[ing] layers of difficulty decrying a “well funded, well or- acceptance of key projects. for [its] opponents, distracting ganized campaign” to “do what- For example, Kinder-Morgan was them from their mission and ever it takes to deny Canada the subject of a complaint to the causing them to redirect their re- from realizing our potential.”74 BC Elections Commission over sources.” The document proposed Establishing grassroots net- television ads run during the “opposition research” focused on works to petition political lead- province’s municipal elections in organizations like the Council of ers or regulators is clearly a form October, 2014. The ads, in sup- Canadians, Equiterre and the of political spending, not simply port of the company’s Trans David Suzuki Foundation.72 After public relations. Two examples Mountain pipeline expansion, the document was revealed, are the newly formed “Energy were run extensively during the Trans Canada quickly disavowed Citizens” network (a CAPP-spon- election in Burnaby and Vancou- that component of the strategy sored platform which seeks to ver, where the expansion was a and announced that its contract create a movement of “advo- major issue of the campaign. with the public relations firm cates” for Canada’s oil and gas in- Kinder Morgan denied the ads would not be extended. However dustry75) and the Canadian were targeting the elections,70 it acknowledged that the leak Chamber of Commerce-funded and the Elections Commissioner “has created distraction most no- “Partnership for Resource Trade” ultimately ruled that the com- tably in Quebec.”73 organization that hosts an on- pany did not have to register as a TransCanada’s public rela- line petition to political leaders third-party advertiser, 71 but the tions strategy – also outlined in urging support for Canada’s nat- incident generated substantial the leaked document – includes ural resources industries.76 The negative press for the company. mobilizing citizens to advocate earlier Energy Policy Institute of In November 2014 the leak of a for the project politically Canada, which featured many of strategy document by a public re- through “digital grassroots advo- the same supporters and lations company employed by cacy initiatives”. The strategy ad- claimed responsibility for signifi- TransCanada Corporation to help vises the company to focus on cant changes in Canada’s envi- sell its Energy East Pipeline proj- “recruiting a sizeable commu- ronmental policies77, took a ect created damaging headlines nity of supporters in our key au- backseat after its director was for the company at a time when it diences and geographies (e.g. charged by the RCMP with pro- was seeking regulatory approval. Conservative, Quebec, etc)”. hibited lobbying and influence The document advised Tran- TransCanada has established an peddling.78

The takeaway lCareful board policy and oversight of the purpose, content and tim- ing of advertising and public relations campaigns is essential. Ad- vertising and public relations efforts related to the public policy environment or electoral campaigns may create additional reputational risks for companies and their shareholders. At present, spending on advo- cacy campaigns by companies either directly or through their trade associa- tions is not generally revealed to investors in Canada.

16 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA Discussion

Section B Questions

SHARE is inviting institutional investors and other Canadian market participants to join in a conversation about political spending as a corporate governance question. We set out, below, a number of questions to help guide that discussion. Along with each question, we include information on practices in other jurisdictions, examples of current practice, and proposals relevant to shareholders.

1. Can we differentiate between appropriate and inappropriate corporate political spending?

Like beauty, the appropriateness tion, the law sets limits on lobby- Example: of a corporation’s political spend- ing, contributions, and advertis- ing may be in the eye of the be- ing, and it addresses the timing Lobbying for holder. When it comes to the of these activities, who can un- tax reductions question of corporate involve- dertake them, as well as the level A common subject of business ment in politics, an individual of public disclosure required for lobbying is corporate tax reduc- may view the activity more each activity. tion, and political contributions favourably when it supports their There is, of course, room for may be given to candidates that personal beliefs or preferred can- debate about the omissions or favour lower corporate taxes. Al- didates and disapprove when it inclusions in these legal limita- though lower taxes may serve runs counter to their personal tions, and there are a number of companies and executives in the preferences. Clearly a more ra- proposals for new limitations short term, companies and their tional approach to assessing cor- and better disclosure, including: shareholders may have different porate political activity is needed. n Provincial-level bans on union long-term interests. For example, Can we, however, make dis- and corporate campaign con- a lower tax base may lead to pub- tinctions between types of cor- tributions lic service cuts that affect the ben- porate political activity? Can we n Requiring disclosure of eficiaries of public sector pension differentiate between appropri- provincial leadership contest plans that may hold substantial shares in the companies under- ate activities and inappropriate donations taking lobbying. Is this lobbying activities? n New and/or lower limits on in shareholder interests? The short answer is yes, in campaign contributions in that the law does differentiate. each province79 As outlined in the previous sec-

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 17 Example: Against Say-on-pay and majority voting Companies sometimes advocate regarding questions of corporate ac- countability to shareholders. For example, Power Corporation of Canada submitted a comment letter to Industry Canada in 2014 arguing against the inclusion of provisions in the Canada Business Corporations Act re- quiring “say on pay” votes, majority voting procedures for boards, and splitting the role of Chair and CEO.82, 83 Yet all three of these are consid- ered good governance practices by shareholders.84 When does corporate management's use of corporate resources to advocate against the ex- pansion of shareholder rights cross the line?"85

For investors, however, the risks involved in the political ac- and measurement difficult, if not limitations imposed by law are tivity? impossible. not the only yardstick. For a cor- Assessing the value of politi- Finally, any returns from polit- poration to engage in political cal contributions for the corpo- ical activity must also be activity it must be clear that the ration is difficult. Using weighed against the risks the ac- engagement or spending pro- shareholder interests as a bench- tivity may create for the corpora- vides value, does not create mark is itself difficult since share- tion, both in terms of undue risks, and does not run holders vary considerably in reputational risks, as well as the counter to the company’s and their interests. Even their com- distinct possibility that a candi- shareholders’ interests – even if mon interest in financial returns date or party that received con- the activity is legal. may vary depending on each in- tributions may not win (i.e. The question is whether the vestor’s anticipated holding pe- wasted resources and/or gener- company’s board makes any dis- riod and tolerance for risk. ating hostility from the winning tinctions beyond those pre- Whether political contributions party or candidate). scribed by law. For example, in by a corporation result in supe- jurisdictions where campaign rior financial returns for a com- contributions are allowed, how pany and its shareholders is does the board assess whether a subject to considerable – and Questions particular expenditure is in the ongoing – empirical study and n What criteria should be ap- company’s best interest? Should scholarly debate.81 Similarly, as- plied to determine whether a the company devote resources sessing benefits to the corpora- political action is in the com- to lobbying governments, and if tion of lobbying activity is pany’s interests? so, how does the company de- difficult, since beneficial laws n What criteria should be used termine the issues on which it and regulations may be the re- to assess risks in political lobbies and the positions it sult of many factors, which spending? takes? How does it assess the makes conclusive attribution

Example: Market level risks Political spending may create both company and market-level risks. For example, an International Monetary Fund Working Paper correlated lob- bying activity in the U.S. mortgage lending sector with riskier lending by those companies that undertook lobbying, the sum of which had mar- ket-wide effects in the crash of 2008.86

