In this “Corporate Political Spending: Why Shareholders Must Weigh In” white paper, NorthStar Asset Management’s Julie Goodridge and Christine Jantz reveal the complex history behind shareholder activism, the controversy and repercussions of several headline-making company gaffes and the steps that leaders need to take to ensure their company contributions don’t create a values conflict with diversity and inclusion.

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources.

INTRODUCTION

Beginning with the divestment campaigns of the 1970s, shareholder pressure on companies to disclose their impact on global communities has been broadening and increasing.  Shareholder resolutions addressing toxic waste, executive compensation, the inclusion of gender identity in Equal Employment Opportunity (EEO) policies, and most recently corporate political contributions, have created consumer, stakeholder and employee awareness of the impact of corporate behavior on public perception and company value.  In response to this type of stakeholder engagement, as well as media coverage of corporate impact on communities, many public companies have chosen to preempt concerns about their environment, sustainability and corporate governance (ESG) records.  Rather than simply adhering to local or federal laws as standards for good behavior, these companies have hired teams of employees to develop, identify, and broadcast corporate values and “good works” to investors and consumers alike.

However, do stated company values truly act as the moral compass for company behavior?  Or does marketing hype create a screen for companies to appear as good citizens, while relying on government regulation as the minimum guideline for appropriate behavior?  We believe that a company takes the high road when their values are clearly defined, and their activities in the global community reflect adherence to their self-defined values.  As shareholders, we invest in companies because we make a choice, based on available data, to participate in the profit from the company’s sales of goods and services.  When the data we examine is misrepresented, shareholder value is put at risk.  As socially responsible investors, we do not limit our scope of concern to corporate accounting scandals.  We examine stated company values and the degree to which those values are reflected in company behavior. When we identify discrepancies, we seek stakeholder engagement as a remedy.  Most recently, we have focused on the nexus of company values and their political contributions.

Given the huge public policy outcry related to the Supreme Court decision in the 2010 Citizens United v. Federal Election Commission case, our firm, NorthStar Asset Management, Inc., examined the treasury and Political Action Committee (PAC) contributions of the companies on our firm’s “buy list,” as compared to the voting records of politicians who received their contributions. At each company, we examined the EEO policies related to protections in the area of sexual orientation, as well as the company’s stance on environmental concerns.  We found that stated company values were not reflected in the voting records of the companies’ supported politicians, and in many cases the stated views of the supported politicians were in direct opposition to company values.

We believe that if corporate political contributions violate  company values, then corporations are risking the good name of the company and, consequently, shareholder value.  Corporate contributions that contradict company values pose a direct and immediate risk to shareholder value.  Our perspective is that in order to minimize risk to shareholder value, corporate standards for political giving must include a congruency analysis between anticipated political spending and the company’s values.  And further, that because it is shareholders who are placed at risk through poor management decisions on political spending, the onus is on shareholders to pre-approve political spending decisions.

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources.

HISTORY

For several years, shareholder activists have engaged companies regarding their corporate political spending. Since the Citizens United v. Federal Election Commission ruling in 2010, corporate exposure surrounding political giving has been reported on widely and in some cases has led to public scrutiny, criticism and diminished shareholder value. Historically, shareholder resolutions have asked exclusively for disclosure of political spending. These resolutions are essential, but just as shareholder rights around issues of corporate executive compensation progressed from seeking simply disclosure to insisting upon shareholder advisory votes, which increased “accountability, transparency, and performance linkage of executive pay,” shareholder input regarding political contributions can provide checks and balances.

Unfortunately, it appears that the singular focus of past shareholder resolutions on disclosure has led to a phenomenon in which companies believe that disclosure is the most stringent requirement by which they must abide.  Corporations seem to believe that if management or company political action committees (PACs) simply disclose in arrears the extent of their political giving, then this is sufficient for shareholder and consumer satisfaction.  Our firm’s engagement with corporations and correspondence with the Securities and Exchange Commission indicates that the misconception that we are simply requesting disclosure prevails.

Currently, there is no process to hold management accountable for actual disclosed contributions to candidates working against company values. Shareholder reaction or public outcry against particularly egregious violations is happenstance. The focus of shareholder resolutions solely on disclosure has failed because it does not provide shareholders a way to voice an opinion on political contributions – hence the company (management and the board) not only assumes it can spend company resources promoting its views of what constitutes corporate “interests,” but in our experience the company may not know that these candidates uphold political policies divergent from company values. Given our concerns and fiduciary duty to protect our clients’ assets, and because of the close relationship between the company value and company values, we feel shareholders must weigh in on all corporate political activity in advance of the actual contribution.

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources. 

