Record Lobbying Expenditures Are Limited In Pact Signed By IBM, Pirelli, And Danone

IBM and Pirelli, the North American arm of the Italian tire maker, are among the big names that have announced that they will restrict or eliminate their lobbying efforts and political campaign contributions in order to curb what some observers believe to be an excessive level of corporate influence on lawmakers.

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The following companies, IBM IBM, -1.07 %, Pirelli Tire North America PIRC, -1.45 %, Danone North America BN, +1.10 %, Aspen Skiing, the French food giant, Danone North America BN, +1.10%, and the food science and chemical concern DSM North America DSM, +0.30%, announced Tuesday that they have joined forces to form the Erb Principles for Corporate Political Responsibility (CPR) in partnership with the University of Michigan's Erb Institute.).

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They are still in talks to add more companies and aim to add 30-40 by the end of the year.

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Architects of the framework say that the goal of the project is to provide a set of non-partisan, pragmatic guidelines that companies can use to determine whether and how to engage in civic and political affairs in a responsible manner. As a key step towards strengthening trust in American civic institutions and promoting collaboration on shared challenges, each inaugural supporter has committed to take measurable action based on the principles, which is seen as a key step in strengthening trust in American civic institutions.

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Open Secrets, a political spending tracker, reports that lobbying spending in 2022 soared to $4.1 billion, a nominal record and the highest since 2010.

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Specifically, the technology sector has been spending record amounts on privacy, antitrust, and other issues.

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A combination of Amazon.com, Apple, and Microsoft, for instance, set records in their disclosed annual lobbying spending on Washington last year, spending more in one year than ever before as Congress and the Biden administration exerted pressure on the tech giants.

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Trade Algo spoke with Maureen Kline, Pirelli Tire North America's vice president of public affairs and sustainability. She told MarketWatch that Pirelli Tire North America operates in the U.S. The company is a member of auto parts and tire trade groups. However, it does not have a lobbyist registered and does not make any political contributions.

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TSLA, -2.30% GM, -1.37% said that the transition from internal combustion engines to electric vehicles shows that the industry can work collaboratively to meet market demands, stay ahead of regulations, and, as she stressed, "be responsible actors in this transition" without having to purchase influence in Washington, as she put it.

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Her experience working in Washington and Italy gave her a unique perspective on government affairs, she said. “There has been a lot of change in Washington over the last few decades, with so much aggressive lobbying. "Corporate worlds are losing sight of what's right."

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It is also lawmakers' responsibility, she pointed out, since companies feel they are getting their money's worth despite record spending.

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“This is the big question. Companies spend a lot of money on lobbying, so it is logical to assume that there is a payoff for them. Would it be possible to shift to more responsible lobbying and still see a payoff? ” she said. “Pirelli does not have a registered lobbyist and does not contribute to political campaigns. Our goal is to grow our business in a way that allows us to continue to meet our goals, but to do so in a way that does not just benefit us, but also benefits a greater good in the long run.”

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‘How much has changed in D.C. in just a few decades, such aggressive lobbying. The corporate world is losing sight of the proper balance.’ — Pirelli’s Maureen Kline

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Officials at the Erb Institute say that confidence in U.S. institutions continues to erode, and now more than ever, the private sector may have to consider how it will handle reputational risks and rewards from customers, employees, investors, and other stakeholders.

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“It has been clear for a long time that neither traditional shareholder primacy nor stakeholder capitalism is fully clear about the legitimate role that business should play in civic and political affairs,” said Elizabeth Doty, director of the Erb Institute's Corporate Political Responsibility Taskforce.

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"Yet, as a result of our conversations, we believe that there may be some areas of common ground when it comes to CPR. The Erb Principles serve as a starting point for better conversations and more aligned action on both an internal and external level," Doty continued.

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The framework was designed specifically to meet the needs of the American market, and it serves to ensure that signatories are aligned, that regulations are managed, and that their efforts are communicated effectively.

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‘Neither traditional shareholder primacy nor stakeholder capitalism has been really clear about the legitimate role of business in civic and political affairs.’ — Erb Institute’s Elizabeth Doty

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“Business and government institutions are engaging in policy and politics in a way that has not been seen for generations," said Christopher Padilla, vice president, of government and regulatory affairs at IBM.

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Strong civic institutions, environmental stewardship, economic opportunity, and long-term shareholder value are high-priority issue areas for applying the Erb framework during the first year.

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In order for the Erb Principles for Corporate Political Responsibility to be able to achieve tangible impact, companies that support the principles are required to commit to at least one of the following three measurable actions, all of which can be verified by trusted benchmarks:

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1. Using the CPA-Zicklin Model Code of Conduct for Political Spending — developed by the Center for Political Accountability, which publishes the CPA-Zicklin Index of Corporate Political Disclosure and Accountability. Model Code outlines policies needed to address governance gaps in political spending, helping companies reduce enterprise risks, exert greater control, act as responsible citizens, mitigate risks, and improve their CPA-Zicklin Index scores.
2. In order to comply with GRI Standard 415: Public Policy, one must adhere to the Global Reporting Initiative's definition of meaningful disclosure of lobbying activity - which includes significant issues, the company's stance, and any differences from other policies, goals, or positions. GRI 415 is one of the most widely used sustainability reporting standards. Transparency, accountability, and stakeholder trust are supported by such disclosures because they focus on alignment. 
3. Companies also have the option to adopt a policy prohibiting the use of corporate treasury funds for election-related spending, as outlined in the CPA-Zicklin Index, which prohibits the use of corporate treasury funds for election-related spending. Over the past few years, such policies have been recognized by twenty companies, a significant increase.