(The following story by Robert McCabe appeared on The Virginian-Pilot website on May 10, 2010.)
NORFOLK, Va. — For the second year in a row, a group of New York City pension funds has asked shareholders of Norfolk Southern Corp. to push the railroad’s board of directors to better disclose the company’s spending on political activities.
The proposal attracted nearly 34 percent of the vote at last year’s Norfolk Southern annual meeting, heartening advocates that the Norfolk-based railroad may join a growing list of companies that have broadened disclosures.
The proposal, filed by the comptroller of New York City, asks Norfolk Southern to post a report on its website that itemizes its political spending and explains its policies for such expenditures.
The report would include corporate spending on memberships in trade associations and the portion of those dues used by trade groups for political purposes such as lobbying and issue advocacy.
The New York City Pension Funds, as they are known, owned more than 1.1 million shares of Norfolk Southern stock when their resolution was filed with the company.
Earlier this year, the comptroller’s office announced that four companies in which the pension funds own stock, including Bank of America, agreed to proposals like the one submitted to Norfolk Southern.
Shareholders have put similar items up for voting at this year’s annual meetings of more than 30 other national firms, including The Allstate Corp., American International Group Inc., Goldman Sachs Group Inc. and Chevron Corp., according to records at The Corporate Library, a Maine-based research firm.
Norfolk Southern’s board opposes the measure, according to the company’s proxy statement.
It states that its procedures concerning political contributions are in a “Sustainability Report” posted on its website, at www.nscorp.com/footprints, and that the majority of its political donations are made by a political action committee, “funded by voluntary contributions, primarily from Norfolk Southern employees.” The PAC’s records are available to the public through the Federal Election Commission.
The board concludes that “the actions contemplated by this proposal would result in an unnecessary and unproductive use of resources.”
The vote at Thursday’s annual shareholders’ meeting in Williamsburg is merely advisory; Norfolk Southern’s board of directors is free to do as it chooses, said Nell Minow, a corporate governance expert with The Corporate Library.
The issue has been lent more urgency by a Jan. 21 Supreme Court decision, known as Citizens United, that allows for unlimited corporate political spending, according to the comptroller’s office and corporate governance experts.
Shareholders tend to vote with management on issues at annual meetings, so the vote for the proposal last year by Norfolk Southern shareholders is “considered a very healthy vote,” Minow said.
“After the decision of Citizens United, it is of even greater importance that we understand where every penny is going,” she said, “whether directly, indirectly, or through an intermediary that is in support of a political initiative.”
Millions of dollars in spending by corporate political action committees, including Norfolk Southern’s, are tracked by websites such as OpenSecrets.org, which processes data from the FEC.
Through seven election cycles, beginning in 1997 through March 31 of this year, Norfolk Southern’s political action committee – the Norfolk Southern Corporation Good Government Fund – spent more than $5 million, according to OpenSecrets.org.
In the current election cycle, from 2009 through March 31, Norfolk Southern’s PAC has spent more than $1.1 million.
“They’re up a good deal from where they were just a few years ago,” said Dave Levinthal, a spokesman for the Center for Responsive Politics, which sponsors OpenSecrets.org. “They’re definitely a very active political action committee relative to all PACs.”
The company has also been active in the lobbying arena.
In 2009, Norfolk Southern spent $6.29 million on lobbying – its No. 1 issue an effort in Congress that seeks to change how railroads are regulated, according to OpenSecrets.org data. The year before, the company’s lobbying expenditures totaled a little more than that: $6.32 million.
This year, through March, Norfolk Southern has spent more than $1.7 million on lobbying, records show.
“If that stays constant, then Norfolk Southern would record its largest lobbying output, in dollars and cents, that it’s ever had, in 2010,” Levinthal said.
The New York City Pension Funds’ proposal acknowledges that some information on the company’s political expenditures is available to the public but it seeks more.
“Relying on publicly available data does not provide a complete picture of the company’s political expenditures,” the stockholders’ supporting statement says. “For example, the company’s payments to trade associations used for political activities are undisclosed and unknown.”
The funds assert that the company must show its political spending is in line with its publicly stated values and positions.
Norfolk Southern is a member of the Association of American Railroads, a Washington-based trade group that spent more than $10.6 million on lobbying last year, according to OpenSecrets.org.
That was on top of Norfolk Southern’s $6.3 million in spending and $29.6 million in lobbying expenditures by the rest of the railroad industry, records show.
Neither Norfolk Southern nor the railroad association, however, is required to disclose publicly how much of Norfolk Southern’s membership dues help fund the association’s lobbying.
“In many cases, even management does not know how trade associations use their company’s money politically,” the New York City stockholders’ supporting statement asserts.
Should the board accept the proposal, it would bring Norfolk Southern “in line with a growing number of leading companies, including Hewlett-Packard, Aetna and American Electric Power that support political disclosure and accountability and present this information on their websites,” according to the stockholders’ statement.
In its statement opposing the shareholders’ proposal, the board said it does not believe that disclosing how much of the company’s trade group dues are used for lobbying “provides a complete, or accurate, disclosure as to the reason for Norfolk Southern’s participation in those organizations.”
Reasons for trade association membership go beyond lobbying, offering employees the chance to share in “educational and public relations activities, industry conferences and networking opportunities,” the directors argue.
“Thus, the proposed disclosure of the amount of membership dues spent on lobbying activities of these organizations, if any, would be incomplete and potentially misleading,” the board concludes.
The Washington-based Center for Political Accountability, a nonprofit that tracks corporate political expenditures, reports that several top Norfolk Southern executives hold positions in politically active trade groups.
James Hixon, executive vice president/law and corporate relations, is on the board of the U.S. Chamber of Commerce and Donald Seale, executive vice president/chief marketing officer, is on the board of the National Association of Manufacturers. And Wick Moorman, the railroad’s chairman, CEO and president, is a member of the Business Roundtable.
Besides the railroad association, the company is a member of the American Coalition for Clean Coal Electricity, according to the Center for Political Accountability.
In 2008, the five trade groups collectively reported $270.5 million in revenue from members and $103.5 million in lobbying and political expenditures, according to the center.
Part of Norfolk Southern’s payments to these groups “likely was used to underwrite some of this political spending,” the nonprofit says. “The company could face risks from the political activities of trade associations or groups to which it makes payments. Without disclosure by the company, shareholders cannot assess these risks.”
In its “Sustainability Report” posted on its website, Norfolk Southern acknowledges that trade groups to which it belongs “may engage in lobbying activities.”
“We work with the other members to ensure that lobbying conducted through trade organizations reflects our values and concerns,” the report says. “If a trade organization wants to adopt a position with which we disagree, we will raise our concerns and we may dissociate ourselves from the position.”