WHO DECIDES WHERE THE MONEY GOES?

The burden of making appropriate political contribution decisions from both the general company treasury (state, local and private political committee giving) and the company PAC (state, local, federal and PAC) are at the discretion of management despite the fact that poorly used funds ultimately impact shareholder value. Corporations are permitted to contribute to federal elections only via PAC contributions.  Only eighty-eight companies in the Fortune 500 disclose their company treasury electioneering contributions, and all Fortune 500 companies disclose their PAC contributions as required by law.

Unfortunately, after our examination of underlying values as self-described by corporations in their publically available media as well as employee policies, with their political contributions through both treasury (where available) and PAC funds, we found glaring inconsistencies in corporate values and the values inherently expressed by support of various candidates for political office.  This was true not only in corporations who disclose their treasury contributions, but even in those companies who denounce treasury contributions in favor of PAC contributions. In each case, while well-meaning management teams supported candidates who were deemed to be working in the best interest of the company, corporate values relating to employment non-discrimination policies, environmental standards, and immigrant rights were consistently violated when contributions were made. Management apparently lacked the skills and knowledge to evaluate candidates based on support or opposition of the comprehensive goals and values of their own contributing business. 

Despite the fact that the corporate standard advocated by The Conference Board (TCB) in their recently published “Handbook on Corporate Political Activity” recommends corporations review their political expenditures to “examine the proposed expenditures to ensure that they are in line with the company’s values and publicly stated policies, positions, and business strategies and that they do not pose reputational, legal, or other risks to the company,” our firm has yet to find one corporation that regularly compares its values to an analysis of the politicians and political groups it supports.

We again consider the fact that perhaps the solitary focus of disclosure in past shareholder engagement with corporations is partially at fault as it has failed to encourage corporations to do anything more than consider disclosing these contributions. In our engagement efforts, it has been clear that the novel idea of congruency with self-defined corporate values had never been considered previously, despite volatile public issues such as the 2010 clash between Target Corporation’s political contribution and the backlash suffered due to that donation’s clearly values-incongruent nature (further described below). Because the board of directors and other upper management officials make all decisions regarding the destinations of company treasury and company PAC contributions, management must take into account potential discrepancies between company values and supported politicians, as well as the fact that sets of contributions risk company brand name, reputation, and shareholder value. While these officials seem to be slowly coming around to the idea of disclosing these contributions, they are failing to understand that political contributions must reflect company values.

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources.

SPECIFIC VIOLATIONS OF COMPANY VALUES 

Target Corp.: In July 2010, Target Corporation donated $150,000 to the political group Minnesota Forward, which ignited a major national controversy with demonstrations, petitions, threatened boycotts, and substantial negative publicity. [For DiversityInc’s coverage of this issue, which involved donations to a gubernatorial candidate who did not support gay rights, visit www.DiversityInc.com/targetpac.]

This controversy, combined with the huge public policy outcry related to the Supreme Court decision in the Citizens United case, caused us to carefully examine the treasury and Political Action Committee (PAC) contributions of the companies on our firm’s “buy list” (those corporations with stated company values) as compared to the voting records of politicians who received their contributions. We uncovered patterns of political activity that were inconsistent with companies’ policies of non-discrimination based on sexual orientation, gender identity or expression:

Home Depot’s Corporate Political Contributions: One particularly unfortunate donation was in support of Governor Bob McDonnell, whose objective was to eliminate non-discrimination protections for LGBT state workers in Virginia.  McDonnell was successful in this regard. We also identified a number of other particularly egregious donations that are detailed in NorthStar’s no-action letter response published on the Security and Exchange Commission’s (SEC) website.

FedEx PAC:  David Vitter for U.S. Senate received $6,500 in 2009/2010from FedEx. As a sitting US Senator, David Vitter was an original co-author of and voted for the Federal Marriage Amendment that would have effectively eliminated same-sex marriage in all states where it is currently legal and have prevented any states from adopting same-sex marriage legislation in the future.  This position against same-sex marriage stands in direct violation of the FedEx commitment to provide same-sex domestic partner benefits and same-sex marriage benefits (in states where it is legal) to all U.S.-based employees by January 1, 2012.

Eight additional co-sponsors of the anti-LGBT “Marriage Protection Amendment” in the U.S. Senate also received contributions from the FedEx PAC including Senators Brownback, Chambliss, Crapo, DeMint, Enzi, Isakson, Roberts, and Thune. Furthermore, candidates receiving FedExPAC contributions voted against hate crimes bills and against the repeal of the “Don’t Ask, Don’t Tell” policy that prohibits LGBT service members from serving openly.

