Archive for the ‘Ethics’ Category

As a candidate, Trump’s claim to legitimacy and mass support was built on a rejection of insider politics and pledges to “drain the swamp” in Washington. However, in the lead up to his inauguration, he and congressional Republicans have shown multiple signs that they intend to do just the opposite, one of which is their unprecedented barrage of attacks on ethical protections.

The most discussed ethical issue is of course Trump’s unwillingness to tackle his own personal conflicts of interest and interconnected assets. But beyond that problem, there have been three other obvious affronts. First was the considered lack of focus from Trump’s Cabinet appointees on completely disclosing and dealing with their own conflicts as required by law. Second was an ignoring (and disdaining of) the Office of Governmental Ethics (OGE) as it tries to administer both Trump and his appointee’s transition process, and third was an unexpected attack on the Office of Congressional Ethics—the independent House ethics watchdog.

At his press conference last week, Trump announced a new arrangement for his business holdings, which will do little to curb his conflicts of interest. Trump declined to divest himself of his holdings, instead only transferring control of them to his two sons. Without full divestment, Trump will still have a financial interest in his global company when he takes office later this week. Scarily, that means that Trump soon will be making regulatory decisions impacting businesses (such as banks, insurance companies, and more) that are entangled with his own. He also will be deciding American foreign policy in countries where he still has holdings and where his businesses could directly profit.

Office of Governmental Ethics Director Walter Shaub has correctly described President-elect Trump’s announced plan as “wholly inadequate.” Since stating his opinion on the Trump plan, Shaub has faced several attacks. First, from U.S. Rep. Jason Chaffetz (R-UT), chairman of the House Oversight and Government Reform Committee, when he made threats in a letter to investigate and potentially eliminate the OGE. The second came from Reince Priebus, the incoming White House chief of staff, when he said that Shaub should “be careful” about criticizing Trump’s handling of his business conflicts. This kind of veiled threat as Shaub tries to critique Trump’s inadequate ethics plan is thuggish and unwarranted.

On the second battle ground, OGE also has made important comments about the slow pace of Trump’s nominees to submit their ethics forms, which typically are cleared before their nominations are even announced. With so many extraordinarily rich appointees (the Cabinet will include three billionaires and is set to become the wealthiest in U.S. history), the problem of their interconnected finances is even more acute. To figure out their plans for recusal from ethical conflicts, nominees must do more than just fill out a form.

The OGE should be free to comment—both with critique and praise, as the Cabinet nominees and others move through the appointment paperwork process.

On the third ethics front, two weeks ago, as Congress started up, House Republicans tried to quietly change House rules and undermine the independent ethics watchdog, the Office of Congressional Ethics. The immediate public outrage led to congressional chaos and forced the Republicans to withdraw their plan.

The blatant attacks on the institutions charged with upholding ethical standards – the OCE and the OGE – coupled with the obvious disregard from incoming President Trump and some of his Cabinet members for resolving their own conflicts, leaves us deeply concerned about the state of ethics in the new administration.

There is no way to reject insider politics without keeping an ethically clean house, but the incoming Trump White House seems to need a new cleaning service.

This article originally appeared on The Huffington Post.

The Tillerson confirmation hearing reminded me at times of hearings for Supreme Court justices in that Tillerson refused to answer the vast majority of questions about his views or what he would do as Secretary of State. At the same time, he gave plenty of evidence that he would be a disastrous Secretary of State. Here are some specific pieces that jumped out:

1. Tillerson claimed that Exxon did not lobby against sanctions in response to Russia’s actions in Ukraine. Sen. Corker interrupted to note that, actually, Tillerson had called him personally to discuss sanctions. When Sen. Menendez later confronted Tillerson with records showing that Exxon lobbied on the sanctions, Tillerson still claimed ignorance, saying he didn’t even know whether the company would have lobbied for or against the sanctions. This is damning for Tillerson because there are only two possibilities: Either he is lying, or he is a shockingly poor manager – someone who was unaware of his company’s position on an issue of enormous importance, sanctions that compromised a $500 billion oil exploration deal. AP did a good fact check on his statements.

2. On climate change:

Tillerson continued to dispute and deny settled climate science, claiming to Sen. Markey that it’s “inconclusive” that climate change makes extreme weather more likely.

Sen. Kaine set out to grill Tillerson on climate denial — and particularly allegations that Exxon knew fossil fuels cause global warming as early as the 1970s and yet to this day is funding groups that deny and cast doubt on climate science. He quickly hit a dead end because Tillerson simply refused to answer whether those allegations are true or false. His first line was that he no longer works for Exxon and the question would have to be put to them. When Sen. Kaine asked, “Do you lack the knowledge to answer my question, or are you refusing to answer my question?” Tillerson responded, “A little bit of both.”

Tillerson refused to say that the U.S. should be an international leader on climate. He said only that we should keep “a seat at the table.”