18 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA 2. Should Canadian companies have policies from Colgate-Palmolive, IBM and Microsoft. The Colgate- policies on political spending and Palmolive model is the most re- disclose them to shareholders? strictive, prohibiting direct and indirect political contributions, as well as indirect spending through non-profit organiza- In the US, more than 125 of the national Corporate Governance tions. It also requires that dues S&P500 companies voluntarily Network, which proposes a set of and other payments to trade as- disclose their political spending principles for policies on political sociations not be used for politi- and lobbying policies.87 In activity framed around the con- cal purposes.91 Canada, 22 companies in the cepts of legitimacy, trans- In France, a coalition of corpo- TSX60 have disclosed policies re- parency, accountability and rate members of Transparency lated to political donations88, but responsibility. The ICGN pro- International (including BNP of those only seven provide poses that policies include pub- Paribas and L’Oreal) signed a dec- guidance on the size or type of lic disclosure of lobbying laration last year pledging to de- acceptable contributions and activities and political donations, velop responsible lobbying identify the committee or indi- including spending on third- policies, disclose political contri- viduals responsible for authoriz- party organizations and trade as- butions as well as lobbying activ- ing contributions. Fifteen sociations, the people ities and positions being taken companies simply identify those responsible for making decisions (including through trade associa- responsible for authorizing con- in the company, oversight by the tions), and to promote similar tributions, but provide no indica- Board’s governance or risk man- policies amongst their trade as- tion of what guides the agement committee, and disclo- sociations.92 company’s decision-making sure of lobbying positions taken Oversight of third-party asso- process. The other two thirds of on key policy issues. Lastly, the ciations is perhaps the most diffi- the TSX60 companies have not ICGN proposes that shareholders cult part of policy development, disclosed any policy related to be allowed to vote on the politi- because it is difficult to distin- political contributions.89 cal donations policy and to set a guish at the policy level between The content of existing corpo- maximum amount for company useful memberships in trade as- rate policies and disclosure political donations.90 sociations and potential undesir- varies considerably. Proposals for Another set of model board able political activity by an model board policies also differ policies has been made available association that the Board does in their scope and content. by the Coalition for Accountabil- not control. On this point, poli- One of the most comprehen- ity in Political Spending, mod- cies may outline a process for risk sive models is that of the Inter- eled after existing company

Legitimate corporate political activities are those that are conducted legally and transparently, are clearly linked to a company’s business purposes and strategic intent and carry the support of its shareholders. Such activities serve the interests of the company as a whole, not interests specific to individual managers or shareholders. Legitimacy is enhanced when corporate political activities occur within a clear policy framework that is overseen by the company’s Board and carries investor support. International Corporate Governance Network80

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 19 management, and provide for board of directors adopt a policy access to the necessary informa- to refrain from using corporate Questions tion upon which to make opera- funds to influence any political n What should be addressed in tional decisions. For example, Ira election,” including taking meas- a corporate policy on political M. Millstein, the former Chair of ures to prevent any contribu- spending? the OECD Business Sector Advi- tions or dues to trade n Should all spending be forbid- sory Group on Corporate Gover- associations being used for the den? nance, proposes that Board same purpose. (Notably, the pro- n What should it say about policies require trade associa- posal did not seek to restrain membership in trade associa- tions to provide the member lobbying). As You Sow argued tions or other third party or- company with a report on their that disclosure alone was insuffi- ganizations? political spending, and disclose cient, because n Who should be responsible to members the full list of for overseeing and/or signing donors underwriting their politi- disclosure is retroactive, occur- off on political spending? cal spending.93 ring after the contribution has al- n Should there be a shareholder ready been made, and does not Some shareholders, seeing vote to approve political allow shareholders to anticipate the risks involved in corporate or pre-emptively evaluate the spending, and if so should it spending to influence political potential risks associated with be binding or advisory in elections, have filed shareholder those contributions. Conse- nature? proposals simply urging a com- quently, proponents believe that pany to refrain entirely from a company policy against politi- cal contributions intended to in- making contributions to political fluence elections will ensure candidates or parties. For exam- shareholders are protected ple, in 2014 the US shareholder against the potential risks and group As You Sow filed a resolu- controversies associated with tion at DuPont asking “that the this practice. 94

3. Should corporate political is clearly much larger than just amounts donated to electoral spending in Canada be disclosed? campaigns. Because most of that spending is not subject to Disclosure of political spending and, even where allowed, little any regulated disclosure regime, by corporations is seen by many evidence of the type of large it is not possible for investors to US investors as a critical element campaign contributions seen in determine the full extent of in good corporate governance the US. Is the level of political spending by Canadian corpora- and an important accountability spending, then, a substantial tions to influence public policy. mechanism because corpora- concern for Canadian investors? In the United Kingdom, where tions in that country can spend If we include spending on corporate campaign donations unlimited amounts on influenc- lobbying,95 spending on adver- also do not reach the levels seen ing the political process, and be- tising and editorial content, and in the US, UK corporate law re- cause the evidence is clear that contributions to third party or- quires that political donations be some corporations are indeed ganizations and industry associ- disclosed to shareholders and spending very large sums of ations that buy advertising and their upper limits prescribed by money on political influence. conduct lobbying, the total level shareholder vote. Total author- In Canada, legal limits on cam- of spending by Canadian corpo- ized spending between 2001 paign contributions are stricter rations to influence public policy and 2010 was more than £85.6

20 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA million, but actual reported cant fact, but a reasonable share- disclosure is needed or wanted spending by publicly-traded cor- holder focusing on the total mix by investors or other stakehold- porations during that period was of information informing his in- ers such that the cost of collect- vestment decisionmaking.98 only £10.2 million (C$18.5 mil- ing, preparing and publishing the lion).96 Yet, disclosure is still a re- data is justified. Similarly, when For political spending, the quirement under UK law. enacting regulations requiring “reasonableness” test would Current Canadian securities disclosures, regulators often con- likely centre on reputational risks laws already require disclosures sult stakeholders to determine created by the activity, which at fairly low financial thresholds. whether there is sufficient inter- could include impacts on things For example, companies must est in the new requirement. like brand value, consumer pref- disclose perks provided to In the US, investor interest in erence, employee loyalty, obtain- Named Executive Officers political spending has been ing regulatory approval of amounting to more than clearly evidenced by the 530 projects, the company’s relation- $50,000 in a given year, not be- shareholder proposals related to ship with local communities, and cause these are material in a fi- political spending filed in the US the company’s relationship with nancial sense but because during the last five years. Political government.99 investors have a clear interest in spending disclosure requests now The editors of Bloomberg.com the information. represents the largest category of note, for example, that even a rel- In a similar vein, the test of shareholder proposals filed in the atively small political donation by materiality for spending on polit- US, and in 2014, 16 of those pro- Target Corporation to a business ical influence should not rely posals achieved support of more group supporting an opponent solely on the level of spending than 40% of votes cast.102 The of same-sex marriage “resulted in but also on the risks it creates for level of investor interest is also damaging publicity and a nation- the corporation. clear from the more than one mil- wide boycott of Target stores by The test for materiality in lion comment letters received by gay-rights supporters.”100 The Canadian securities law is the Securities Exchange Commis- amount of the donation was not whether a “reasonable investor’s sion on the issue. material; its results, however, decision whether or not to buy, In Canada, however, political were.101 sell or hold securities of the is- spending is still a nascent issue, Apart from the disclosure of suer would likely be influenced and has not yet been the subject specific political spending, in- or changed if the information of shareholder resolutions. vestors may be interested in the was omitted or misstated”97 policies and practices adopted Speaking to the same point by the Board to oversee political in US law – and opposing a dis- Questions spending, as discussed above. closure rule at the SEC – Paul n To what degree do Canadian Typically, boards do not disclose Atkins writes: companies face reputational all policies to the public, but or other risks from political many non-financial policies (e.g. Fundamentally, it is not enough spending? Environment, Health and Safety that some investors may view a n Is there a clear need and/or fact as important; rather, it must policies) are disclosed, and pro- desire for disclosure of spe- be important to the reasonable vide confidence to investors that cific spending in Canada? investor. Not a special-interest the Board is exercising appropri- n Should investors be made shareholder, a shareholder with ate oversight in a particular area. an axe to grind, a shareholder aware of Board or manage- Before voluntarily disclosing with a particular religious or po- ment policies regarding over- information that is not required litical bent, or a shareholder who sight of political spending? thinks that it would be “nice to by law, company boards or man- know” some relatively insignifi- agers must evaluate whether the