Procter & Gamble PAC:  David Vitter received $2,000 in 2009 and another $3,000 in 2010. He not only co-authored the Federal Marriage Amendment, but in July 2007, Vitter was “identified as a client of a prostitution service” and continues to serve in the Senate. Chuck Grassley has been written about as having ties, as far back the 1980s, to the “C Street” radical right anti-gay group pushing the “Kill the Gays Bill” in Uganda. And another five senators receiving PAC money signed onto the Federal Marriage Amendment as co-sponsors including Senators Burr, Crapo, DeMint, Isakson, and Kyl. Many of the officials supported by P&G PAC contributions also voted for the Federal Marriage Amendment and voted against hate crimes bills and the repeal of the “Don’t Ask Don’t Tell” policy. [For Procter & Gamble’s response, visit www.DiversityInc.com/goodridge.]

A company’s EEO policy, non-discrimination policy, and values statements comprise the company’s set of public values, and hence, to abide by the “Handbook on Corporate Political Activity,” all corporate political activity and contributions should reflect these values whether contributions are made to political organizations or directly to political candidates. Yet even the above examples, focusing only on EEO values, indicate that management has acted in violation of stated company values.  We believe that because management and/or the company board of directors is responsible for determining the recipients of company PAC giving as well as corporate treasury political spending decisions, and yet the above types of incongruent decisions are commonplace, stakeholders must ensure that management does not blindly approve political contributions that contradict company values.  Disclosure of political contributions after the fact does not repair harm created by inconsistent actions. We believe that a company’s political activities become our concern when:

1. Company resources of any kind are used to make or direct political contributions for any reason.
2. A contribution to a candidate actively works against the values of the company or creates potential damage to the company and its employees, customers, or shareholder value.
3. We bring concerns about risks created by political giving to management’s attention and management fails to address (or in the case of Home Depot, even notice) the brand, reputational, or legal risks to the company.
4. Investment managers with a fiduciary responsibility to address significant risks to shareholder value with management, the board of directors, and the owners rubberstamp approval on incongruent corporate expression of values.
5. Supreme Court opinions like those expressed by Justice Kennedy in Citizens United insist that we, as shareholders, correct misdoings by management, through the “procedures of corporate democracy.”

Inconsistencies shown between corporations’ publically stated values (environmental policies, health care policies, compensation, pension, and employee benefit issues) through support of specific candidates whose public policy and government regulation is in violation of company values can directly harm shareholder value.  

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources.

A VOTE ON CORPORATE POLITICAL SPENDING

When NorthStar began to take a harder look at the political activities of companies in our portfolio, we took into consideration approaches pursued by the Center for Political Accountability (CPA) and other social investors, notably Walden Asset Management and Trillium Asset Management. We concluded, as mentioned above, that disclosure of political spending alone does not sufficiently address discrepancies between corporate values and the values of endorsed candidates or political entities.

As fiduciaries, we are concerned that political spending decisions by management, which are intended as beneficial to company value, may work at cross purposes.  In addition, Justice Kennedy’s majority opinion for the court in the Citizens United decision placed the onus on shareholders in a corporate democracy to keep management’s political activities in check, such that we, as representatives of shareholders in the proxy process, must use our votes to uphold or dissuade management from potential conflicts.  As a result of that investigation, NorthStar crafted and filed its first round of shareholder proposals at Home Depot, FedEx, and Procter & Gamble (P&G), for the 2011 shareholder meetings,  decrying corporate political activity incongruent with publically stated values and seeking a shareholder vote on corporate political activity.  We have similarly pursued eight companies on the same issue for the 2012 shareholder meetings (Chubb, Intel, Google, Home Depot, Praxair, Ecolab, Johnson and Johnson, and Western Union).

Our perspective is that corporate standards for political giving must include an analysis of anticipated political spending for congruency with the company’s values to minimize risk to shareholder value.

Support for this approach is evidenced by:

• When the 2010 Supreme Court ruling in Citizens United v. Federal Election Commission interpreted the First Amendment right of freedom of speech to include certain corporate political expenditures involving “electioneering communications,” striking down elements of the previously well-established McCain-Feingold law, the decision itself required the remedy of “potential abuses” through “procedures of corporate democracy.”
• NorthStar’s decision to seek a shareholder vote on political contributions was lauded by John C. Bogle, founder of the Vanguard Group, in making the case for a shareholder vote on political contributions in a New York Times Op-Ed: “In the Home Depot case, which was brought by NorthStar Asset Management, a Boston money manager, a vigilant S.E.C. [Securities and Exchange Commission] has allowed our shareholders to take that first step toward [corporate] democracy.” Bogle argues that self-interested managers “exploit provisions in the law…to make lavish political contributions without disclosure… and subvert our political system,” which can only be corrected by imposing a requirement for a binding “supermajority” (75%) shareholder vote on political contributions. Bogle also addresses the concern that “our nation’s money managers now hold[ing] 70 percent of all shares of American corporations…have not always honored [the] responsibility to vote,” pointing out that “mutual funds, our largest holders of stocks, are now required to publicly report how they voted during the year,” finally giving shareholders the means to hold financial institutions accountable as well.
• “The standard (under Delaware corporate law) requires a unanimous shareholder vote to ratify a gift of corporate assets other than for charitable purposes.”
• In allowing NorthStar’s resolution, the SEC agreed with NorthStar’s view that seeking an advisory vote on electioneering contributions is a shareholder right.  Importantly, the SEC’s decision to allow the Home Depot resolution also established that NorthStar’s proposal was a significant social policy issue of concern to shareholders, addressed issues outside the ordinary business of the firm, was clearly defined, and that giving shareholders a vote goes beyond disclosure.
• On July 13, 2011, congressional leaders Rep. Michael Capuano, Sen. Robert Menendez and Sen. Richard Blumenthal re-introduced the Shareholder Protection Act; a bill that would allow shareholders of public companies to vote annually on political spending. NorthStar signed a coalition letter to Congress supporting the Shareholder Protection Act. The coalition letter stated: “Responsible corporate governance requires the involvement of informed shareholders and is not a partisan issue. We believe that holding management accountable and ensuring that political spending decisions are made transparently and in pursuit of sound business is important for both the market and for democracy.”

Increasingly, shareholders are asking for more accountability and even evidence of value received for corporate political expenditures. When contributions are made to candidates via corporate treasury funds or through PAC funds that violate the same corporation’s policies and values, shareholder value is put at risk. Greater oversight requires that shareholders and their fiduciaries be allowed an opportunity to weigh in on all of the company’s political contributions before incongruent contributions occur.

In our experiences, company management states that compliance with election laws is the standard for directing contributions to political candidates–even when candidates’ political positions violate the company’s policies and publically stated values. However, guidance provided by the CFA Institute’s Code of Ethics and Standards of Professional Conduct states “in the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation.” We believe this must include the company’s own internal governing policies so as to avoid bias that reflects personal views and interests rather than those of the company as stated in company policies. As owners, we believe that the criteria for the company’s political activities should be the higher of company standards or legal requirements, rather than the minimum (legal) standard referenced by management.

Furthermore, some of our colleagues have asserted that corporate PAC contributions should not be subjected to shareholder scrutiny through an advisory vote.NorthStar maintains that PACs carry the same brand and reputational risks to shareholder value as any other corporate political activity. PACs are formed by the company, expenses are paid by the company, the name or brand of the company is used in association with the PAC, the PAC solicits both shareholders and salaried employees for contributions to the PAC, and senior management exercises discretion over the money. Therefore, we maintain, shareholder scrutiny and input in advance of these PAC contributions is necessary to mitigate risk and safeguard shareholder value. 

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources.

SUMMARY

We believe that there is a need to hold companies accountable for all aspects of their public actions. Incongruities in their public actions–whether or not we have had successful prior shareholder engagements; whether the source of the contribution is from a Political Action Committee (PAC) or by the company–are inherently problematic.

Shareholder value can be diminished by negative publicity associated with political giving that is incongruent with company values. Political spending decisions that are wholly dependent on the will and vision of a management without oversight to ensure that these decisions are in line with company values exposes the company to unnecessary risk.  Governing policies that allow management to exercise personal views and interests rather than reflect corporate values potentially serve to harm company image and increase shareowner risk. As shareholders and fiduciaries, we believe that the criteria for the company’s political activities should be based upon not solely legal requirements, but also on considerations of the company internal values as a higher standard. At this time of heightened public scrutiny of corporate political involvement, all shareholders need to the opportunity to evaluate management’s decisions and vote on political spending to avert potential loss of shareholder value.

The Target Corporation debacle of the summer of 2010 resoundingly demonstrated that shareholder value is at risk when contributions are made in violation of company values.  As investment advisers, financial professionals, and shareholders, we must exercise our fiduciary responsibility and weigh in to provide checks and balances on corporate political activities.

Download the “Corporate Political Spending: Why Shareholders Must Weigh In” PDF to view footnotes and sources.

Company Comments

DiversityInc contacted the companies cited in the whitepaper. Comments from Procter & Gamble, No. 5 in the DiversityInc Top 50, and Target, No. 30, were given earlier this year in response to a Q&A with Goodridge in DiversityInc’s 2012 Talent Development & Mentoring issue. The Home Depot did not respond. FedEx declined to comment.

