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Mar 20, 2024

Verizon faces vote on political spending incongruence report

SEC denies no-action request to omit the measure

Verizon Communications shareholders appear set to vote on a shareholder resolution seeking information about any ways the company’s political spending does not align with its public positions after the SEC denied a request for the go-ahead to exclude the proposal.

The proposal filed by As You Sow asks that Verizon’s board report each year on the company’s ‘political and electioneering expenditures, identifying and analyzing incongruence between such expenditures and the company’s operational and strategic needs and its stated values and policies. The report should state whether Verizon has made, or plans to make, changes in contributions or communications as a result of identified incongruencies.’

As You Sow recommends, at management’s discretion, that Verizon include in its report:

  • Aggregate metrics that highlight the degree to which political contributions align with its stated strategy, values and policy priorities year over year
  • Management’s analysis of political spending risks to the company’s brand, reputation or shareholder value that could arise from spending by the firm or its political action committees (PACs), directly or through third parties, which is ‘reasonably susceptible to interpretation as being in support of or in opposition to a specific candidate.’

As You Sow writes: ‘As the [US] Supreme Court has explained, transparency in corporate electoral spending ‘permits citizens and shareholders to react to the speech of corporate entities in a proper way’ by providing ‘shareholders and citizens with the information needed to hold corporations and elected officials accountable’. Greater political spending transparency is associated with ‘better internal corporate decision-making’ and facilitates a positive relationship between corporate political spending and future financial performance.’

The group argues that political donations to candidates who do not fully align with a company’s stated values and commitments ‘may create long-tail reputational risks to the company when recipients engage in polarizing political acts. The impacts on a company may include difficulties in recruiting and retaining talented employees, shareholder dissatisfaction and public backlash and boycotts.’

Verizon publicly discloses its policy on corporate political spending and its direct contributions to candidates, parties and committees but does not disclose information about misalignment between its political spending and its strategic and operational needs or its publicly stated values as described in its corporate responsibility reporting, As You Sow states.


Proxy vote

Verizon’s response
Verizon asked the SEC to grant no-action relief if it omitted the proposal from its proxy materials on the grounds that, per Rule 14a-8(i)(11), it ‘substantially duplicates an earlier-submitted shareholder proposal.’

The company is referring to a resolution filed by Trillium ESG Global Equity Fund that asks the board to ‘commission, oversee and publish an independent third-party study [that] examines the impact on the company, the sector and American democracy of the company adopting a policy prohibiting the use of corporate or PAC funds for direct or indirect contributions to political candidates. The study should provide recommendations and potential next steps.’

Verizon argues that the proposals ‘share the same principal thrust and focus; namely, the potential reputational and business risks to Verizon arising from the misalignment of its political spending activities with its stated corporate values and strategy… Both the [As You Sow] proposal and the [Trillium] proposal seek further information and analysis of Verizon’s political spending and how potential changes to its political spending policies and practices could mitigate the potential risks to its brand, reputation and shareholder value.’

As You Sow responded that the two proposals are distinct requests. ‘The Trillium proposal asks the company to analyze the impact of a cessation of contributions to political candidates. In contrast, the [As You Sow] proposal seeks a report analyzing the incongruence of the company’s political and electioneering expenditures with its needs and stated goals and policies. As a result, the principal thrust of the Trillium proposal is that Verizon ‘cease political contributions’ while the [As You Sow] proposal’s concern is with bringing the company’s political contributions into alignment with its stated values and business needs.’

The SEC did not agree with Verizon, writing: ‘In our view, the [As You Sow] proposal does not substantially duplicate the proposal submitted by Trillium ESG Global Equity Fund.’

Verizon filed its 2023 proxy statement on March 27 and held its AGM on May 11.

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

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...