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 21 4. What is the appropriate to influence public support for a party, candidate, or position in a mechanism for disclosure? referendum) or political expen- ditures (including advertising or Should disclosure be pursued as direct political contributions to company activity designed to in- a voluntary option for individual parties or candidates, while fluence public support for a companies or a regulatory re- fewer disclosed their contribu- party, candidate, or position in a quirement across the market? If tions to trade associations or referendum). Shareholders are a regulatory approach makes non-profit third-party organiza- asked to approve an overall ceil- sense, is it better to make tions. Notably, as pressure to dis- ing on donations or expendi- changes to applicable securities close grows in the US, a number tures for a given period (rather regulations or to corporate law? of companies that had not yet than specific sums for specific Should shareholder approval of faced a shareholder resolution purposes), with a maximum pe- political spending be required? on the subject had also made riod of four years. If a company In order to answer these partial disclosures. 104 makes a donation that is not au- questions, we look first to exist- thorized by a general share- ing practices in Canada and 2. Regulatory approaches holder resolution, the Directors other jurisdictions for experience are personally liable for reim- and guidance. Changes to corporate law bursing the amount and com- In the United Kingdom, the pensating the company for any 1. Voluntary approaches Companies Act of 2006 (Part 14) damage.105 requires UK companies to obtain General memberships in trade As noted above, disclosure of shareholder approval for finan- associations, even if those associ- political spending by individual cial contributions to political ations carry out political activity, US corporations has been the parties and organizations (de- is not considered a political do- subject of numerous share- fined as organizations that seek nation under the law.106 The Com- holder resolutions and some vol- panies Act political untary disclosure. The US Center spending provisions for Political Accountability pub- A modest proposal? also do not address lishes an annual Index of Corpo- corporate lobbying ex- Lucien Bebchuk (Director of the Corporate rate Political Disclosure and Governance Program at Harvard Law penditures, which rep- Political Accountability (the Zick- School) and Robert Jackson (Associate Pro- resents a significant lin Index) which measures trans- fessor of Law at Columbia Law School) have gap in disclosure obli- parency at the largest 300 suggested that US lawmakers: gations compared, for companies in the S&P 500.103 The • Provide shareholders with a role in deter- example, to the ICGN 2014 survey found that 99 of the mining the amount and targets of corpo- standard. companies surveyed have rate political spending; Companies are reached agreements with share- • Require that independent directors over- required to include in holders to disclose political see corporate political speech decisions; their annual Directors’ spending, and that 100 of the • Allow shareholders to opt out of – that is, Report to sharehold- either tighten or relax – each of these first 192 companies included in both ers a list of any politi- two rules; and the 2013 and 2014 indices had cal donations or • Mandate detailed and robust disclosure to improved their scores. However expenditures that ex- shareholders of the amounts and benefici- 65 of the companies surveyed aries of a corporation’s political spending, ceeded £2000 (aggre- still disclose little or no informa- whether made directly by the company or gated over the year), tion. More companies disclosed indirectly through intermediaries.109 including naming the

22 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA candidate, party or organization Changes to Securities Law any political expenditure in ex- that received the donations. Sim- A group of ten U.S. law pro- cess of US$50,000 and to disclose ilarly, companies must report fessors submitted a proposal to these votes – including the vote charitable donations over a simi- the Securities Exchange Com- taken by each Director – to share- lar threshold.107 mission in 2011 asking that the holders. Lastly, the Act would re- Similar approaches have been SEC “develop rules to require quire issuers to report quarterly proposed but not adopted in the public companies to disclose to on any political expenditures and United States. In 2011, for ex- shareholders the use of corpo- votes of the board authorizing ample, legislators in New York rate resources for political activi- expenditures, and to summarize proposed amendments to the ties.”110 The rule-making petition every expenditure over $10,000 state’s corporate laws requiring a received more than one million in an annual report. corporation to obtain prior comment letters, more than any The Act was immediately sent shareholder approval “at least petition ever received by the to the Senate Committee on Bank- annually” before making any po- SEC. Although the rule-making ing, Housing, and Urban Affairs litical donations or independent proposal was put on the SEC’s and is not expected to go to a expenditures, and to set an an- agenda for 2013, the SEC faced vote.113 This was the third attempt nual aggregate amount of al- considerable political pressure at introducing similar legislation lowed donations or from Republican lawmakers not by Democratic Senators. expenditures. The law would to adopt a rule,111 and the proj- In Canada, enacting changes also require disclosure to share- ect was subsequently aban- to securities regulations is, at pres- holders of the company’s dona- doned in favour of completing ent, complicated by constitutional tions or expenditures and the overdue Dodd-Frank rule-mak- division of powers, as there is no business rationale for them. The ing projects. It is not clear single national securities regulator. bill did not pass.108 whether the SEC will again take Efforts to maintain a level playing In Canada, enacting changes up the project. field across the country mean that to corporate law is complicated Efforts have been made to changes made by some of the by the constitutional division of enact changes to the US Securi- larger securities regulators may powers. While the federal gov- ties Exchange Act of 1934 in the lead to eventual adoption across ernment may make changes to US Congress, most notably all jurisdictions; opportunities may the Canada Business Corporations through the Shareholder Protec- also arise from the introduction of Act, this only governs companies tion Act of 2013 (S. 824). Intro- the proposed Co-operative Capital incorporated federally. Changes duced in the US Senate in April, Markets Regulatory System. to the relevant company laws in 2013, this bill proposed an each province would be required amendment to the Securities Ex- for any companies incorporated change Act requiring companies Questions provincially. Further, changes to to obtain majority shareholder n Are voluntary measures (en- corporate laws would also affect approval for annual expendi- couraged by shareholder votes) privately-held companies. While tures for political activities, in- sufficient, or is there a space for there may be an argument for cluding funds provided to trade regulatory approaches to re- public disclosure of spending by associations or tax exempt or- quiring disclosure? privately-held companies, this ganizations that may be used or n If so, are securities regulators paper is concerned with protec- transferred to other organiza- best equipped to create ap- tion of public company share- tions for political activities, but propriate rules or should dis- holders and does not necessarily not including direct lobbying ex- closure be enacted by extend to the spending being penditures.112 The Act would also amendment to Canadian cor- done by private parties. require issuer Boards to vote on porate laws?

