A “Flat-Out Gift” for CEOs

The corporate advisory committee provision in H.R. 4790 is likely a reaction to similar committees established after the 2008 market crash under the Dodd-Frank bill. That bill created the Investor Advisory Committee, which holds hearings and writes reports and recommendations for the SEC on issues ranging from fee structures, disclosures, and securities products. The committee is made up of pension and retirement fund advisers, law professors, and other investment experts appointed by SEC commissioners.

“[Corporations] believe that corporations should have the same thing,” Golinger said.

The corporate advisory committee would be made up of ten to twenty “officers, directors, or senior officials of public companies,” and others appointed by the SEC that would meet twice a year to provide advice on rules, regulations, and other matters to the SEC commissioners.

The corporate appointees to the committee would receive paid travel and lodging expenses, a per diem stipend, and a paycheck — all funded by taxpayers.

“That’s a flat-out gift for the corporate CEOs to give them effectively taxpayer-funded lobbying to influence the people who are supposed to regulate them,” Golinger said.

While corporations can already spend millions of dollars lobbying SEC regulators, critics say the advisory committee could take matters a step further by effectively paying corporate CEOs to lobby the SEC on behalf of business interests that can run counter to investors’ wishes.

The National Association of Manufacturers supported the advisory committee in their 2023 letter to Congress, stating that the committee would help promote the interests of publicly traded companies and “provide the SEC with advice on how its rules and regulations impact public companies.”

But these companies already have an overwhelming advantage in lobbying regulators like the SEC, said Golinger.

The National Association of Manufacturers represents companies in many sectors, including in tech, weapons manufacturing, pharmaceuticals, consulting, oil and gas, and others. The association’s board includes executives from Johnson & Johnson, Pfizer, General Motors, Deloitte, RTX (formerly Raytheon), the Koch Government Affairs lobbying operation, the consulting firm McKinsey & Company, and other major corporations.

General Motors, Deloitte, Koch Government Affairs, and ConocoPhillips have together spent more than $79.3 million since January 2022 lobbying Congress, the SEC, the White House, and other regulators on corporate disclosure issues, corporate governance matters, shareholder rights, and other issues, disclosures show.

Days before the final vote, Rep. Sean Casten (D-IL), introduced an amendment to H.R. 4790 that would have stripped away the Public Company Advisory Committee — but the amendment failed.

“On the verge of a government shutdown, House Republicans wasted time this week forcing votes on bills that, if enacted, would fundamentally weaken the foundation of America’s free markets and limit Americans’ freedom to make their own investment decisions without interference from the government,” Casten said in a news release. “These bills are straight out of the Project 2025 playbook and bad news for American workers.”

Attacking Shareholder Rights

ESG investing has come under attack in recent years by conservatives who claim the practice wastes company time and dollars by forcing companies to focus on issues not relevant to the core of a certain company’s business.

While many examples of ESG investing have been knocked for prioritizing social contributions over shareholder returns, experts say conservatives are using anti-ESG efforts to attack shareholder rights more broadly.

A recent survey of New York–based voters in six House swing districts found that voters were skeptical of anti-ESG policies.

The SEC has the final say on allowing shareholder proposals to go to a vote during annual shareholder meetings, and the agency has allowed proposals that would force companies to disclose their staff diversity rates, environmental impacts, how they deal with pollution, and other issues. These kinds of disclosures have angered some CEOs and conservatives.

In January, ExxonMobil took the extraordinary step of suing two investment firms holding Exxon stock for repeatedly filing climate-focused shareholder proposals. Exxon filed the case in the Republican-dominated Fifth Circuit Court of Appeals, which has become a go-to court for corporate victories, and continued with the suit even after the proposals in question had been rescinded. Observers saw the effort both as an intimidation campaign against mounting shareholder activist efforts, and a way to get federal judges to supersede financial regulations on shareholder proposals. The suit was dismissed in June.

The National Association of Manufacturers, which has ExxonMobil executives on its board of directors, said H.R. 4790, the anti-ESG bill establishing the corporate advisory committee, would rein in the SEC’s regulatory overreach and help keep “activists out of the boardroom.”

“Politically motivated activists and underregulated proxy advisory firms have been empowered by recent actions by the SEC,” the association wrote in a July 2023 letter. “And the SEC has taken steps to advance an ESG agenda of its own via prescriptive and inflexible disclosure mandates.”

