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Jun 06, 2024

Lobbying disclosure proposal garners support at Morgan Stanley AGM

Resolution is latest to gain significant backing at AGMs this year

A shareholder proposal seeking information about Morgan Stanley’s lobbying attracted almost a third of the votes cast at the bank’s recent AGM, the latest such resolution to gain support this proxy season.

The proposal, filed by activist shareholder John Chevedden, asks that Morgan Stanley issue a report each year disclosing:

‘1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications

‘2. Payments by Morgan Stanley used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient

‘3. Morgan Stanley’s membership in and payments to any tax-exempt organization that writes and endorses model legislation

‘4. Description of management’s and the board’s decision-making process and oversight for making payments described in sections 2 and 3 above.’

According to an SEC filing, the proposal was backed by 31.2 percent of votes cast at the May 23 meeting. That level of support, despite not being a majority, is widely viewed as significant by governance experts.

In a supporting statement, Chevedden writes: ‘Full disclosure of Morgan Stanley’s lobbying activities and expenditures is needed to assess whether [the company’s] lobbying is consistent with its expressed goals and shareholders’ interests.’ According to Chevedden, the bank spent $37 mn between 2010 and 2022 on federal lobbying, in addition to state-level lobbying.

‘Companies can give unlimited amounts to third-party groups that spend millions on lobbying and undisclosed grassroots activity,’ the proponent writes. ‘Morgan Stanley fails to disclose its payments to trade associations and social welfare groups, or the amounts used for lobbying, to shareholders.’ He states that the firm discloses membership of groups such as the American Bankers Association and US Chamber of Commerce but omits other major trade association memberships.

Morgan Stanley’s lack of disclosure poses reputational risks when its lobbying – including through groups to which it belongs – goes against its public position on topics such as climate change, Chevedden writes.

Almost identical proposals have achieved similar levels of support at Verizon Communications and Goldman Sachs this proxy season, in which shareholders are voting at AGMs ahead of the US presidential and congressional elections in November.

Board opposition
Morgan Stanley’s board had urged shareholders to vote against the proposal, writing in the 2024 proxy statement: ‘We are committed to providing our shareholders with meaningful disclosure about our lobbying activities and trade association participation… The Morgan Stanley Corporate Political Activities Policy Statement… available on our website… and existing public disclosure already address the material items requested in this proposal.

‘Our policy statement is designed to provide transparency with respect to the principles and procedures concerning Morgan Stanley’s political contributions, political action committee, lobbying activities and trade association participation.’

According to the board, the policy statement includes recent enhancements approved by its governance and sustainability committee to improve transparency about Morgan Stanley’s lobbying activities and consolidate its existing public disclosures such as on policies related to grassroots lobbying and organizations that write or endorse model legislation, in addition to disclosure about the bank’s average lobbying expenditures for the past three years and the aggregate dues attributable to lobbying by US trade associations.

The board stated that Morgan Stanley does not make corporate contributions in the US at the federal, state or local level to candidates, political party committees, ballot committees or political action committees even when permitted to do so by law. It does not ‘generally engage in grassroots lobbying, but if we did engage in grassroots lobbying in a given year we would publicly disclose any related expenditures in our policy statement and comply with all applicable reporting requirements.’

According to the board: ‘We remain committed to complying with all applicable laws relating to political contributions and lobbying activities, including lobbying registration and regular reporting… Our lobbying activities and expenditures, political activities and contributions and participation in trade associations are subject to oversight by management and the board as described in our policy statement.’

It concluded that creating a separate annual report restating existing, publicly available information would be an inefficient use of the company’s resources.

A Morgan Stanley spokesperson had no comment beyond the proxy statement.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...