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Lobbying
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Lobbying of governments and political influence
are subjects on which we – along with all industries –
are receiving increasing attention. We invited
Robert Barrington of F&C Asset Management,
a recognised expert in this area, to provide an
outline of stakeholder expectations on disclosure
and approach to such issues. Our response and a
description of our activities can be found below*.
* This commentary does not imply approval or otherwise for the content of this report. |
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Stakeholder positionRobert BarringtonDirector of Governance & Socially Responsible Investment F&C Asset Management plc “In recent months, a spotlight has shone in both Washington and London on the issue of political influence exercised by companies. It is a subject that presents particular difficulties for defence companies. They have a relationship with government unlike any other sector, since most of their clients are governments: diplomacy and confidentiality have been part of their DNA – as has the special skill of cultivating government contacts when aiming to win contracts or gain support for export sales. As a shareholder, F&C believes that it is entirely legitimate for companies to participate in the political process. More than that,we regard it as necessary, as so much regulation and legislation affects companies that their voices need to be heard alongside others when issues are debated within government. Likewise, when a government is your client, you need to engage it in a sales and marketing process. However, it is also the case that legitimate influence can relatively easily veer from wholesome to dubious, when proper controls are not exercised. This starts to damage shareholder value. Allegations of misconduct, bribery or corruption are a distraction for management, can bring a halt to M&A activity, depress share prices and displease clients. Proven instances can generate fines, de-bar a company from bidding for contracts in the US, the world’s largest equipment defence buyer, and taint the company’s reputation when bidding elsewhere – not to mention land key staff in prison. Transparency about political lobbying and donations are one of the safeguards against this. F&C’s concern has grown to the extent that it has recently published guidelines outlining the standards it expects of companies in which it invests. For the defence sector, as with other sectors involving government dealings, there is an additional problem in trying to move beyond the opaque dealings of the past. If any individual company wishes to operate to higher standards, it may find these are commercially disadvantageous – which is unlikely to command the support of shareholders. Clearly, an industry-wide initiative is necessary to create higher standards and more transparency across the sector. That is why I welcome BAE Systems’ participation in discussion of an International Defence Industry Anti-Corruption Initiative, which is a good example of how companies can engage pro-actively to address such issues. However, even within BAE Systems, there are occasional throwbacks to a less cooperative and transparent age. The debate on revising the Export Credit Guarantee Department’s (ECGD) anti-corruption provisions was an example of where BAE Systems has encountered problems. Although confident it had formed a sensible and pragmatic stance, the Company appeared to many others to be lobbying strongly against provisions that anti-corruption experts were citing as reasonable, and at the same time did not engage pro-actively with other parties in the debate to explain its position. This stimulated opponents, shortly followed by the press, to be highly critical of the Company’s approach to anti-corruption initiatives. What would we like to see as a shareholder? First of all, I should note that BAE Systems has made good progress in transparency and corporate responsibility over the past three years. I particularly welcome the creation of a board-level Corporate Responsibility committee. But the company does need to tackle head on its residual reputation as being a laggard in corporate transparency, an opponent of NGOs and an abrasive partner in discussions about its business practices. Becoming a leader in transparency over political influence would be a good first step: including full disclosure of political donations made worldwide and publishing details of trade association memberships and lobbying positions – such as the submissions to the ECGD. Becoming a champion for stronger anti-bribery positions in international defence procurement would be another. As shareholders,we fully respect commercial confidentiality: but we also live in a transparent and information-rich age, which requires companies to be accountable. We look forward to accompanying BAE Systems on this journey.” Our responseThe defence industry has national governments as its customers. It is, therefore inevitable that we will have significant contact with different facets of, in particular, the UK and the US governments – our principal customers. It is imperative that we operate ethically and with integrity in all our business dealings, both for the sake of our own reputation and that of our customers.We must also rigidly observe requirements of confidentiality and national security which means we are not always able to be as open on issues as our stakeholders would like. We do, however, recognise the validity of Robert