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 23 5. What information should be used to participate or inter- vene in any political cam- disclosed and what should be paign, broken down by the threshold for disclosure? recipient. n How trade associations are using their payments, includ- One difficulty with voluntary dis- institutional investors represent- ing the recipients or benefici- closure at a company-by-com- ing more than US$690 billion in aries of trade association pany level is that the scope and assets under management pro- political spending underwrit- quality of data reported can vary posed answers to the questions ten by company funds114 significantly, making analysis by of scope and materiality. They They also argued that there investors more akin to reading argued that the following infor- should be no de minimis excep- tea leaves than a careful assess- mation should be disclosed: tions for direct donations, on the ment of risks and opportunities. n Policies and procedures for grounds that even small, imma- Even if companies were con- political contributions and terial do- One difficulty with sistent in the type of spending expenditures nations they reported, there is still the n The title of the person re- can create voluntary disclosure question of the threshold of sponsible for making deci- large repu- at a company-by- spending that requires disclosure sions about political tational company level is that (the “material” threshold for contributions risks for spending). n Monetary and non-monetary companies the scope and quality A comment letter submitted contributions and expendi- and there- of data reported can to the US SEC by a group of forty tures (direct and indirect) fore vary significantly, should be making analysis by known to Are there GRI Indicators for investors. investors more akin to political spending? They pro- reading tea leaves posed a than a careful Within the world of voluntary corporate reporting, the Global $25,000 Reporting Initiative’s (GRI) current G4 guidelines include an indicator threshold assessment of risks regarding political contributions: for report- and opportunities. ing mem- G4-SO6: TOTAL VALUE OF POLITICAL CONTRIBUTIONS BY berships in associations, such COUNTRY AND RECIPIENT/BENEFICIARY n Report the total monetary value of financial and in-kind that only more substantial mem- political contributions made directly and indirectly by the berships are reported. organization by country and recipient/beneficiary. The most common requests n Report how the monetary value of in-kind contributions in shareholder proposals on po- was estimated, if applicable. litical spending in the US are for the company to review and re- Many investors favour the use of GRI indicators to create consistency port on political spending and comparability in sustainability reporting. While this GRI indicator and/or lobbying. In 2014 seven is useful for companies reporting campaign contributions, it does not shareholder proposals asked address other types of political spending like lobbying. the company to report specifi- GRI’s previous set of indicators (G3) did ask companies to report on cally on climate change advo- “Public policy positions and participation in public policy develop- cacy, and seven proposals ment and lobbying.” However Canadian companies that use GRI indi- urged the company to end all cators mostly did not report on that indicator.

24 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA political spending. A small num- 6. How often should information ber of proposals have asked for either shareholder approval or be disclosed? an advisory vote on political spending.115 Proposals related to spending tend to ask for “a report, with Advocates for disclosure of politi- the time laws and regulations are semi-annual updates, on how cal donations note that any cam- being developed. [the company] makes direct and paign contributions should be Shareholders require informa- indirect contributions to political disclosed prior to the vote in tion on risks to their investment campaigns and referenda, identi- question.117 While the argument on an ongoing basis, but at the fying recipients, individual con- that details of a candidate’s back- same time do not want to divert tributions, and the titles of ers should be known to the vot- too many company resources to corporate officials making deci- ers prior to the election is strong, reporting, and should not be sions.” Proposals related to lob- the democratic interest for the overwhelmed by excessive infor- bying tend to ask for reports on average voter is not the same as mation. A balance is necessary. In the company’s policy, payments, a shareholder’s interest in their corporate reporting, this is usu- memberships in groups that corporation’s contributions. For ally achieved by including rele- write model legislation, and in- the latter, the reason to seek dis- vant information in the formation on how these pay- closure is to identify risks to the company’s annual report to ments occur and how company and ensure manage- shareholders, or in some cases in management and the board of ment is representing the com- an annual sustainability report is- directors monitors them.116 pany’s best interests, rather than sued at a different time. However to decide how to vote as citizens companies also report financial in a particular election. information on a quarterly basis, Questions With regard to reporting on a and publish other information in n What range of activities company’s lobbying and adver- the form of news releases and/or should be disclosed to share- tising spending, both sharehold- website postings. holders (e.g. campaign contri- ers and the general public could In a recent survey by the CFA butions, lobbying, benefit from timely disclosure. In Institute in the United States (see memberships, advertising)? many jurisdictions specific lobby- graph, page 26), 66% of respon- n Should contributions to trade ing activity must be posted in dents felt disclosures of political associations or other third public registries shortly after it is spending should be made in an- party organizations be in- conducted, as there is a clear nual reports, followed by 46% cluded in reporting, and if so, public interest in disclosure who favoured quarterly report- should this include general about lobbying and influence at ing and 43% who favoured in- membership fees or only con- tributions earmarked for lob- bying or other political Shareholders require information on risks to their advocacy? investment on an ongoing basis, but at the same time n Should there be a de minimis do not want to divert too many company resources exception for reporting and, if so, what should be the to reporting, and should not be overwhelmed by threshold? excessive information. A balance is necessary.

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 25 Source: CFA Institute cluding it in annual proxy state- cial contributions to specific ing on political donations that ac- ments (respondents could select campaigns, or lobbying activity companies quarterly financial re- more than one option).118 related to a time-sensitive policy ports. Also, some believe that Although annual reporting matter? In the Canadian context, disclosures should be made “suffi- should be sufficient to provide would annual reporting still pro- ciently in advance of the com- investors with information about vide shareholders with adequate pany’s annual shareholder policies, oversight, and member- information on the company’s meeting to allow shareholders to ships in outside organizations spending and relevant risks asso- use the ‘procedures of corporate (none of which is likely to ciated with it? democracy’ to address the com- change on a quarterly basis), As the chart above demon- pany’s political activity.”119 would it be sufficient for finan- strates, some would prefer report-

Questions n How often should companies report on political spending? n Are there different considerations for campaign contributions, lobbying, advertising, or contributions to trade associations? n How often should companies report on policies and oversight? n Should disclosure be included in Annual Reports, quarterly reports, proxy circulars, or in some other form?

26 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA 7. Are there risks or costs for investors from disclosure?