The new anti-ESG House bills are the latest attempt by Republicans and conservative activists to attack shareholder rights.

“Under the Biden-Harris administration, rogue regulators are weaponizing independent agencies to pursue the ESG objectives of the far-left at the expense of our financial system and everyday investors,” said Rep. Bill Huizenga (R-MI), House Financial Services Committee member and author of H.R. 4790.

Huizenga is chair of a Financial Services subcommittee and authored a report released in August that found the SEC had “overstepped its statutory authority by finalizing a climate disclosure rule, which exploits the securities regulatory and disclosure frameworks to advance the Biden Administration’s climate policy goals,” among other issues.

Huizenga’s bill would also roll back the shareholder proxy process — a procedure that allows shareholders to issue proposals to companies on how to guide companies’ business practices and force them to disclose certain practices such as climate change risks and labor uses — by making it harder for shareholders to bring proposals to a vote at annual shareholder meetings. The bill would allow companies to have control over what proposals get voted on during annual meetings.

“Part of the bill would raise the bar to nearly insurmountable heights for shareholders to put things to a vote,” Golinger said. “And that is something driven by the National Association of Manufacturers and the Chamber of Commerce to try to keep companies insulated from accountability.”

Additionally, Golinger said the bill would diminish the SEC’s role in the shareholder process and make it harder for investors and the public to know about illicit business practices that a company may be engaged in. The bill would limit disclosure requirements to only information that a company deems is “material” — or economically relevant — to their stated business.

Golinger said this provision in the bill could block investors from seeking information on how companies are addressing climate change, and other issues.

“This is really a battle over whether corporations should have to disclose information about their business record, how they treat the workers . . . their environmental practices, and other things to investors, or whether corporations should get to decide whether to keep that information secret,” Golinger said.

Earlier this year, the SEC enacted a rule requiring companies to report their greenhouse gas emissions and climate risks to investors. However, that rule is on pause as the agency defends the rule in court. A lawsuit seeking to block the rule was brought by a slew of states and the Chamber of Commerce, alleging that the SEC rule exceeds its legal authority.

The White House said Huizenga’s anti-ESG bill could be detrimental to shareholders and federal agencies working to hold companies accountable.

“H.R. 4790 would disempower stakeholders and investors, including by preventing the SEC from compelling companies to notify investors of other shareholders’ proposals and by limiting the types of proposals that shareholders can introduce,” the White House wrote in a September 17 policy statement.

“Deep Impact on Retirees”

Though not as sprawling as its counterpart, H.R. 5339, authored by Rep. Rick Allen (R-GA), would radically change how retirement and pension fund advisers operate by blocking them from considering ESG principles when investing for employer-sponsored funds. Conservatives argue that advisers who consider ESG principles are putting outside factors ahead of their clients’ best monetary interests.

However, advisers are already required by law to invest in the best monetary interests of their clients. What’s more, the White House claims that the bill could undermine core parts of the Employee Retirement Income Security Act (ERISA), which sets minimum standards for employee retirement plans, by preventing advisers from considering the long-term effects of business practices.

“Artificially limiting fiduciaries’ ability to consider material information in making sound investments will reduce savings and retirement security for Americans and runs contrary to the purpose of ERISA,” the White House wrote in a September 17 statement.

The bill is opposed by the AFL-CIO, one of the country’s largest unions, which said the bill would “have deep impacts on retirees.”

“This bill would effectively disfranchise retirement plan participants from having their shares voted on important ESG issues,” the union wrote in a September 17 letter to Congress. “ESGs are critical factors in assessing and mitigating risks and creating opportunities for enhanced returns. Therefore, AFL-CIO urges you to oppose H.R. 5339.”

According to a recent study, public pension funds in Democratic-controlled states that are open to ESG principles have outperformed public pension funds in Republican-controlled states, which tend to be more dismissive of ESG investing.

The study also found that states with anti-ESG laws on the books performed worse than Republican-controlled states that have not enacted anti-ESG laws.

During a September 19 debate on the bills, Rep. Casten highlighted how Kansas’s state budget office estimated that anti-ESG laws will result in retirees losing $3.6 billion over ten years, and problems in other states.

“Americans in red states are losing money today because of these policies,” Casten said. “In Texas, anti-ESG laws like the one you’re proposing are costing the state nearly $700 million in lost economic activity and more than 3,000 jobs. . . . That is what you are imposing on the rest of the world.”