The U.S. Chamber of Commerce —the self-proclaimed voice of business in Washington—has been wrong on virtually every major public-policy issue of the past decade: financial deregulation, tax and fiscal policy, global warming and environmental enforcement, consumer protection, health care reform …
The chamber remains an unabashed voice for the libertarian worldview that caused the most catastrophic economic meltdown since the Great Depression. And the chamber’s view of social justice would warm Scrooge’s heart. It is the chamber’s right to be wrong, and its right to argue its preposterous ideas aggressively, as it does through vast expenditures on lobbyists and litigation. Last year alone, the chamber spent more than $91 million on lobbying, and, according to lobby tracker Opensecrets.org, it has spent more than twice as much on lobbying during the past 12 years as any other corporation or group.
The problem is, the chamber is doing all this with our money. The chamber survives financially on the dues and support of its members, which are most of America’s major corporations listed on the stock exchange. The chamber derives its political clout from the fact that its membership includes these corporations. Yet we—you and I—own the companies that support the chamber and permit it to propagate its views. Our passive, permissive attitude toward the management of the companies we own has enabled the chamber to be one of the primary impediments to the reform of markets, health care, energy policy, and politics that we have all been calling for. It is time for that to change.
How, you might ask, do we own these companies? Public pension funds and mutual funds are the largest owners of equities in the market. They are the institutional shareholders that have the capacity to push management—and the boards of the corporations. Yet the mutual funds and pension funds have failed to do so. They have failed to control the management of the companies they own because the actual owners of those mutual funds and pension funds—you and I—have failed to raise our voices. We haven’t even asked questions.
Mutual funds, until recently, didn’t even disclose how they voted the proxies of shares they owned. When asked why not at a forum I was part of several years ago, the general counsel of one of the largest mutual fund companies tried to explain that it would be too expensive to make such disclosure. The answer was patently ridiculous, and it hid the much more important reason for nondisclosure: Mutual funds rarely if ever want to vote in opposition to management because mutual funds want to be included among the list of 401(k) options the company chooses for its employees. Mutual funds make money by increasing the size of the portfolios they manage, and if management knocks them off the 401(k) list, they will lose that revenue stream. This basic conflict of interest has neutered mutual funds. They are not meaningful checks on corporate mismanagement.
The comptrollers and treasurers who run public pension funds (often elected officials), have also failed to flex their political muscles. The passivity of the publicly elected officials who have the capacity to raise these issues has been a bit surprising.
So what should be done? The issue of passive institutional ownership is one of the most vexing and serious problems in American business. Expecting CEOs and boards to run companies properly without our input is a prescription for failure. But at least on the one issue of corporations playing politics with our money through support of the U.S. Chamber of Commerce, there is an easy answer.
The elected comptrollers and treasurers who agree—as a vast majority will—that the Chamber of Commerce has a distorted view of both economic and political policy should demand that each company in which they own stock drop its membership in the chamber. If the CEO doesn’t agree, the public pension funds should pressure the board to drop the chamber membership. If one activist state comptroller begins to build this coalition, the other state pension funds will follow.
In recent weeks, Apple and two energy companies—PG&E and Exelon—have defected from the chamber, objecting to its environmental policies. The Wall Street Journal editorial page of course views this bit of wisdom as heresy and counter to shareholder interest.
If elected comptrollers and treasurers do take a stand against the U.S. Chamber of Commerce, expect a hue and cry from the typical voices. They will complain that elected comptrollers and treasurers are injecting politics into corporate management. To which the answer should be: No, they are trying to take politics out of it! It is corporate leadership, through its support of the chamber, that has injected politics into the corporations that we own. We are reminding corporate leaders that they are our fiduciaries. As long as the chamber and the CEOs who are supposed to be our representatives are using our money to be overtly political, it is our duty to respond. If we are passive, we permit the chamber to hijack our funds and companies to support positions antithetical to our own views. Waking pension funds and mutual funds from their slumber on this relatively easy issue might finally begin the necessary process of fixing mismanaged corporations.