One argument marshalled a company could refrain from or administrative burdens for a against disclosure of political lobbying related to legislation company? spending is that it may create that affects their interests, leav- Unfortunately, on this point risks for companies by drawing ing the playing field open for the evidence is not yet clear. attention to the amounts and re- competitors or other interests After reviewing its own policies cipients of their spending. who may influence lawmaking and procedures for political David Primo, an advisor to the in a manner detrimental to the spending, Charles Grezlak, Vice Center for Competitive Politics120 corporation’s value. President of State Government in the US, wrote recently that Or a company may feel the Affairs and Policy at Merck, “any group, including non-share- need to forego a largely benefi- noted that “The administrative holders, can use the information cial membership in a trade asso- burden wasn’t much of a prob- gleaned from disclosure reports ciation because of a relatively lem.”125 However there has not to attack the company and ad- minor position taken by the as- yet been a comprehensive vance the group’s political sociation. Membership in a trade study of the burden of report- goals.”121 For example, the phar- association may confer benefits ing political spending, in part maceutical company Merck was on the company, including the because the phenomenon is an early adopter of political development of jointly-sup- relatively new. spending disclosure, and it has ported industry advocacy re- been subject to a shareholder garding legislation and proposal by a self-described con- regulations that help companies Questions servative think tank regarding its overcome free-rider problems.123 n What are the potential nega- expenditures on lobbying in the Activist campaigns to con- tive consequences of political US. The organization’s primary vince companies to disassociate spending disclosure? concern was the company’s sup- with such associations once n Do the risks of outside pres- port for the President’s health they are fully disclosed could sure outweigh shareholder care reform in the US, specifi- cause the company to forego interests in political spending cally, “prevent[ing] another ca- the benefits to shareholders of disclosure? tastrophe like ObamaCare.”122 membership. n Are there ways of tailoring The risk of negative attention Eighteen US companies have disclosure requirements to re- for a company’s political spend- responded by earmarking con- duce those risks? ing is real. The question, how- tributions to distinguish be- ever, is whether these risks are tween trade association best avoided by keeping contri- membership dues and contribu- butions undisclosed from share- tions which go to political activi- holders, or by having clear and ties. Qualcomm Inc., for defensible policies and practices instance, has a policy requiring on political spending that with- disclosure of any portion of dues stand shareholder scrutiny. or special assessments chan- Another concern for investors nelled towards lobbying or po- is that disclosure may deter litical contributions by the companies from participating in association.124 the political process even where Lastly, could a disclosure they should do so. For example, regime create unnecessary costs

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 27 Conclusion

“A healthy system of corporate governance ensures that companies make proper use of power that is entrusted to them by their shareholders. This relates to all aspects of a company’s activities, but certainly includes a company’s involvement in seeking influence in the political process.” - International Corporate Governance Network126

lthough the question Canada’s capital markets have of disclosure of politi- also benefitted from increased Contribute cal spending is rela- disclosure. Many matters not to this Atively new to the previously subject to disclosure corporate governance agenda in under strict financial materiality discussion: Canada, questions about corpo- tests have been added to the ros- rate spending in the political ter of relevant information for in- 1. Take our online survey at: arena are not. Canada’s first vestors in recent years, as Prime Minister, John A. MacDon- investors increasingly become http://ow.ly/HX4ka ald, was forced to resign when aware of the full range of risks the opposition revealed sub- and opportunities that can affect 2. Contact SHARE at: stantial secret payments made the value of their portfolios. http://www.share.ca/contact/ to the Conservative Party’s 1872 SHARE’s examination of political election campaign by Hugh spending is intended to stimu- Allan, then-head of the Canadian late discussion amongst institu- Pacific Railway Company, in ex- tional investors about the change for the contract to build intersection of these two worlds Canada’s cross-country rail line. – good public governance and Concerns about corruption and good corporate governance. In corporate influence have contin- both cases, much is to be gained ued ever since. from a better understanding of Canadian jurisdictions have the issues, better policies to gov- enacted many rules to lessen the ern the relationship of corpora- impact of corporate money in tions and the political process, politics, and to expose those con- and better disclosure of informa- tributing financially and those tion relevant to decision-makers lobbying behind the scenes to – whether voters or shareholders. daylight. Canada’s political sys- We invite your comments and tem, in general, has benefitted thoughts. from better disclosure.

