Shareholder Petitions Threaten SGR

By Michael Behm, Senior Vice President

I happened to be visiting a client’s office last month when an email from the general counsel arrived. New internal disclosure rules were being considered by senior management at the request of several vocal shareholders. Money committed to certain advocacy activities and most political spending would now require even further disclosure – and thus additional scrutiny.

Oh, and one more thing: the general counsel wanted to know why budget dollars were being spent on several elected officials Groups. His questions could be summed up as follows: “What are we doing there…what are we getting in return?”

In a climate of unending cost-cutting, continuous program reorganization and scrutiny over political spending and participation in certain Groups of state and local officials – now understood as “increased transparency” – the scenario might hardly be considered unique. But the cumulative effect of these factors is making our Groups investments harder to defend and so the question is: Can you defend your Groups investments?

Let’s consider again why we participate in state and local officials Groups:

  1. Because I always have;
  2. Because that is what everyone else in my industry does during the spring and summer months; or
  3. Because these Groups return some tangible value to my program.

The correct answer is, of course, 3. But I cannot tell you how many times in my career I have heard some combination of the first two answers from industry colleagues and clients. They do it because they have always done it that way. It is business as usual.

These answers are occasionally accompanied by an awkward chuckle, because these professionals know that Groups participation is a critical part of their state and local government relations program. The challenge is articulating why it is critical, how they map these often costly contributions, memberships and sponsorships back to their retail government affairs efforts or how they should quantify its value for the boss. They also know that business is not as usual anymore.

Defending your investments in Groups should not be a difficult exercise – that is, to express what Groups participation returns to your program in terms of value. If you cannot quantify these efforts, then why are you doing it?

One of the very first questions you need to ask yourself is the following: Is there an “internal client” that considers Groups participation a priority?

In the instance of my client’s response to its senior management, the answer was yes, absolutely, without question. We were able to explain that the business units (the internal clients in this case) consider the Groups outreach to be critical in terms of elevating the company profile among elected officials in an otherwise crowded technology market, sustaining their innovation efforts in a changing public policy environment and ensuring a competitive edge for the company.

We went on to explain that the leaders and officials in the Groups are important to the national relationship-building efforts, that these officials have often championed policy on behalf of the client and more than a few of these officials represent areas that neighbor the client’s facilities or they are customers. We described the many policies we have targeted and influenced over the years and subsequently leveraged at both the state and federal levels of government; we also described the occasions in which the Groups forums were utilized to challenge policies adverse to the client.

We provided the right answers to the general counsel and the program continues today.

As you quantify – or have to defend – your own Groups investments, you should consider some of the threshold questions that go straight to the Groups’ value proposition. I pose just a few below:

  • Who participates in these Groups and how are these officials meaningful to your program?
  • Does the Group offer you opportunities to participate in a meaningful way or do you watch from the sidelines?
  • Can my senior management or internal client play a role as an expert or resource to the Group?
  • Does the Group develop policies or does it simply serve a clearinghouse function for its members?
  • Is the Group in which you participate a policy-oriented Group, ideologically-oriented or a politically-focused (527) Group and does that matter to your program or internal client?
  • Do state or local leaders participate in the Group?
  • What is the value of the relationships you develop, or have developed, and what do they mean to your program or internal client?
  • Is there a value to the Group’s policymaking?
  • What is the Group’s influence and reputation and does that matter to your program, the internal client or even company shareholders?

A regular process of quantifying your participation in the Groups and their overall value should be incorporated into your program – and as a program component that is regularly revisited.

All of this can help make defending your Groups investments much easier – and not just when the boss calls.

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