In response to Sen. Shaheen’s question about complying with international agreements to end subsidies for fossil fuels, Tillerson said he wasn’t aware of any U.S. fossil fuel subsidies. Only tax code provisions that apply to all industries. Another place he strangely lacks key knowledge about his own company and industry.

Tillerson told Sen. Markey that he doesn’t think climate change is an imminent security threat. That might be the most disqualifying thing he said all day. We can’t have a Secretary of State who doesn’t take seriously the most terrible threat to U.S. security.

3. Tillerson refused to answer countless questions about bad international actors — for example whether Putin is a war criminal for bombing civilians in Syria and whether Philippine President Rodrigo Duterte’s well-documented extrajudicial killings constitute human rights violations. He dodged every question, no matter how well-known the underlying facts, by saying he needed access to classified government information before he could render a judgment. I don’t recall a single instance in which Tillerson was willing to say that someone has engaged in human rights abuses or is war criminal. It’s not my area of expertise, but I thought he come across as ill-informed (if not simply unconcerned about serious problems in the world) and overly reliant on a pre-fabricated dodge that was often a poor fit for the question he was being asked.

Since President-elect Donald Trump announced his choice of Exxon CEO Rex Tillerson for Secretary of State, people have been speculating about how Tillerson and Exxon might deal with an ethics problem: Tillerson has around $180 million worth of Exxon stock that will vest over the next decade. He can’t hold on to it if he becomes Secretary of State because that would create a clear conflict of interest: He’d have a strong interest in boosting Exxon’s stock value.

Yesterday, Exxon and Tillerson struck a deal that media outlets are characterizing as severing Tillerson’s ties with the company. The basic terms are that Tillerson’s non-vested stock will be cashed out and the money placed in an irrevocable trust, with a slight discount, from which Tillerson will receive payments over 10 years. If he goes back to work in the oil and gas industry within 10 years, he forfeits the remaining money and it goes to a charity of the trustee’s choosing. In other words, Tillerson gets payments over time that aren’t linked to Exxon’s performance, and he has a strong incentive not to go back to his industry, so he won’t favor it while in office.

But maybe it’s not that simple.

We found a discrepancy in the documents Exxon filed with the U.S. Securities and Exchange Commission. The filling contains two agreements, one between Exxon and Tillerson, and one between Exxon and Northern Trust Company, which will serve as the trustee. The contract between Exxon and Tillerson says the CEO will forfeit all remaining assets in the trust if he works for the oil and gas industry in the next 10 years. But Exxon’s agreement with the trustee says that Tillerson forfeits the trust assets if he engages in “competitive” employment in the oil and gas industry – in other words, employment with any company other than Exxon.

So which is it?

The difference matters. If, under the trust agreement’s terms, Tillerson can continue to receive payments if he returns to work for Exxon during the next ten years, but not if he works for any other oil or gas company, then he retains a strong interest in Exxon. Not only would he want Exxon to perform well during his tenure as secretary of state, he’d have an incentive to advance the interests of the only company in the field where he could work – and still receive the huge trust payments – over the next ten years. That’s a far cry from eliminating his interest in the company.

Senators should ask some tough questions about this deal at Tillerson’s confirmation hearing.

 

Note: Under Exxon’s current policies, the company couldn’t re-hire Tillerson as an employee because it has a mandatory retirement age of 65. But the company presumably could hire him as a consultant or contractor.

Every recent presidential transition has set a new precedent in terms of transparency of operations.

Until now.

The lack of details coming out of the Trump Tower and other hubs of the transition has led to an ever-growing list of unanswered questions about how the transition team is conducting its business. These are questions that President-elect Donald Trump should answer for the public — not only to make good on his pledge to “drain the swamp,” but also to show good faith to the taxpayers, who are footing the bulk of the bills for the transition.

A central question is this: What is the transition team’s ethics code?

For a long time, the transition team’s leaders deflected questions about whether it had an ethics code at all. A week after the election, when Vice President-elect Mike Pence took over the transition, newspapers reported that an ethics code was newly finalized and they published the purported document.

Later the same day, Politico reported on the existence of a brand new ethics code that apparently superseded the earlier one, although the paper did not publish the code itself.

A key component of an ethics code is how it treats lobbyists, whom Trump singled out in his swamp-draining pledge. The two ethics codes reported on by the press conflict on whether recently active lobbyists may participate on the transition team simply by cutting their ties to current clients.

It is also unclear how the policies handle quasi-lobbyists who do not officially register as lobbyists. Candidate Trump pledged to “close all the loopholes that former government officials use by labeling themselves consultants and advisers when we all know they are lobbyists.”

How is he managing that promise for the transition?