28 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA 11 Center for Responsive Politics. Senator Hudak. Available at: www2.elec- Endnotes Mitch McConnell. Available at: tions.on.ca/stats/09files/leadership/p https://www.opensecrets.org/politi- cp/09pcplchudak5-1.htm 1 Harper v. Canada (Attorney General), cians/summary.php?cid=N00003389 21 Radwanski, Adam. "Cashed-up On- [2004] 1 S.C.R. 827, 2004 SCC 33 par. 12 CBC News. “SNC-Lavalin exec admits tario Liberal candidates play with fire" 72. Available at: http://scc- to illegal party financing in Quebec”, Globe and Mail, 15 January 2013. csc.lexum.com/scc-csc/scc- 14 March 2013. Available at: Available at: http://www.theglobe- csc/en/item/2146/index.do http://www.cbc.ca/news/canada/ andmail.com/news/national/cashed- 2 Canadian Chamber of Commerce. In- montreal/snc-lavalin-exec-admits-to- up-ontario-liberal-candidates-play-wi volvement of Foreign Foundations in illegal-party-financing-in-quebec- th-fire/article7395905/ Canada’s Domestic Affairs. (2012). 1.1323059 22 Office of the Commissioner of Lobby- http://www.chamber.ca/download.as 13 Noel, Brigitte et al. "SNC-Lavalin staff ing. Annual Report 2013-14. Available px?t=0&pid=3dc1b24c-9bae-e211- donated $15K to Conservative nomi- at: http://www.ocl- 8bd8-000c291b8abf nee", CBC News, 20 March 2013. Avail- cal.gc.ca/eic/site/012.nsf/eng/00920.h 3 Peyton, Laura. “Radicals working able at: www.cbc.ca/news/canada/ tml#toc2-1 against oilsands, Ottawa says” CBC snc-lavalin-staff-donated-15k-to-con- 23 Office of the Commissioner of Lobby- News. 9 January 2012. Available at: servative-nominee-1.1320787 ing of Canada. Monthly Communica- http://www.cbc.ca/news/politics/rad- 14 Canadian Press. "Riadh Ben Aissa, Ex- tion Reports by Reporting Period. icals-working-against-oilsands-ot- SNC-Lavalin Executive, Extradited To Available at: https://ocl-cal.gc.ca/app/ tawa-says-1.1148310 Canada" 15 October, 2014. Available secure/orl/lrrs/do/cmmnctnsByRprt- 4 Loat, Alison. “Let’s Give Them Some- at: http://www.huffingtonpost.ca/ ngPrd thing to Talk About” The Philanthro- 2014/10/15/ben-aissa-snc-lavalin- 24 Fekete, Jason. “Number of federal lob- pist. Vol. 25, No. 4 (2014). p.3. fraud_n_5993216.html byists up sharply” Ottawa Citizen. 12 Available at: http://thephilan- 15 Antle, Rob and Cochrane, David. June, 2014. thropist.ca/index.php/phil/article/vie "Leadership donation ‘loopholes’ re- 25 Curry, Bill. “Boardroom confidential: w/988 main, despite PC pledge" CBC News, 4 What CEOs are asking of .” 5 Thomas, Kevin. Are Canadian corpora- February, 2014. Available at: Globe and Mail, August 15, 2012 tions spending to influence the US po- http://www.cbc.ca/news/canada/ 26 http://www.fin.gc.ca/n14/14-093- litical process? SHARE, October 2014. newfoundland-labrador/leadership- eng.asp#notes. Notably there are no Available at: donation-loopholes-remain-despite- representatives from organized http://www.share.ca/files/SHARE- pc-pledge-1.2521493 labour, but there are representatives US_Political_Spending_by_Cana- 16 Elections Canada. Limits on Contribu- from the Fraser Institute, the CD dian_Corporations_web.pdf tions. Available at: http://www.elec- Howe Institute and the MacDonald 6 Elections Canada. Compendium of tions.ca/content.aspx Laurier Institute. Election Administration in Canada:A ?section=pol&document=index&dir= 27 Lukacs, Martin. “Alberta, Ottawa, oil Comparative Overview. 27 June, 2012. lim&lang=e lobby formed secret committee”, Available at: 17 Herald. "New fundraising Toronto Star, 12 March 2012. http://www.elections.ca/res/loi/com/ rules for leadership campaigns called 28 Natural Resources Canada. Pan-Euro- compoverview2012jun_e.pdf ‘awkward’" 14 May, 2014. Available at: pean Oil Sands Advocacy Strategy. 7 2013 is the most recent full year for http://calgaryherald.com/news/new- March 2011. Accessed under Access which public reporting is currently fundraising-rules-for-leadership-cam- to Information Act request #A-2010- available. paigns-called-awkward 02237. 8 The ruling Saskatchewan Party pulled 18 Bell, Sonya. "Brewers poured 29 Skelton, Chad. “Lobbying: Oil, gas in over $3 million in corporate contri- $100,000 into Ontario Liberal leader- companies are the top B.C. Lobbyists”. butions in 2011 (both publicly-traded ship race" iPolitics.com. 10 April 2013. Vancouver Sun, 21 March 2014, avail- and private corporations) (www.elec- Available at: http://www.ipolitics.ca/ able at: tions.sk.ca/resources/sask-party-fis- 2013/04/10/brewers-pour-100000- http://www.vancouversun.com/tech- cal-period-return-final.pdf) into-ontario-liberal-leadership-race/ nology/Lobbying+companies+lobby- 9 19 Center for Responsive Politics. 2014 Ontario Liberal Party. 2013 Leader- ists/8264170/story.html Election Overview. Available at: ship Contestant Return: Kathleen 30 Review of lobbyists registered directly https://www.opensecrets.org/ Wynne. Available at: or as consultants to TSX60 companies overview/ Figures converted to Cana- http://www2.elections.on.ca/stats/ (TSX60 as of November 25, 2014). For dian dollars. 13files/leadership/1st%20filing/13LIB federally-registered lobbyists, we 10 wynne1stcr5.htm Center for Responsive Politics. Ken- have only included in-house staff who 20 tucky Senate Race. Available at: Progressive Conservative Party. 2009 dedicate more than 20% of their time https://www.opensecrets.org/races/ Leadership Contestant Return: Tim to lobbying and have therefore ex- summary.php?id=KYS1&cycle=2014

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 29 cluded many staff that are involved cal.gc.ca/app/secure/orl/lrrs/do/clntS Democracy, January 2014. more sporadically in lobbying (e.g. mmry?clientNumber=226641&sMdKy 50 See: http://gotothinktank.com/the- CEOs). Lobbyist registration practices =1411153110674 2013-global-go-to-think-tank-index- may be inconsistent between juris- 41 Canadians for Responsible Advocacy. ggttti/ . One leading think tank, the dictions, with some jurisdictions re- In Focus. September 2014, p. 17. Avail- North South Institute, has been re- quiring registry of any employee that able at: http://responsibleadvocacy.org/ moved from Table 4 because it closed. is involved in lobbying and other ju- wp-content/uploads/2014/01/CFRA- Table 4 lists the think tanks in order of risdictions distinguishing between 20140915-IF-September-In_Focus.pdf influence (according to the Univer- those that spend a requisite amount 42 Documents available here: sity’s ranking). of their time lobbying government https://drive.google.com/file/d/0B_0 51 The Fraser Institute. Letter to British officials. MqnZ4wmcMaTFKMjQ0NVZVSDQ/ed American Tabacco. 12 September, 31 Not all provinces provide a public it?pli=1 2000. Available at: http://legacy.li- registry of lobbyists. Saskatchewan, 43 Notably, now Alberta Jim brary.ucsf.edu/tid/uzb53a99/pdf New Brunswick and PEI do not cur- Prentice used almost identical argu- 52 Atlantic Institute for Market Studies. A rently have a publicly-available lobby- ments when explaining why he de- Balancing Act. March 2010. Available ist registry. layed an increase in Alberta’s carbon at: www.aims.ca/site/media/aims/ 32 Source: Federal lobbyist registry. levy: “I became convinced that even A%20Balancing%20Act.pdf Based on number of monthly com- small increments in terms of carbon 53 Atlantic Institute for Market Studies. munications registered between De- cost can result in pretty immediate The Benefits of allowing business back cember 2013 and November 2014. and significant changes in terms of into Canadian health care. December 33 Meeting between Industry and Gov- investments and jobs and, in particu- 2002. Available at: ernment Officials on Northern Gate- lar, that if you layer on costs on the http://www.aims.ca/site/media/aims/ way. August 29, 2013. Released under Canadian side of the border that are benefits.pdf Access to Information request #A- not present on the U.S. side, people 54 Atlantic Institute for Market Studies. 2013-00276. will make investment decisions that The Unintended consequences of CPP 34 drive capital to a U.S. location.” Canadian Association of Petroleum expansion. 13 November, 2013. (source: http://www.macleans.ca/po- Producers. Atlantic Canada’s Offshore http://www.aims.ca/en/home/ litics/want-a-frank-discussion-about- Oil and Gas Industry: Opportunities library/details.aspx/3611?dp=aXM9M climate-change-heres-a-start/) and Challenges. April 30, 2013. Re- TU_ leased under Access to Information 44 Ganley, Michael. “The Business Case 55 Atlantic Institute for Market Studies. A request #A-2013-00250 for Putting a Price on Carbon”, Alberta Balancing Act. 35 See, for example: http://www.cn- Venture. 2 April 2013. Available at: 56 American Legislative Exchange Coun- lopb.nl.ca/abt_mandate.shtml http://albertaventure.com/2013/04/c arbon-costs-harper-government/ cil. Right to Work: Model Legislation. 36 Mark Corey, Natural Resources Available at: http://alecexposed.org/w/ 45 CDP. Global Corporate Use of Carbon Canada. Memorandum to the Deputy images/c/c8/1R10-Right_to_Work Pricing. September 2014, p.42. Minister: Meeting with the Canadian _Act_Exposed.pdf Association of Petroleum Producers. https://www.cdp.net/CDPResults/glo 57 Goldenberg, Suzanne. "Google to cut May 3, 2013. Released under Access bal-price-on-carbon-report-2014.pdf ties with rightwing lobby group over to Information request #A-2013- 46 Canadian Chamber of Commerce. $50 climate change 'lies'". The Guardian. 00250. Million a Day. Available at: 23 September, 2014. Available at: 37 http://www.chamber.ca/media/blog/ McCarthy, Shawn. “Ottawa scales http://www.theguardian.com/envi- 130917-50-Million-a- back oversight of offshore drilling.” ronment/2014/sep/23/google-to-cut- Day/1309_50_Million_a_Day.pdf Globe and Mail, November 6, 2013. ties-with-rightwing-lobby-group-over 47 http://www.theglobeandmail.com/ne McCarthy, Shawn. “Chamber of Com- -climate-change-lies ws/politics/ottawa-scales-back-over- merce makes pitch for new pipelines.” 58 Center for Media and Democracy. sight-of-offshore-drilling/arti- Globe and Mail, 17 September 2013. "Coal and Oil Polluters Dominate ALEC cle15305924/ 48 Canadian Chamber of Commerce. Conference" 31 July, 2014. Available 38 “Uproar over mining lobbying in http://www.chamber.ca/media/news- at: www.prwatch.org/news/2014/ Chubut” Buenos Aires Herald, 2 De- releases/140610-five-key-facts-about- 07/12557/polluters cember 2014. moving-oil-by-water-that-need-to-be 59 Canada Elections Act, S.C. 2000, c.9 39 Office of the Commissioner of Lobby- -part-of-the-national-debate/ 60 It is still possible that third-party or- ing. Annual Report 2013-14. 49 Goldman, Gretchen and Carlson, ganizations using their own reserves 40 Christina. Tricks of the Trade: How com- Office of the Commissioner of Lobby- to pay for election advertising ex- panies anonymously influence climate ing. 12-month lobbying summary: penses could have received non-ear- policy through their business and trade Canadian Association of Petroleum marked donations from associations. Center for Science and Producers. Available at: https://ocl- publicly-traded corporations, as these

