The CHOICE Act is the Wrong Choice

With all of the chaos happening in Washington, DC it can be hard to keep up with everything that is changing. While your advisors here at Natural Investments stay up to date on a wide variety of policy issues, we particularly want to highlight a bill that would have a large impact on our industry and our ability to advocate for social change.

Earlier this year Republicans in the House introduced HR10 The “CHOICE” Act. CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, but in simple terms this bill is a massive give-away to large Wall Street firms. It destroys much of the regulatory framework put into place under the Dodd-Frank reforms. And, most disruptive to socially engaged investors, it puts limits on the shareholder activism work that is so critical to our ability to impact change at the businesses we invest in on your behalf.

On June 8, the bill passed the House of Representatives on a pure party line vote. The bill now sits in the Senate where it is likely to come up for a vote later this summer.

This bill takes several detrimental actions that we want to highlight.

1 – It allows financial institutions to get away with less reporting and transparency. After the crash in 2008, Congress required financial institutions to report more information about their internal finances in hopes of preventing another crash. One of the most important things companies can do to help consumers is to be transparent about their activities. If large companies don’t have to disclose what they are spending money on they are more likely to take unnecessary risk and place investors in danger. We believe that investors should be better able to judge for themselves the fiduciary impact of various corporate actions and policies; this law guts those regulations and keeps consumers in the dark.

2 – It cuts funding for the Consumer Financial Protection Bureau (CFPB), in an effort to eliminate it. This bureau, which was championed by Sen. Elizabeth Warren, has returned $12 BILLION dollars to consumers who were victims of various financial companies’ malfeasance. This is money that belongs to consumers—without this watchdog group, big banks and credit card companies will not be called out on their errors and misleading policies.

3 – It limits shareholder activism. For years we’ve partnered with mutual funds and other companies to bring shareholder resolutions to annual meetings. This is a way for those of us who have specific grievances or policies we want changed to impact a company, whether we own ten shares or a million shares and sit on the board of directors. Under the CHOICE act only investors or groups of investors that own 1% or more of the shares of a company can bring a resolution. This means that presenting a resolution is only available to the billionaire class. Even groups of millionaires wouldn’t be able to participate and regular investors would be left out of the process entirely.

Last year I presented a resolution to the IBM annual shareholder meeting. This resolution was presented on behalf of thousands of investors and we were asking the board of directors to disclose what trade organizations the company gave to. Currently they disclose political contributions but don’t disclose trade organization dues. Under the proposed law we wouldn’t be allowed to bring this resolution because you would need to own tens of millions of shares, over a billion dollars of IBM, to bring a resolution.

At a time when the world is becoming more democratized this is a major step backwards. The internet has allowed a more free flow of information but this bill allows companies to hide information from consumers. At a time when we should be expanding rights of average people, this bill takes away rights we currently have and relegates them to the select few. It turns out that financial policy changes aren’t a sexy issue so it isn’t garnering a lot of press, but this is a really important change that will impact all of us.

In summation, this is a terrible bill. We are working with other like-minded progressives to try to kill the initiative in the Senate. If you’d like to join the cause you can learn more at wrongchoiceact.com. However, you can rest assured that Natural Investments is pushing as hard as it can on your behalf to make sure that anti-consumer legislation like this never becomes law.

This article first appeared in the Summer 20107 issue of Natural Investment News.

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Brady Quirk-Garvan

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