Green Century Urges CVS Caremark Corporation to End Trade Association Secrecy
May 10, 2011 — Tomorrow, at the company’s annual meeting, CVS Caremark Corporation (CVS)* shareholders will vote on a resolution that calls on the company to comprehensively disclose and have its board oversee its political spending. The Green Century Equity Fund filed the shareholder proposal to end the secrecy that hides the company’s direct and indirect political spending with corporate funds.
Currently, CVS does not provide comprehensive disclosure of its direct or indirect political spending, including its payments to trade associations or other tax exempt organizations that are used for political purposes. In addition, the company does not provide information on its internal processes and policies to determine how such expenditures are made or how associated risks are minimized.
“This lack of transparency makes it nearly impossible for investors to determine if the company’s expenditures pose risks that could threaten shareholder value,” said Larisa Ruoff, Green Century Capital Management's Director of Shareholder Advocacy. Green Century Capital Management (Green Century) is the investment advisor to two environmentally responsible mutual funds, the Green Century Balanced Fund and the Green Century Equity Fund.
Companies are not required under current law to report their soft money political donations or the portion of their payments to trade associations and other tax exempt organizations that are used for political purposes. Moreover, trade associations, which are often employed as conduits for corporate political spending, are not required to report itemized funds they receive that are spent on political activity, including advertisements supporting or opposing candidates. Many do not disclose even the names of their corporate members.
As a result, hundreds of millions of corporate dollars flow into the political process, including state judicial races and initiative and referenda campaigns, often without controls, board oversight, or public knowledge. In the 2010 mid-term elections, for example, spending by third party groups that did not disclose the sources of their funding exceeded $135 million, or nearly half of the total spent by outside groups, according to Public Citizen.
This is the fourth year CVS has received this proposal and each year an overwhelming percentage of the company’s shareholders have supported the proposal and expressed support for increased transparency. In 2008, 39 percent of shares voted supported this proposal, in 2010 that figure increased to 41 percent.** “We believe these strong votes send a clear message to CVS that a significant portion of the company’s shareholders are deeply concerned about this issue and require increased transparency and accountability. Therefore, we encourage CVS to respond to its owners,” continued Ruoff.
The proposal is one of nearly 35 resolutions filed in 2011 in conjunction with the efforts of the non-partisan Center for Political Accountability (CPA), whose mission is to bring transparency and accountability to corporate political spending.
Green Century is part of a coalition of nearly 30 investor groups that urge companies to take similar steps. To date, 85 companies in the S&P 500 and more than half of S&P 100 firms have agreed to implement political disclosure and accountability, according to the CPA.
Green Century Capital Management is an investment advisory firm focused on environmentally responsible investing. Founded by a partnership of non-profit environmental advocacy organizations in 1991, Green Century's mission is to provide people who care about a clean, healthy planet the opportunity to use the clout of their investment dollars to encourage environmentally responsible corporate behavior. Green Century believes that shareholder advocacy is a critical component of responsible investing and actively advocates for greater corporate environmental accountability.
*As of March 31, 2011, the Green Century Balanced Fund did not hold CVS Caremark and it comprised 0.81% of the Green Century Equity Fund. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal. Abstentions and broker non-votes were not included in the calculation.
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The Green Century Funds are distributed by UMB Distribution Services, LLC. 5/11
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