30 | DOLLARS, DEMOCRACY AND DISCLOSURE WWW.SHARE.CA contributions would not be consid- party-advertiser-elections-bc/arti- pdci.nsf/vwapj/SHARE_CBCA_sub- ered for the purpose of election ad- cle21277125/ mission.pdf/$FILE/SHARE_CBCA_sub- vertising. 72 Transcanada Corporation. “Energy mission.pdf 61 Source: third party election spending East Campaign Organization: Pro- 84 See, for example, SHARE’s model reports, available at: http://www.elec- mote, Respond, Pressure.” 5 August, proxy voting guidelines: tions.ca/content.aspx?section=fin&do 2014. Available at: https://www.docu- http://www.share.ca/files/SHARE_Pro cument=index&dir=thi/advert/tp41&l mentcloud.org/documents/1362367- xy_Voting_Guidelines_2014.pdf ang=e tc-energy-east-campaign-organizatio 85 Bebchuk, Lucian A. and Jackson, 62 Elections Canada. Compendium of n.html Robert Jr. “Corporate Political Speech: Election Administration in Canada:A 73 http://www.energyeastpipeline.com/ Who Decides?” Harvard Law Review, Comparative Overview. p.86 starting-a-new-discussion-on-en- Vol. 124:83, 2010, p.91 63 Elections Nova Scotia. http://election- ergy-east/ 86 Igan, Deniz, et al. A Fistful of Dollars: snovascotia.ca/candidates-and-par- 74 http://action.energyeastpipeline.com Lobbying and the Financial Crisis. Inter- ties/third-parties /about-the-action-network/ national Monetary Fund Working Paper. December 2009. 64 Elections Nova Scotia. http://election- 75 http://www.energycitizens.ca/about- snovascotia.ca/sites/ the-movement 87 Walden Asset Management. Investors default/files/Registered%20third%20 76 http://powerofcanada.ca/speak-up/ Raise New Set of Issues with Companies Parties_4.pdf on Public Policy and Climate. February 77 See Forest Ethics. Who Writes the 3, 2014. 65 Linnitt, Carol. "Postmedia Gets Away Rules? A Report on Oil Industry Influ- 88 With Running Unmarked Oil Adverto- ence, Government Laws, and the Corro- We have not included policies on rials" DeSmog.ca, 20 June, 2014. Avail- sion of Public Process. December, bribery and corruption in this evalua- able at: http://www.desmog.ca/2014/ 2013. Available at: tion, nor have we included staff poli- 06/19/postmedia-gets-away-running- http://www.forestethics.org/sites/fore cies which address personal unmarked-oil-advertorials stethics.huang.radicaldesigns.org/file contributions. This number refers only to policies which specifically address 66 Fawcett, Max. “Reason over passion: s/Who_writes_the_rules.pdf legal political contributions by the CAPP president David Collyer talks 78 Payton, Laura. "Bruce Carson, Former company itself. about the energy industry’s PR chal- PMO Staffer, Faces New Charges" CBC. 89 lenges.” Alberta Venture. 22 January, 7 December, 2014. Available at: These figures are based on an analysis 2014. Available at: http://albertaven- http://www.huffingtonpost.ca/2014/ of publicly-available documents pro- ture.com/2014/01/capp-david-col- 05/12/bruce-carson-charges-lobby- duced by the companies in the TSX60 lyer-industry-pr-challenges/ ing-influence-peddling- index as of November 25, 2014. 67 Dion-Ortega, Antoine and Blin, Pier- _n_5310890.html 90 International Corporate Governance rick . “Performance under pressure”, 79 See: http://democracywatch.ca/cam- Network. ICGN Statement and Guid- CIM Magazine, September 2013. Avail- paigns/money-in-politics-campaign/ ance on Political Lobbying and Dona- able at tions. 2012. 80 International Corporate Governance http://magazine.cim.org/en/2013/Sep 91 Network. ICGN Statement and Guid- Coalition for Accountability in Politi- tember/feature/Performance-under- ance on Political Lobbying and Dona- cal Spending. “Model Policies for Cor- pressure.aspx tions. 2012. p.11 Available at: porations to Strengthen Disclosure 68 ibid. https://www.icgn.org/images/ICGN/fi and Oversight of Political Spending” Available at: http://politicalspend- 69 ibid. les/icgn_main/Publications/best_pra ing.org/wp-content/up- 70 Prystupa, Mychaylo. "Kinder Morgan ctice/PLD/icgn_pld_mar2012_long.p df loads/2013/10/CAPS-Model-Corporat TV ads attacked as influencing city e-Policies.pdf elections in B.C." Vancouver Observer. 81 See, for instance, http://www.man- 92 Transparency International France. 9 October, 2014. Available at: hattan-institute.org/pdf/lpr_15.pdf “Déclaration commune des entre- http://www.vancouverobserver.com/ and http://papers.ssrn.com/sol3/pa- prises membres de Transparency In- news/Kinder-Morgan-TV-ads-at- pers.cfm?abstract_id=2128608 and ternational France sur le lobbying" 25 tacked-as-influencing-city-elections- http://papers.ssrn.com/sol3/papers.cf February, 2014. Available in-BC m?abstract_id=972670 at:http://www.transparency- 71 82 See: https://www.ic.gc.ca/eic/site/cilp- The Canadian Press. “"Kinder Morgan france.org/ewb_pages/div/Declara- pdci.nsf/vwapj/Power_Corporation.p doesn’t need to register as third-party tion_commune_lobbying.php advertiser: Elections BC" Globe and df/$FILE/Power_Corporation.pdf 93 Freed, Bruce and Sandstrom, Karl. “Po- Mail, 23 October, 2014. Available at: 83 Full disclosure: SHARE advocated for litical spending: Big risk for boards.” http://www.theglobeandmail.com/ne all three of these items in its submis- Annual Report of Directors & Boards, ws/british-columbia/kinder-morgan- sion: 2013. p.26 doesnt-need-to-register-as-third- https://www.ic.gc.ca/eic/site/cilp-