Procter & Gamble: P&G’s commitment to diversity and inclusion is unwavering. Our aim is to provide a work environment, which fosters a culture of inclusion for all, so that everyone is valued and included. Our Company Purpose is to touch and improve lives, beginning with our employees. Without exception, we value all of our employees and respect their right to be who they need to be.

Target: Following the 2010 election, Target conducted a thorough evaluation of our processes and established a Policy Committee to review and provide greater oversight to future corporate political giving. Moving forward, we will evaluate our giving based on business, team member and stakeholder objectives. Target believes that engaging in civic activities is an important part of operating a national retail business and believes we operate best when working with policy makers on both sides of the aisle.

NorthStar Asset Management, Inc. is a socially responsible investment firm based in Boston, Massachusetts.  

Julie N.W. Goodridge is the President, CEO, and founder of NorthStar Asset Management, Inc. She holds a B.A. from Boston University and an Ed.M. from Harvard University.

Christine Jantz, CFA is the Investment Analyst at NorthStar Asset Management. Her education includes an MBA in Financial Management from the MIT Sloan School of Management, and she also holds an MS in Statistics from the University of Iowa and a BA in Mathematical Sciences from Bethel College.

REFERENCES

Bogle, John C. “The Supreme Court Had Its Say. Now Let Shareholders Decide.” New York Times, 15 May 2011. Web.

“Capitol Hill ‘C Street house’ connected to ‘kill the gays’ Evangelicals in Uganda [video].” Metro Weekly, September 23, 2010. Web.

Center for Constitutional Rights. Uganda’s ‘Kill the Gays’ Bill Back in Play and Could Be Law By End of Week. New York: CCR, May 11, 2011. Web.

Center for Political Accountability. Center for Political Accountability, n.d. Web.

“CFA Institute Code of Ethics and Standards of Professional Conduct.” CFA Institute, 2010.

Citizens United v. Federal Election Commission. Supreme Court of the United States, n.d. Web.

Coates, John. “What Effect Will Citizens United Have on Shareholder Wealth?” Harvard Law and Economics Discussion Paper No. 684, 21 September 2011. Web.

Corporate Political Contributions. The Home Depot, 2010. Web.

DeNicola, Paul, Bruce F. Freed, Stefan C. Passantino, and Karl J. Sandstrom. “Handbook on Corporate Political Activity.” The Conference Board, November 2010.

Edgar System. Securities and Exchange Commission, n.d. Web.

Federal Election Commission. United States Government, n.d. Web.

Ferri, Fabrizio and Maber, David A., “Say on Pay Votes and CEO Compensation: Evidence from the UK” (November 24, 2011). Review of Finance, Forthcoming. Web.

Hyatt, James. “Shareholders Press for Political Spending Disclosure” Business-Ethics.com, 29 June 2010. Web.

Keilar, Brianna, Sean Callebs, Steve Brusk and Ninette Sosa. “Hustler says it revealed senator’s link to escort service.” CNN Politics, July 11, 2007. Web.

Martiga Lohn. “Target CEO defends Minn. GOP contributions.” MSNBC, 27 July 2010. Web.

Sharlet, Jeff. The Family: The Secret Fundamentalism at the Heart of American Power. New York: Harper Collins Publishing, 2008. Print.

Trillium Asset Management. Target & Best Buy Announce New Policies on Political Spending Following Controversy about Minnesota Forward Contributions. Boston: Trillium Asset Management, Feb 2011. Web.

Tracking the United States Congress. Civic Impulse, LLC, n.d. Web.

The post Are Political Donations That Conflict With Your Diversity Policy a Shareholder Issue? appeared first on DiversityInc.

Do these organizations have diversity-focused mission statements? Are they culturally competent in global local markets while upholding basic human rights? In the United States, what responsible types of political action committee (PAC) contributions are they making?

Having the answers to these questions allows Goodridge and her staff of women to analyze the financial and social impacts of shareholders’ investments to maximize return. And she’ll be the first to hold their “feet to the fire” when businesses’ practices are less than socially responsible. She says it’s all part of her fiduciary responsibility to protect her clients’ ROI.

During a recent interview with DiversityInc CEO Luke Visconti, Goodridge details some of the challenges she has faced in protecting her clients’ portfolios when corporations act in ways that are not considered socially responsible. She discusses how her firm has taken the initiative to uphold equitable business practices and inspire activism. Scroll down to watch video clips from the interview.

For more on corporate social responsibility, read Visconti’s column, “Ask the White Guy: Decision Making, Clarity of Values & What to Do When It Goes Horribly Wrong,” and “Lowe’s Muslim Publicity Gaffe Serves as Case Study of What Not to Do.” For best practices in diversity management, visit DiversityIncBestPractices.com.