Barrington’s comments on the issue of transparency and are working towards improvements both on our own behalf and across our industry. Specific policies and practices related to issues of lobbying and political influence are outlined below. Political activity It is our policy to comply with all laws governing political activity of the Company and its employees. Employees are not allowed to engage in lobbying activities on behalf of the Company unless they have complied with all requirements of law, regulation and internal policy regarding such activities. All lobbying activity is regulated and co-ordinated through our Government Relations departments. A primary objective of our government relations activities is to ensure that politicians, various parliamentary groups and government organisations are equipped with the necessary facts about our business and our industry to make knowledgeable decisions. We consider it a key responsibility both for our Company and our employees as well as the wider defence sector to provide this information and respond promptly and comprehensively to queries from decision makers. Action in support of projects/capability in the UK BAE Systems plays an important role both in the delivery and on-going support of military capability for the UK Armed Forces. We are also a key manufacturer and major employer in the UK, and therefore have a significant impact in our local communities both through the supply chain and our support of local activities. It is part of our responsibility to represent the case for sustaining and modernising key defence industrial capabilities, both to ensure the UK retains the capability to make and support those products which deliver the basis of national security and in recognition of the impact our facilities have on the economy and local communities. To ensure we act in a responsible and coordinated manner,we have a joint lobbying model with our Trade Union members in the UK, who obviously have particular focus on sustaining skills and jobs. This model contains the following typical activities:
Working for effective regulation All aspects of our operations are subject to local, national and sometimes international regulation. We respect and obey the law in all countries in which we operate. During the development of new legislation we will aim to work with the relevant groups to ensure that they have the information they require of our industry and activities to make informed decisions. We also participate actively in a number of trade associations to ensure the wider industry view is presented on key issues. One of many examples of this is our involvement with the Society of British Aerospace Companies (SBAC) on agreeing carbon emission limits for the aerospace sector. Another example is the partnership we have with the UK Health and Safety Executive (HSE) along with our trade union safety representatives to develop and deliver high standards of safety practice. This partnership helps the HSE better understand our operations and facilitates the sharing of expertise while still respecting the role of the HSE as the regulatory authority. We acknowledge Robert Barrington’s view that we could have better communicated our stance on the debate with ECGD and are constantly seeking to improve our communication to our stakeholders or to at least explain the process we are undertaking. Political influence and affiliation Our Operational Framework states: “We do not make donations on behalf of the Company to political parties or their representatives. We respect the right of individual employees to make personal contributions”. In the US our eligible employees are allowed to participate in the BAE Systems USA Inc Political Action Committee (PAC). PACs exist legally as a means for employees of corporations to make donations to candidates for Federal office – something that corporations cannot do directly. PACs work by raising money from eligible people employed by a corporation or in a trade union. The PAC is governed by and complies with US laws under the auspices of the Federal Election Commission. We participate openly with trade associations. Integrity in business dealings Our anti-corruption awareness and compliance programme is entitled 'Integrity in Business Dealings'. It incorporates our two main anti-corruption policies, namely:
We want to make sure that all employees know:
Our basic rule is: We do not, and will not, offer, give or receive bribes or inducements of any sort. Charitable donations We have an important role to play in the communities in which we operate and trade and as part of this support the work of charities and other good causes. This support should not be motivated by the need to achieve any direct return other than general recognition of the contribution that the Company makes as a good ‘corporate citizen’. Two internal committees exist to govern all donations. The Subscriptions and Donations Committee chaired by our Chief Operating Officer meets four times a year and oversees the Company’s charitable donations in accordance with the Company’s Operational Framework. The Committee also oversees the sponsorship priorities for the Company which are recommended to the Committee by a sub-committee, the Sponsorship Committee, chaired by the Group Communications Director. The Sponsorship Committee is also responsible for the corporate sponsorship budget, which is held by Group Communications. We monitor where donations are made using the London Benchmarking Group (LBG) model. |
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