WWW.SHARE.CA DOLLARS, DEMOCRACY AND DISCLOSURE | 31 94 As You Sow. DuPont Shareholder Reso- 101 One newspaper estimated the loss in duced in April 2013, and sent to Com- lution, 2014. Available at: market value at US$1.3 billion. mittee. See http://www.asyousow.org/wp-con- http://www.twincities.com/business/c http://www.newsrecord.co/action-re- tent/uploads/2014/04/dupont2014g i_15671164 action-politics-in-congress-creates- mos_memo.pdf 102 Welsh, Heidi. “Mid-Year Review: Cor- opposition-over-sec-disclosure-regul 95 Unlike in the United States, lobbyists porate Political Activity Proposals in ations/ are not required to disclose the the 2014 Proxy Season.” Sustainable 114 http://www.sec.gov/comments/4- amounts spent by their clients on in- Investments Institute. August 28, 637/4637-11.pdf fluencing government. 2014. Available at: 115 Welsh, Heidi, p. 11. 96 https://si2news.files.wordpress.com/2 A review of UK corporate spending 116 Welsh, Heidi, p. 15. on political contributions between 014/08/si2-2014-proxy-season-mid- 117 http://www.edmontonjournal.com/ 1993 and 2010 found that aggregate year-review-corporate-political-activ- keeps+promise+release+monthly+le political spending by publicly-traded ity-excerpt.pdf adership+donor+lists/10109935/stor companies remained fairly steady be- 103 Center for Political Accountability. y.html fore and after the reforms. Post-re- "New CPA-Zicklin Index Reveals Com- form, management-proposed panies Adopting Political Disclosure 118 CFA Institute. Political Contribution political spending resolutions were on Their Own" Available at: www.po- Disclosure Survey Results. August almost all approved by shareholders, liticalaccountability.net/ 2014. Available at: http://cfainsti- but most were for fairly modest index.php?ht=d/sp/i/8051/pid/8051 tute.org/Survey/political_contribu- tion_survey_final.pdf amounts (£50,000 to £100,000) and 104 Center for Political Accountability. The most companies underspent their 2014 CPA-Zicklin Index of Corporate Po- 119 Haan, Sarah C. “Which Comes First: ‘In- budget considerably. Further, a num- litical Disclosure and Accountability. 24 vestor Accountability’ or ‘(Public) Dis- ber of large companies (like BP) September 2014. Available at: closure’?” Columbia Law School Blue passed resolutions allowing spending www.politicalaccountability.net/ Sky Blog, 3 October 2014. http://cls- only as a safeguard against legal lia- index.php?ht=a/GetDocumentAc- bluesky.law.columbia.edu/2014/10/0 bility (should some spending inadver- tion/i/8642 3/9617/ tently occur), even while holding 105 http://www.legislation.gov.uk/ukpga/ 120 The Center for Competitive Politics policies against corporate political 2006/46/part/14 campaigns against campaign finance spending. Total authorized spending laws in the US. Notably, it does not between 2001 and 2010 was over 106 Ibid, section 375 disclose its donors. £85.6 million, but actual reported 107 http://www.legislation.gov.uk/uksi/ 121 Primo, David. “A Political attack on spending by publicly-traded corpora- 2008/410/schedule/7/made tions during that period was only shareholder value” Wall Street Journal, 108 http://open.nysenate.gov/legisla- £10.2 million. Source: Torres-Spelliscy, 19 September 2014. Available at: tion/bill/s101-2011 pp. 553-567. http://www.wsj.com/articles/david- 109 Bebchuk, Lucian A. and Jackson, m-primo-a-political-attack-on-share- 97 Canadian Securities Administrators. Robert Jr. “Corporate Political Speech: holder-value-1412032579?mod=Opin CSA Staff Notice 51-333: Environmental Who Decides?” Harvard Law Review, ion_newsreel_7 Reporting Guidance. October 27, 2010. Vol. 124:83, 2010, p.84 122 http://www.osc.gov.on.ca/docu- http://www.nationalcenter.org/PR- 110 ments/en/Securities- http://www.sec.gov/rules/peti- Merck_052813.html Category5/csa_20101027_51-333_en tions/2011/petn4-637.pdf 123 Copland, James R. “Against an SEC- vironmental-reporting.pdf 111 ElBoghdady, Dina. "SEC pressed to Mandated Rule on Political Spending 98 Atkins, Paul. “Materiality: A bedrock abandon corporate political spending Disclosure: A Reply to Bebchuk and principle protecting legitimate share- disclosures petition" Washington Post, Jackson” Harvard Business Law Review, holder interests against disguised po- 16 May, 2013. Available at: Vol. 3, 2013, pp.381-411. litical agendas” Harvard Business Law http://www.washingtonpost.com/ 124 Center for Political Accountability. The Review, Vol. 3, 2013, pp363-379. business/economy/sec-pressed-to- 2014 CPA-Zicklin Index of Corporate Po- abandon-corporate-political-spend- 99 Canadian Securities Administrators. litical Disclosure and Accountability. 24 ing-disclosures-petition/2013/05/16/ CSA Staff Notice 51-333: Environmental September, 2014. P.17. d76b782e-be55-11e2-97d4- Reporting Guidance. October 27, 2010. 125 http://www.corporatesecretary.com/ a479289a31f9_story.html 100 Bloomberg Editors. "SEC Should Make articles/proxy-voting-shareholder-ac- 112 https://www.govtrack.us/congress/ Companies Disclose Political Spend- tions/12556/political-disclosures- bills/113/s824/text ing", 8 May 2013. Available at: reaching-tipping-point/ 113 http://www.bloombergview.com/arti- Notably, a bill introduced by Republic 126 International Corporate Governance cles/2013-05-08/sec-should-make- Senators aimed at prohibiting the SEC Network. ICGN Statement and Guid- companies-disclose-political-spending from enacting political spending dis- ance on Political Lobbying and Dona- closure regulations was also intro- tions. p.6

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