Corrections Corporation of America Votes Down Transparency on Political Donations
As part of work for a new project (more details to come soon), I've been reviewing the Securities and Exchange Commission filings of the Corrections Corporation of America, which is the largest private prison company in the US. Each year, companies traded ont he stock exchange have annual meetings where shareholders get to vote on issues related to governance, which are reported in form 14A (definitive proxy). For 2007, the following proposal by a group of activist shareholder nuns caught my eye. What's in the box below is the exact writeup from CCA's 2007 14A (see p 29-31):
PROPOSAL 5 – PROVIDE SEMI-ANNUAL REPORTS TO STOCKHOLDERS REGARDING THE COMPANY’S POLITICAL CONTRIBUTIONS AND EXPENDITURES
Sisters of Charity of the Blessed Virgin Mary, 205 W. Monroe, Suite 500, Chicago, Illinois 60606-5062, beneficial owner of at least 100 shares of our common stock, Mercy Investment Program, 205 Avenue C, #10E, New York, New York 10009, beneficial owner of 200 shares of our common stock, and The Province of St. Joseph of the Capuchin Order, 1015 North 9th Street, Milwaukee, Wisconsin 53233, beneficial owner of at least 100 shares of our common stock, have given the Company notice that they intend to present the following stockholder proposal at the Annual Meeting. In accordance with applicable proxy regulations, the proposal and supporting statement, for which the Company accepts no responsibility, are set forth below.
Corporate Political Contributions and Trade Association Dues
Corrections Corporation of America – 2007
Resolved: that the shareholders of Corrections Corporation of America hereby request that our Company provide a report, updated semi-annually, disclosing our Company’s:
This report shall be presented to the Board of Directors’ audit committee or other relevant oversight committee and posted on our Company’s website to reduce costs to shareholders.
As long-term shareholders of Corrections Corporation, we support policies that apply transparency and accountability to corporate spending on political activities. Such disclosure is consistent with public policy and in the best interest of our Company’s shareholders.
Company executives exercise wide discretion over the use of corporate resources for political activities. These decisions involve political contributions called “soft money.” They also involve payments to trade associations and related groups used for political activities that media accounts call the “new soft money.” Most of these expenditures are not disclosed. In the 2006 election cycle, Corrections
Corporation contributed at least $403,000 in soft money. (PoliticalMoneyLine: http://www.fecinfo.com/cgi-win/irs_ef_inter.exe?DoFn=&sText=1910&sYR=2006). In the 2004 election cycle, Corrections Corporation contributed at least $401,435 in soft money. (PoliticalMoneyLine: http://www.fecinfo.com/cgi-win/irs_ef_inter.exe?DoFn=&sText=1910&sYR=2004). In the 2002 election cycle, Corrections Corporation contributed at least $135,500 in soft money. (PoliticalMoneyLine: http://www.fecinfo.com/cgi-win/irs_ef_inter.exe?DoFn=&sText=1910&sYR=2002)
However, its payments to trade associations used for political activities are undisclosed and unknown. This proposal asks our Company to disclose its political contributions and payments to tax exempt organizations including trade associations.
The Bi-Partisan Campaign Reform Act of 2002 allows companies to contribute to 527s and to give to tax-exempt organizations that make political expenditures and contributions.
Absent a system of accountability, corporate executives are free to use company assets for political objectives that are not shared by and may be inimical to the interests of a company and its shareholders. Relying on publicly available data does not provide a complete picture of the company’s political expenditures. Our Company’s Board and shareholders need complete disclosure to be able to fully evaluate the political use of corporate assets. Thus, we urge your support for this critical governance reform.
The Response of the Board of Directors to the Stockholder Proposal
The Board of Directors has considered this proposal and believes that its adoption is unnecessary and would not be in the best interests of the Company or our stockholders.
The Board believes that participating in the political process is an important means to enhance stockholder value and promote good corporate citizenship. From our perspective, it is important that federal, state and local governments have an understanding of how their actions impact the Company’s business, customers and employees as well as an understanding of the benefits of public-private partnerships and the Company’s ability to assist them in meeting their corrections needs. Consequently, we communicate with government organizations and officials about our business concerns and the services we provide. We also seek to be an effective participant in the political process by making prudent political contributions that are consistent with federal, state and local laws. We also contribute to tax-exempt organizations, some of which may make political expenditures, from time to time when we believe that doing so is in the best interests of the Company and its stockholders. When made, such contributions are not earmarked and thus may be used for non-political purposes such as research activities, charitable endeavors, education initiatives and public information campaigns.
The Company’s ability to be active in the political process is already limited by numerous federal, state and local laws and regulations that restrict the organizations and entities that may receive corporate funding. In addition, political contributions are subject to extensive disclosure requirements by both the federal and state governments. The Company also has in place established budgeting, reporting and compliance procedures that are designed to ensure that all of the Company’s political activities are subject to the Company’s budgeting process, known and evaluated by management and in compliance with applicable laws and regulations, including laws requiring public disclosure. Such procedures and the contributions made by the Company are subject to oversight by the Board, through its Nominating and Governance Committee.
Overall, the Board deems the Company’s political activities to be important efforts that should not be burdened by special disclosures in addition to those required by federal, state and local regulatory authorities. We also believe that the high level of disclosure that is already publicly available is sufficient to provide information to stockholders and others who are interested in the Company’s political activities, and that the Company’s current budgeting, reporting and compliance activities are sufficient to ensure accountability. Accordingly, we believe that the time and expense that would be required to implement the proposal would result in little, if any, corresponding benefit to the Company’s stockholders.
For these reasons, the Board of Directors unanimously recommends a vote AGAINST this proposal.
Approval of the proposal requires the affirmative vote of a majority of the votes cast on the matter.
Because most shares are owned by management and large institutions, shareholder votes go overwhelmingly in favor of what the Board recommends. The results are found in the 10Q form (p 40), filed after the annual meeting and we see:
On a stockholder proposal for the Company to provide a semi-annul report to stockholders disclosing certain information with respect to the Company’s political contributions and expenditures, 28,180,340 shares, or 25% of the shares present or represented at the Annual Meeting, voted in favor of the motion, 52,448,090 shares voted against the proposal and 33,524,778 shares abstained.
The 14A also contains new info on executive salaries, which I will soon use to update my existing page on why private prisons do not save money over public prisons (hint - the CEO's salary is $700,000).
This is disappointing but not surprising. It's no consolation, but CCA is in good company with Google. As a column on TheStreet.com explains, the by the New York City Comptroller proposal meant
Google management would have been required to take all legal steps possible to fight any demand for censorship. The company would never have been required to break the law anywhere. But if a government wanted Google to start doctoring search engine results to suppress politically inconvenient truths, that government, any government, would have had to take the company to court to impose its will.
Not much to ask, really. But it was too much for Brin, Page and Schmidt. And it was too much for your fund manager. (Brett Arends, Funds Cave to Google Blind Eye at Censorship 9/26/2007)
Who needs political freedoms and transparency when you have capitalism?