LUKE VISCONTI: Tell us about NorthStar and what you do.

JULIE GOODRIDGE: I started the company about 20 years ago. I work primarily with people with inherited wealth. We only have about 65 clients and manage $160 million, so it’s a small firm and, by Wall Street standards, a good setting.

We initially set out to create portfolios for our clients that we felt would match their values. That was easier a long time ago; now things are much more complicated.

We started filing shareholder resolutions on behalf of the shares held in our clients’ accounts. We didn’t believe that there was really any company that’s 100 percent socially responsible.

We wanted to engage with companies on behalf of our clients, to show them that we really do care about the companies that are in the portfolio and that we do think about their values when we choose those companies.

VISCONTI: You were doing this in an effort to help the companies make sound decisions for the benefit of your investors?

GOODRIDGE: I have a fiduciary obligation to my clients to have things in their portfolio that actually reflect what they need and want. I am looking at their financial returns, and I am looking at the social return.

If I have a company in the portfolio that is really fantastic but has a few things that make me nervous, I feel like I need to engage with the company to help them think it through.

This engagement is a tricky thing. We’re a very small firm, an all-women firm. We are just now eight in total. Last year, we were four. It was hard to get a call from a company. They’d say, “Julie, we’d really like to come and meet with your crew and get to know you a little bit.” I feel like what they didn’t understand was that we had five chairs in the office. We have everybody in the company sit down and think it out—what is going on in the news right now and in what ways might those issues affect the companies and our portfolios.

Public Policy, Corporate Values

VISCONTI: Tell me about some of your favorite shareholders?

GOODRIDGE: Our clients have inherited wealth. A lot of times they have stock in the portfolio that we wouldn’t necessarily want them to have. We started crafting shareholder resolutions at those companies.

For example, one of my favorites was when Lee Raymond retired [in 1995 as chairman and CEO] at ExxonMobil with what then was seen to be an exorbitant executive-compensation package. We asked them to do an analysis of the highest- and lowest-paid workers and to tell us how that had worked over the last 10 years for both.

This was a point where gas prices were striking highs. It cost people something like one month’s worth of their salary to equal the amount of money that Lee Raymond made in his first 15 minutes every day.

The other thing we worked on is getting companies to create a “human right to water policy.” We had been working with a group at the Unitarian Universalist Service Committee that was doing a lot of work on this.

One of our clients chose Pepsi in their portfolio. Pepsi had gotten into a lot of trouble for sucking all the water out of the aquifers in this town in India. What we wanted the company to do was to develop an ethical standard for using water and interacting with communities around water usage. We came up with five different principles that we thought that they should have.

[Director of Public Policy] Paul Boykas from Pepsi called me and said, “Julie, what can we do to make this resolution go away?” That was an opportunity for me to engage with him. He asked me to draft something for him and I did. I drafted what was the basis for the Pepsi Human Right to Water Policy. They ended up getting awards and recognition. It’s a big part of their annual report every year.

I feel like if you don’t have an ethical guideline from which to operate your company, you can’t count on a matrix or government regulation to pull you through.

Steve Jobs is a perfect example. Here’s a guy who knew exactly what he wanted to do. There has to be a way to put in writing what the values of the company are so that the company can move forward and be seen as adding benefit over time.

VISCONTI: What in your mind constitutes a good statement of values? Is there a formula?

GOODRIDGE: We are concerned about the treatment of employees, consumer safety issues and good products, sustainability, commitment to climate, environmental concerns. Each corporate group has to examine the ways in which they have an impact in their immediate and global neighborhood.

If they are not really looking at themselves in every aspect to see how their mission is being carried forth by their employees, through their operations and locations for those operations by the vendors that they use, they are going to run into trouble.

The most recent example of that is around political contribution, since the Citizen United decision [the 2010 U.S. Supreme Court holding that the First Amendment prohibits government from censoring political broadcasts in candidate elections when those broadcasts are funded by corporations or unions]. We were freaked out when this happened to Target. (Thank God Target wasn’t a company in our portfolio.)

[For more on Target’s PAC funding of a Minnesota gubernatorial candidate who had expressed anti-gay views, see www.DiversityInc.com/targetpac.]

We looked at all the companies in our portfolio, heavily consumer-driven companies that could potentially be targeted by groups—right or left didn’t really matter because their values are not in congruence, expressed through their political contributions.

Procter & Gamble gave a $40,000 contribution to an Ohio group [Partnership for Ohio’s Future] that supported the election of two judges. This group supports a piece of legislation that would end collective-bargaining rights for public citizens in Ohio.