For its part, the transition team has not officially announced anything on its ethics policies. The Obama-Biden transition team, in contrast, published its ethics code within a week of the general election. A strong ethics code is foundational to any commitment to run a clean, unconflicted government. The public deserves to know the steps the Trump team has taken to ensure that the architects of the next administration aren’t designing it for their own benefit.

Trump also owes it to the public to announce these steps officially to demonstrate that he is accepting accountability for them.

The transition also has neglected to share the specific details of the nondisclosure agreement (NDA) team members reportedly have been required to sign. The mere existence of a nondisclosure agreements raises all sorts of troubling questions.

For instance, does the agreement preclude rank-and-file members of the team from revealing details of the agreement?

Do the terms of the agreement violate whistleblower protection laws?

Would the agreement be enforced in secret arbitration proceedings, as with agreements that Trump previously has required his employees to sign?

The public also deserves to know which outside experts and advocates team members have met with and what policy proposals outsiders have submitted. By this time in the Obama-Biden transition, the team was disclosing with whom it met and was posting policy documents submitted by outside groups on its website.

We have seen no indication that the Trump team intends to follow suit.

As Louis Brandeis famously wrote, “sunlight is said to be the best of disinfectants.” Brandeis’s metaphor is particularly apt today, as the president-elect was elected on a promise to “drain the swamp.”

Even though it predates the inauguration, the transition process is one of the most influential periods in an entire presidential administration, as it sets the stage for staffing and policy. The transition is largely funded by us, the taxpayers, and so we should given an opportunity to monitor and evaluate its work.

This post originally appeared in The Hill.

This week, the Corporate Reform Coalition released a video interview with Vanguard Group’s founder, John C. “Jack” Bogle, about his vision in 1975 to set up a different kind of mutual fund company and how he thinks companies should best serve their shareholders.

Watch Vanguard’s founder Jack Bogle talk about a shareholders right to information like a company’s political spending.

Bogle, who founded Vanguard over 40 years ago based on a novel principle at the time- that a mutual fund company should be owned by the shareholders of its funds and not just by management- remains committed to that vision today. He fosters that commitment by speaking out on broader investor issues, for example, corporate political spending disclosure.

Bogle has submitted public comment to the U.S. Securities and Exchange Commission (SEC) on the securities law professor’s petition calling for the SEC to put forth a rulemaking that would require publicly- held companies to disclose how they spend money in politics. When asked why he commented on the petition Bogle replied, “It’s the shareholder’s right to know what we are all doing,” referring to corporate activities.

bogle-shareholder-right2-twitterBogle’s remarks come at a significant time. Investor advocates are reaching a tipping point in their push for the SEC to issue a rule requiring companies to disclose how they spend money in politics.

As of October 21, outside spending in the 2016 election alone has totaled over $1 billion, much of which is coming from dark money groups that do not have to disclose their donors. This makes it impossible to track secret corporate influence. American know that more dark money in our politics is not good for the health of our democracy, but when faced with adversaries such as giant corporations it’s hard to see an easy way to make change.

One way to combat secret corporate influence is to bring it into the light, which this disclosure rulemaking would do. Unfortunately, the SEC has been dragging its feet on the rulemaking and Congressional Republicans have helped the stagnation by inserting an inappropriate policy rider into the federal budget forbidding the SEC from finalizing (though not from working on) the rule.

For the last decade, investors have been filing shareholder resolutions at individual companies and seeing promising responses from many who are interested in increasing their transparency. Without a uniform rulemaking, though, others are allowed to continue to keep shareholders and the public in the dark about how they spend in politics. Even those who do disclose may not do it the same way as other corporations, making it hard for investors to actually use the information to make corporate comparisons.

How do mutual funds fit into this picture? The major ones, like Vanguard and BlackRock, have incredible power in corporate elections; power accumulated from the millions of retirement savings accounts they manage. With the volume of shares they control, the major mutual funds can and should support shareholder resolutions calling for political spending disclosure. Instead, Vanguard, specifically, either votes against or abstains from voting for these resolutions at the companies where its clients’ savings are invested. The weight of the major mutual fund vote means that many times resolutions fail to get majority support without it.

All shareholders, whether the traditional kind or those who own shares through their mutual fund investments, “are entitled to the information they want, they’re owners,” says Bogle in the interview. Therefore, if shareholders are calling for information about how companies spend money in politics so that they can weigh the reputational risk of this activity, companies should listen and increase their transparency.

The gravity Jack Bogle continues to hold within the investment community is immense, and we should heed his words about shareholder rights. The SEC should make strides on the political spending disclosure rule and Congress should not stand in its way. Until the rule is finalized, though, mutual funds should not hamper the efforts of shareholders calling for disclosure at individual companies.

Bogle seems optimistic that the tide is turning in shareholders’ favor. “When shareholders aren’t served first the world will change,” he says. “And it is changing.”

Originally published on the Corporate Reform Coalition’s website.

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