PROXY MEMORANDUM
Date: March 20, 2019
To: Nucor Corporation shareholders
Subject: Shareholder resolution requesting a report on the company’s political spending policies and practices
Lead Filer: First Affirmative Financial Network, on behalf of Waterglass, LLC
Contact: Holly A. Testa, Director, Shareowner Engagement
hollytesta@firstaffirmative.com/303-641-5190
We ask for your support of the following resolution that will be included in the Nucor Proxy Statement for the 2019 annual meeting:
RESOLVED: that the shareholders of Nucor Corporation (“Nucor” or “Company”) hereby request that the Company provide a report, updated semiannually, disclosing the Company’s:
- Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum. 2
- Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:
- The identity of the recipient as well as the amount paid to each; and
- The title(s) of the person(s) in the Company responsible for decision-making.
The report shall be presented to the board of directors or relevant board committee and posted on the Company’s website within 12 months from the date of the annual meeting. This proposal does not encompass lobbying spending.
This resolution is not a criticism of Nucor’s political spending in general, as we agree with the Company that engagement on public policy issues affecting the company is appropriate. It is, however, a call for more transparency. We have no doubt that the Company, as it points out in its opposition statement, complies with current laws and regulations regarding political spending, as that is certainly the minimum expectation. However, compliance with law does not equate with adequate disclosure to investors. Our proposal requests disclosure that is
- material to investors and not currently disclosed by the Company
- necessary for investors to properly evaluate Company’s effectiveness in managing their involvement in public policy
- not a threat to the Company’s competitive position
- is of increasing interest to investors, as demonstrated by increasing support of such resolutions at other companies
The board recommends that shareholders vote against this proposal, citing that
- the company complies with current applicable laws
- political spending is subject to board oversight
- additional disclosure may place the company at a competitive disadvantage
Current disclosure omits material information
Disclosure is in the best interest of the company and its shareholders. The Supreme Court recognized this in its 2010 Citizens United decision, which said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
Nucor describes the nature and extent of current federal and state law and the Company’s policies and procedures for complying with these laws in its opposition statement to this proposal. These laws focus on limits to and disclosure requirements for direct spending and Political Action Committee (PAC) spending. Nucor does not currently engage in the best practice of disclosing political contributions on their website, but a review of publicly available records shows that Nucor has contributed at least $570,000 in corporate funds since the 2010 election cycle (CQMoneyLine: http://moneyline.cq.com; National Institute on Money in State Politics: http://www.followthemoney.org). This comprises the Company’s direct spending.
However, investors currently have no insight into the extent to which Nucor funnels corporate funds to third parties for political purposes. Through membership dues, donations and other spending, substantial political spending may be done under the auspices of third parties, such as trade associations and 510c4 organizations. Current law does not require third parties to disclose their sources and most do not. This leaves shareholders with no knowledge of how much and for what purpose these undisclosed corporate dollars are used. The influence of this ” dark money” is growing rapidly, as the most recent midterm elections demonstrate, where third-party organizations collectively outspent the candidates’ own campaigns in 16 races, according to The Center for Responsive Politics.
Like many other companies, Nucor states that membership in a trade association does not equate to an agreement of all of its positions. This acknowledgment does not eliminate the potential business and reputational risks posed by the activities of these affiliations, particularly where the Company plays a prominent leadership role in the association and/or the trade association political spending strategies do not support long-term corporate goals or are considered controversial. When a company contributes corporate funds that are used by a trade association or other third parties for political purposes, it is essentially delegating an important corporate function to a third-party, necessitating diligent management oversight and disclosure to investors.
Comprehensive political spending disclosure does not place the Company at a competitive disadvantage
Presumably, political spending that is funneled through third parties would serve the same priorities set by the Board of Directors for direct political spending expenditures and support the overall public policy goals established by the company. Disclosure of this information should not compromise competitive advantage any more than the disclosure of direct expenditures as currently required by law. Further, political spending via third-party organizations are, by nature, designed to represent the interests of a broader, industry based coalition, and as such would seemingly imply less, rather than more risk of competitive disadvantage with peers when compared to direct political spending disclosure.
This proposal requests disclosure of information that is of increasing interest to investors and routinely made available by other companies
The company indicates that shareholders defeated substantially similar proposals in 2010 and 2015. We note that political spending proposals were voted on in 2010 and 2015 and both garnered over 30% support. Investor concern regarding political spending has escalated since 2010 when a decision was made by the Supreme Court on Citizens United v. SEC. In July, a rule-making petition (www.sec.gov/rules/petitions/2011/petn4-637.pdf) was submitted to the S.E.C. asking the agency to develop rules requiring public companies to disclose their spending on politics. To date, the agency has received more than 1.2 million comments (https://www.sec.gov/comments/4-637/4-637.shtml) on the proposal — the most on any petition ever submitted. The vast majority expressed support, and this majority included many institutional investors. that supported the petition. Average shareholder support, for political spending shareholder proposals overall, reached a record level in 2018, at 34 percent, representing a significant cohort of investors who consider political spending by companies to be a material issue in their decision-making process.
We urge Nucor, Corporation investors to vote in favor of this proposal.
NOTE: This is not a solicitation of authority to vote your proxy. Please DO NOT send us your proxy card; the proponent is not able to vote your proxies, nor does this communication contemplate such an event. The proponent urges shareholders to vote FOR this resolution following the instructions provided on the management’s proxy mailing.