Those could be the wives, the children, the parents of their employees. Why would that be great, to have your father lose all of his pension benefits or not be able to continue health insurance? Their PAC contributions are out there and people start to take a look at who they are giving to.

Disclosing PACs 

VISCONTI: How does a decision like this get made in a company? How do these things happen?

GOODRIDGE: There is a management committee that makes the decisions. You can make a contribution to a corporate PAC if you are a shareholder. You can make it if you are a certain class of employee and you can make a contribution to a specific candidate through the PAC.

What they are not doing is they are not seeing how their values translate into every single aspect of their corporate citizenship.

VISCONTI: You are doing this on behalf of your customers? Providing a superior return for their investments?

GOODRIDGE: We file the shareholder resolution. We would quite truthfully be embarrassed to have some horrible piece of news come out about any of the companies that we currently have in our portfolio, or we are probably going to get sued by our clients.

If I have stock in a portfolio that is underperforming—for example, if I had Target and it has been underperforming over this period of time—I need to be able to explain to my clients why that’s happening and why it’s still on the portfolio. I would really rather have the reasons for that be that they had a bad quarter. I don’t want it to be because they made an incredibly stupid gift to a very conservative group that violates their corporate values.

Interestingly, a lot of corporations don’t disclose. Corporations form PACs because historically that is the only way you could give to federal candidates. For elections, those PACs and that money has to be disclosed. No one has ever looked at the data. If a company is disclosing, as was the case with The Home Depot, there is data there for anybody to look at.

We had The Home Depot in the portfolio and we did an analysis of what they are giving. They have nondiscrimination based on sexual orientation, nondiscrimination based on gender identity. They got in trouble so they are trying really hard to do the right thing. We were blown away. You would think a company that has publically defined values would support candidates that shared those values. They will say, “We’re concerned about our business interest.” As far as I am concerned, and probably the folks at Target are now concerned, their business interests have to do with how they are speaking with their resources.

[The Home Depot] had made a [$10,000] contribution to Bob McDonnell, who was running for the governor of Virginia, through the general treasury funds. The minute he got into office and on his campaign trail, he was committed to rolling back all of the protections for LGBT citizens in the state of Virginia.

I look at that and I think, “Wow, what would it be like to be any level of employee who is LGBT at The Home Depot in Virginia and realize that contributions made from the general treasury support this guy?”

And what about PAC money? It’s employee money and should not be subjected to this sort of thing. It would be worse if you are gay or lesbian and realize that the guy sitting at the desk next to you is giving money to this PAC precisely to support this guy.

Recently we went to Procter & Gamble. Procter & Gamble does a lot around the world. They were very concerned about these kinds of things. They were really trying hard. But when we looked at their PAC contributions, we saw that stuff and they denied that they made any treasury contributions: “We don’t make any treasury contributions, so why are you picking on us about our PAC?” In fact, they had just been awarded a special recognition by the Center for Political Accountability because they don’t give money directly out of the treasury.

Low and behold, they are preparing to go to shareholder meetings and something comes up on the SEC website. Procter & Gamble has come forth and said that they did.

We spent a lot of time worrying about people’s asset allocation, their income needs. We believe that shareholder engagement, in addition to money management, can be a positive force for social change.

Gender Investment Strategies

VISCONTI: Wall Street and the Wall Street banks have been dominated by men, but your firm is dominated by women. Do you see a philosophical difference between women and men, their investment strategies and how they view investments and security?

GOODRIDGE: When the market goes down like 500 points at a day, which it does pretty much every other day, the women are like, “Are you OK? Is everything all right?” Then they will ask, “Do I still have any money?” I’m like, “Yes, let’s schedule a time; let me go through your portfolio.” The guys are like, “We should buy something; it’s just an opportunity,” “We should sell this,” or “I have to trim my portfolio”—just crazy, irrational decisions.

You’d think it would be the other way around—that women become hysterical and they decide to sell. No, it’s the guys that freak out. The guys are active traders. They want to buy and sell. They want to sort the stock. We don’t do that. Those kind of guys need to find somebody else; there are plenty of people that do derivatives.

VISCONTI: I was told by WEConnect, which is the global effort by WBENC that certifies women-owned businesses, that there is only 1 percent of global business equity held by women. What do you think would be the benefits—on the world and women in business—of having gender equity?

GOODRIDGE: It’s just the same benefit that you have by including any kind of diversity. If you don’t have a broad group of people sitting around the table trying to analyze—for example, what we should do, who you should give your money to, what political candidate you should fund—you are not getting the full picture.

I found that a woman thinks differently than a man. Most women are raised differently. There is a lot going on. The question is, how can you bring in diversity?

