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Jun 24, 2024

Lobbying proposal at Caterpillar follows pattern of attracting support

Resolution is latest to gain significant backing at AGMs this election year

Almost a quarter of votes at Caterpillar’s AGM were in favor of a proposal seeking information about the company’s lobbying.

The resolution garnered 23 percent of the votes cast. That level of support, despite not being a majority and being lower than the 29 percent of the vote it received at Caterpillar’s 2023 AGM, is widely viewed as significant by governance experts.

Other lobbying disclosure proposals have this year gained significant support at Morgan Stanley (31.2 percent of votes cast), Verizon Communications (34.6 percent) and Goldman Sachs (39.4 percent). Shareholders have been voting at AGMs this proxy season ahead of the US presidential and congressional elections in November.

Specifically, the proposal filed at Caterpillar asks the company to prepare an annual report disclosing:

  • ‘Company policy and procedures governing direct and indirect lobbying and grassroots lobbying communications
  • ‘Payments by Caterpillar used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient
  • ‘Caterpillar’s membership in and payments to any tax-exempt organization that writes and endorses model legislation
  • ‘Description of management’s and the board’s decision-making process and oversight for making payments described in sections 2 and 3 above.’

‘Full disclosure of Caterpillar’s lobbying activities and expenditures is needed to assess whether [the company’s] lobbying is consistent with its expressed goals and in stockholders’ best interests,’ the proponent writes, stating that Caterpillar spent $49.6 mn from 2010 to 2022 on federal lobbying. ‘This does not include state lobbying, where Caterpillar also lobbies, but disclosure is uneven or absent. Caterpillar also lobbies abroad.’

According to the supporting statement, Caterpillar does not disclose any of its payments to trade associations and social welfare groups, nor amounts used for lobbying, to its shareholders. The company also does not disclose its contributions to tax-exempt organizations that write and endorse model legislation, the proponent states, adding: ‘Caterpillar’s lack of disclosure presents reputational risks to shareholder value when its lobbying contradicts the company’s public positions.’

Board opposition
The board had recommended that shareholders vote against the resolution, writing in the proxy statement: ‘Caterpillar already provides its shareholders with extensive information on its lobbying and political activities through its annual lobbying report and the information made available on its website and has significantly enhanced its transparency over the past two years.

‘Caterpillar understands that actions taken by governments around the world can have a significant impact, both positive [and] negative, on [the company], its employees, dealers, suppliers and customers. Caterpillar believes that transparency in its lobbying expenditures and political activities is important and, therefore, provides both required and voluntary disclosures that meet or exceed any legal requirements with respect to its lobbying expenditures and political activities.’

The board wrote that shareholder feedback led to the company releasing its first lobbying report in 2023, which added to existing disclosures by, for example, providing more transparency about Caterpillar’s US trade and industry association memberships. The company’s 2024 lobbying report goes further by including tiered reporting of the dollar amount of membership dues paid to US trade and industry associations and the percentage of these dues used for federal lobbying activities, according to the board.

Caterpillar also argues, among other things, that it files required federal Lobbying Disclosure Act reports with Congress, voluntarily participates in the EU’s Transparency Register and that its governance policies ‘provide effective oversight of its political activities.’

A request for comment from the company was not returned immediately.