The TakeAway: BP’s transparency, the power of proxy advisory firms, and uncontrolled campaign spending
BP disaster: truth or “integrated spin”? | Today’s New York Times and Wall Street Journal report that Halliburton knowingly supplied “unstable” cement to BP to seal the Macondo well, a likely factor in the blowout according to the presidential commission charged with investigating the Deepwater Horizon explosion. Earlier this week, “The Spill”, a joint investigation by PBS’ Frontline and the nonprofit newsroom ProPublica, aired. On Tuesday, Investor Environmental Health Network (IEHN) counsel Sanford Lewis used BP to illustrate the difference between reporting and reality.
“BP is a prominent and touted GRI sustainability reporter. It has even received awards and recognition for its Global Reporting Initiative formatted reports,” he writes. “Viewed in retrospect, BP’s financial and sustainability reports seem to have veiled core weaknesses in how the company was managed with regard to pivotal issues of maintenance and safety. Assertions of NGOs from earlier in the decade that BP’s sustainability assertions were greenwash seemed to come true with a vengeance.” Lewis makes recommendations to avoid “integrated spin” and ensure reliability as the trend toward blending financial and sustainability disclosure, or “integrated reporting”, gains momentum.
Proxy plumbing & advisors | The SEC public comment period has ended for changes in so-called “proxy plumbing,” which seek to make the proxy regulatory system more open and transparent, according to SEC Chair Mary Schapiro. Andrew Bonzani, assistant general counsel at IBM, supported regulation of proxy advisory firms comparable to that of credit rating agencies, according to Melissa Klein Aguilar in Compliance Week. Bonzani argues that institutional investors often vote “in a lock-step manner” with recommendations from the Institutional Shareholder Services (ISS) division of MSCI, and hence “outsource their voting decisions.” Nell Minow, editor and co-founder of The Corporate Library (TCL) and former president and co-founder of ISS, submitted a letter to the SEC to “object in the strongest possible terms to the possible regulation of proxy advisory services,” arguing that freedom of expression protects their right to make recommendations that are valued by the market. “[T]he data show that … the more high-profile and controversial a proposal or proxy contest, the more likely that clients are to read the analysis and come to their own conclusion, often departing from the proxy advisory services recommendation, demonstrating the independence of their judgment.”
Proxy advisory firms’ business is research and education, not prescription—that is, if asset owners are doing their job and making their own informed decisions. For more on this “debate”, see Broc Romanek‘s blog at TheCorporateCounsel.net; see also TCL’s Monday blog on the proxy access premium.
Campaign spending | Speaking of voting, OpenSecrets.org released a new video showing where the campaign money is going. “Outside spending” – compared to direct contributions or lobbying – spiked this year, thanks to the Supreme Court’s Citizen United decision. Today’s Los Angeles Times reports a record-breaking $3 billion will be spent on political advertising—with local TV stations reaping most of these rewards, despite the power of the Internet. You have to wonder why this is so, when their public license to operate is granted by the Federal Communications Commission—shouldn’t the quid pro quo be free campaign ads? That’s what some have argued over the years, including such prominent network anchors as Marvin Kalb, John Chancellor, and Walter Cronkite. Perhaps it’s time to revive the idea.
In the meantime, Jon Stewart’s and Stephen Colbert’s Rally to Restore Sanity and / or Fear is expected to draw tens of thousands to the Washington Mall tomorrow. You can download the free iPhone app, or follow it on Twitter at #rally4sanity.
Happy Halloween, and have a great weekend!