Diverse groups of people can be really scary because it challenges you to think outside the box. For example, I don’t have any men working for me, except my computer consultant. For a long time, I didn’t have people of color in my office. Not because I didn’t want to hire people of color but because I had four employees.

The way that we come to decisions, the way we come to learn and respect one another’s opinions and values, the way we grow and are creative—it’s vitally important that everybody is sitting at the table for that to happen.

The Beginning

VISCONTI: How did you end up doing this?

GOODRIDGE: I went to high school for performing arts. I had to figure out why to go to college. I was a terrible writer and the guys in the next room said, “Look, if you take these philosophy classes with us, you are going to totally learn how to write.”

I decided to become a philosophy major at Boston University. I just wanted to learn how to write and think in a broad way. Then I was a community organizer. I went to the Harvard Graduate School of Education where I got master’s degree in human development.

The only place locally in Massachusetts that would hire me at the salary level I needed was Merrill Lynch. I called them up. They asked if I had any sales experience. I was a community organizer and I raised all this money. I was known throughout ACORN [Association of Community Organizations for Reform Now]. I made that sound like sales experience. They hired me. I hated it.

My friend Amy Domini came out with a book in early 1984 called “Ethical Investing.” We started doing classes and I started learning how to do socially responsible investing. I started doing this activism.

We created a booklet. We were the first people to do this. We would describe every single issue. We had a cross reference. You go to these issues and this is how you should vote; if you believe this thing, you should vote that way.

Then clients were voting their proxies anyway because they were just throwing [the booklets] in the trash. I decided that we needed to start voting client proxies for them. 

Career of Activism

VISCONTI: Think of my audience, mostly women, and who they are. If they want to leave their corporate job, what was that bridge? What was that job?

GOODRIDGE: I was working at that point as a team leader. I worked at Dean Witter and I was the only one doing social investing. There were 125 brokers in the office; I was the only woman.

I was totally different and my clients were totally different. I had, at that time, $20 million under management, and my manager said to me, “You are not generating enough commission.”

I felt that if I was paid even half a percent for managing that $20 million, and I could do what I want to do on behalf of my clients, I wouldn’t have to come downtown and work with these guys every day. I thought to file with the Securities and Exchange Commission to become a registered investment adviser, and that’s what I did.

SIDEBAR: Company Comments

DiversityInc contacted the companies Goodridge cited in this interview for response. Target and Procter & Gamble, Nos. 30 and 5 in The 2012 DiversityInc Top 50, respectively, responded to DiversityInc, and their statements appear here. The Home Depot, ExxonMobil and PepsiCo declined to comment.

Target 

Following the 2010 election, Target conducted a thorough evaluation of our processes and established a Policy Committee to review and provide greater oversight to future corporate political giving. Moving forward, we will evaluate our giving based on business, team member and stakeholder objectives. Target believes that engaging in civic activities is an important part of operating a national retail business and believes we operate best when working with policy makers on both sides of the aisle.

Procter & Gamble 

P&G’s commitment to diversity and inclusion is unwavering. Our aim is to provide a work environment, which fosters a culture of inclusion for all, so that everyone is valued and included. Our Company Purpose is to touch and improve lives, beginning with our employees. Without exception, we value all of our employees and respect their right to be who they need to be.

Guided by our Purpose, Values and Principles, P&G participates in the political process to help shape public policy and legislation that has a direct impact on the Company. Engagement on public policy issues ensures that the interests of our employees, consumers and shareholders are fairly represented at all levels of government around the world. We are committed to being transparent about our political involvement globally, and more information can be found on the Political Involvement page on www.pg.com.

Regarding P&G’s contribution to Partnership for Ohio’s Future, P&G engages in the political process by occasionally providing financial support to state ballot initiatives and issue advocacy campaigns that have a direct impact on the business. In this case, P&G supported two candidates for the Ohio Supreme Court because P&G is an Ohio company, and the Court plays an important role in the legal climate in which we operate. P&G’s involvement in these campaigns is overseen by a multi-functional team comprised of representatives from Global Government Relations, Legal, Human Resources, Corporate Communications and other functions related to the specific issue under consideration. As with all other aspects of our political involvement, our participation in such efforts is guided by our Purpose, Values and Principles and by our business strategies.

The Procter & Gamble Good Government Fund (P&G GGF) is P&G’s political action committee. The P&G GGF consists of voluntary personal contributions by employees to support candidates at the federal, state and local level, who support issues important to the business and the quality of life in the communities in which we live and work. Support for any political candidate is based solely upon business impact (i.e., tax, trade, chemical regulation, innovation policy, marketing and advertising, etc.) and not in consideration of positions candidates may take on social issues.

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