Shareholders of Michigan’s two major investor-owned utilities have recently rejected calls for more transparency on the companies’ contributions to tax-exempt nonprofit advocacy groups.
While similar investor resolutions have failed for years at annual shareholder meetings for DTE Energy and Consumers Energy, the calls come amid recent criticism and state sanctions on the utilities’ political spending.
Last year, the Michigan Public Service Commission barred Consumers from contributing to 501c(4) nonprofits — the tax-exempt, “dark money” social welfare groups that don’t have to disclose contributors — after the company was linked to a spike in political spending during the 2018 election. Consumers had contributed $43.5 million to a group called Citizens for Energizing Michigan’s Economy since 2014, including $20 million ahead of the 2018 election cycle.
Detroit-based DTE Energy faced criticism last year from utility watchdog groups over its ties to multiple 501c(4) groups, including Michigan Energy First, that continue to promote energy policies also supported by the utility. The policies involve limiting payments to customers who generate their own solar power and third-party energy developers. While it’s unclear whether DTE contributed money to the groups, multiple DTE officials serve on the nonprofits’ boards. Michigan Energy First also has assumed names of Michigan Energy Promise and the Alliance for Michigan Power.
A DTE spokesperson referred comments about Michigan Energy Promise to the nonprofit. Eric Doster, an Okemos attorney who’s listed as the registered agent of the nonprofits, would not disclose the group’s contributors.
Doster said the DTE officials’ board positions are “the only link” between the nonprofit and the utility.
“I don’t care about their resolution,” Doster said of the DTE shareholders.
The DTE resolution was brought by Mercy Investment Services, a Missouri-based company affiliated with the Sisters of Mercy that holds 850 shares in DTE. It called DTE’s policies on corporate political disclosures “deficient” and relying on publicly available information “does not provide a complete picture of the company’s electoral spending.” DTE shareholders rejected the resolution 63.5 percent to 36.5 percent.
Mary Minette, Mercy’s director of shareholder advocacy, said “very uneven reporting” among companies’ political disclosures and lobbying activity has “been a longstanding concern in the investor community.”
While companies, including utilities and their political action committees, are required to disclose political contributions to campaigns under state and federal election law, the same rules don’t apply for tax-exempt groups.
“We see a real reputational risk to that,” Minette said. “Political spending ever since the (2010) Citizens United decision is really seen as a testament of where a company stands.”
She added: “We’re long-term shareholders. We have been talking to the company for a number of years about this.”
DTE spokesperson Peter Ternes said the vote result this month “is in alignment with the majority of its shareholders.”
In a statement against the resolution, DTE’s board of directors said the “overly specific disclosure contemplated by this proposal is unnecessary, would hold the Company to a higher standard than other participants in the political process, and could have negative consequences for the Company.”
The board goes on to say it has opposed similar proposals going back to 2008. Since then, they have been rejected 10 times, the board said.
At the annual shareholder meeting last month for Jackson-based CMS Energy Corp., Consumers’ parent company, investors rejected a similar resolution 65 percent to 35 percent.
The resolution was brought on behalf of the New York State Common Retirement Fund, which holds more than 588,000 shares of CMS stock. It called on CMS to “fully report its political spending and its policies and procedures for making political contributions with corporate funds,” Patrick Doherty, director of corporate governance at the New York Office of the State Comptroller, said during the virtual shareholder meeting last month.
“As longtime shareholders of CMS Energy, our fund supports policies that apply transparency and accountability to corporate political giving,” Doherty said in the meeting. “Company executives exercise wide discretion over the use of corporate resources for political purposes, and relying on only limited data from the Federal Election Commission and the Internal Revenue Service can give shareholders an incomplete and sometimes misleading picture of a company’s political spending. Our fund believes that a complete disclosure by the company is necessary for investors to be able to fully evaluate the political use of corporate funds.”
Doherty could not be reached for comment.
Consumers spokesperson Katelyn Carey called the shareholder proposal “unnecessary and would cause CMS to incur undue costs and administrative burdens without commensurate benefit to our stakeholders, including shareholders.”
Carey added that the request is “not in the best interests of CMS or its shareholders,” is “duplicative” of the company’s governance and oversight practices, and “would not provide shareholders with any more meaningful information than is already publicly reported.”
Last year, the MPSC barred Consumers from making political contributions to 527 and 501(c)4 groups until at least late 2020, and the company “does not currently have plans” to make contributions in the future, Carey said.
Minette says energy companies fall in a unique space and are subject to stringent state and federal regulations. Further, public utilities across the U.S. — including DTE and Consumers — are increasingly making clean energy and climate change pledges, and investors should know how corporate funds are being used in advocacy campaigns, she said.
The Center for Political Accountability issues an annual rating system of 399 companies based on their political spending disclosures. Utilities leading on political disclosure transparency include Ameren, Sempra Energy and Dominion Energy. CMS ranks in the second tier of the index, while DTE ranks in the fourth tier.
“A lot of utility companies are doing quite a good job of disclosing political spending so investors know what they’re doing and see they are managing the risk well,” Minette said. “But DTE is really lagging in that area.”