Verizon Communications, Inc. – Cease Political Spending (2023)

Outcome: The proposal received a vote of 6.25% at the annual meeting.

Former chief justice of the Delaware Supreme Court Leo Strine argued in the Harvard Business Review: “Because political donations are controlled by managers, and because no corporate stakeholders, including shareholders, base their relationship with a company on the expectation that it will use its entrusted capital for political purposes, corporate political spending cannot reflect the diverse preferences and views of those stakeholders.  Even the classic justification that corporate donations maximize shareholder wealth is on shaky ground: Emerging evidence suggests that they can destroy value by suppressing innovation and distracting managers from more-pressing tasks.”

A study of corporate political activity in the form of lobbying and PAC spending by S&P 500 companies from 1998 to 2004 found that it was strongly and negatively related to company value. This suggests that ceasing political spending does not necessarily put a company at a competitive disadvantage.

Political contributions by one company can take the form of rent-seeking which may lead to externalities that weigh on other companies, taxpayers, and consumers – possibly slowing real overall economic growth. This may raise concerns for widely diversified investors who are more exposed to the broader economy and suggests that they should support a cessation of political contributions.

Companies such as IBM, Nvidia, ADP, Boeing, Verisign, and fifteen others have adopted policies prohibiting contributions of political funds to influence elections.

We believe Verizon has reputational risk as it has repeatedly been called out for political contributions which appear to be inconsistent with its corporate values. In 2022, Verizon recognized Women’s History Month by highlighting how “Verizon ‘focus[es] on breaking down bias and stereotypes while continuing progress on women’s equality and gender equality.’”  But between 2016 and May 2022, Verizon reportedly contributed $901,150 to anti-abortion political committees.

Verizon claims it is “proud to foster an inclusive environment” and that it is “committed to LGBTQ+ equality across the board.” From January 2021 to May 2022 Verizon reportedly contributed at least $504,812 to the campaigns and leadership PACs of members of Congress that have received a zero rating from the Human Rights Committee.

We believe that business needs a healthy democracy, yet it appears that “Verizon has donated $123,000 to 54 different 2020 election deniers.”

Given potential risks and potential negative impact on shareholder or portfolio value, we believe Verizon should adopt a policy to refrain from using corporate treasury funds in the political process. Adopting such a policy would not prohibit Verizon from lobbying spending or other activities where it can participate in the policy making process.

Resolved: shareholders request that the board of directors adopt a policy prohibiting political and electioneering expenditures.

Supporting Statement: “political and electioneering expenditures ” means spending, from the corporate treasury and from the PAC, directly or through a third party, at any time during the year, on printed, internet or broadcast communications, which are reasonably susceptible to interpretation as in support of or opposition to a specific candidate.

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