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WSJ Editorial- Intimidation by Proxy_ May 8 2012

WSJ Editorial- Intimidation by Proxy_ May 8 2012

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Published by: CtWInvestmentGroup on May 30, 2012
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REVIEW & OUTLOOK May 8, 2012, 6:38 p.m.


Intimidation by Proxy
The campaign against corporate free speech targets WellPoint. The campaign to intimidate companies from exercising their free-speech rights is in high gear as shareholder proxy season arrives, and the most prominent early target is health-insurer WellPoint. The arc of this attack will be one of the election year's political leitmotifs, and it should be on the radar of every corporate boardroom. In the favored new tactic of the left, unions and activists are using politicized shareholder resolutions to send a message to corporations: Drop support for free-market and conservative causes, or you'll take a political beating. Last month saw the smear campaign labelling the American Legislative Exchange Council (ALEC) as racist because of its support for Voter ID laws. The real target was the free-market group's corporate donors, like Coca-Cola, which activists urged to stop supporting ALEC. The bullying sent corporations scurrying for cover. According to the union front group Change to Win, Coke, as well as Pepsi, Mars, Kraft, McDonald's, Wendy's and Intuit, have dropped their ALEC memberships. Change to Win is now targeting WellPoint's annual meeting on May 16 when it will demand that shareholders vote against board members Julie Hill and Susan Bayh (wife of former Indiana Democratic Senator Evan Bayh) because the company has refused to disclose or stop all of its political spending. Among the company's crimes? Corporate funding of, you guessed it, ALEC. The "controversy" surrounding ALEC, Change to Win writes, is a "timely reminder of the reputational risks of corporate spending." Translation: getting attacked by liberal activists makes you vulnerable to more attacks by activists.

Associated Press The larger political goal is also to stigmatize and shut down funding sources for any business group that seeks to influence policy debates, such as the U.S. Chamber of Commerce. Unions are especially angry about the transfer in 2010 of some $86 million by the health insurers' trade association, America's Health Insurance Plans (AHIP), to the Chamber for what Change to Win calls its "highly divisive ad campaign attacking health care reform proposals, including specific proposals which WellPoint explicitly endorsed."

Change to Win is referring to ads that opposed ObamaCare while the bill was making its way through Congress in 2010. One Chamber ad said the bill would create huge tax increases and "make a tough economy worse" with "expensive mandates" on business that could "wipe out even more jobs." All of which has turned out to be true. The irony is that the health-insurance lobby supported the individual mandate, which the Supreme Court may overturn. But the insurers still make inviting political targets because they are unpopular and have no choice but to raise premiums due to ObamaCare's new coverage mandates. The White House wants to blame insurers for these increases, and it doesn't want the insurers to be able to fight back. In addition to attacking WellPoint, Change to Win has already begun a shareholder campaign targeting Cigna for contributing to the insurance trade association. The union attack on WellPoint is notable for targeting two board members by name and the effort to make extra hay out of Susan Bayh's political profile. (Added frisson: Evan Bayh has worked as a consultant to the Chamber.) The ad hominem attack is right out of the Saul Alinsky playbook and is intended as a warning to other corporate directors that their personal reputation will be damaged if they don't force companies to stop donating to industry groups. All of which is too much even for the usual left-leaning union allies who run Institutional Shareholder Services (ISS), which provides guidance to large investors on proxy proposals. ISS recommended the re-election of Ms. Bayh and Ms. Hill, noting that "the company's board oversight process is not fatally flawed and has not resulted in a material failures [sic] in governance." ISS adds that while there are "gaps" in WellPoint's disclosure practices that it will monitor for improvement, the insurer "provides robust disclosure regarding its political spending activities and related oversight mechanisms for political contribution" and its political spending practices are "in line with its peers." None of this is really about "disclosure" or shareholder rights. The proxy campaign is part of the larger campaign by unions and liberal lobbies to demonize corporate donors so they leave the political field to unions and liberal lobbies. Expect more of this in the months to come. A version of this article appeared May 9, 2012, on page A12 in some U.S. editions of The Wall Street Journal, with the headline: Intimidation by Proxy.

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