Shareholders Push Travel Companies to Disclose Political Giving as Mid-Terms Loom

After a period of strong words from travel companies following the election of President Donald J. Trump and the chaos of the travel ban fiasco which followed, executives across the industry have tempered down their rhetoric on political issues.

At first, the executives of companies including Expedia Group and Airbnb expressed concern about the election of Trump. Yet as the administration and series of travel bans rolled on, fewer leaders voiced opposition to policies that were squarely opposed to the health of the U.S. travel industry.

All the while, these companies used their financial muscle to lobby the government and contribute to candidates on both sides of the aisle. Most of this spending, however, is shrouded behind political action committees, leaving investors at a loss to understand exactly where a company stands on important political issues.

This year, however, a new wrinkle could be emerging as the country, even further polarized by politics, prepares for crucial mid-term elections. Against that backdrop, investors are demanding stronger disclosures of political contributions by travel companies, their trade groups, executives, and boards of directors.

The proxy statements for Wyndham Worldwide and Wynn Resorts, to name two, contain proposals for the companies to more fully disclose political spending and strategies used.

“The concern is: How are you spending our money?,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “A company can not make a political contribution; they can have a political action committee, but typically companies are in the business to return value to shareholders. You’ve seen [political spending] split between left and right, and that’s important because companies shouldn’t be taking a political side.”

The Wynn request was advanced by New York State Common Retirement Fund, while multiple groups have requested the change at Wyndham since 2016’s proxy. New York State Comptroller Thomas P. DiNapoli wrote in a filing that the fund holds the equivalent of $32,879,508 in Wynn Resorts stock and that “gaps in transparency leave shareowners in the dark regarding the alignment of spending with the Company’s business, and can give rise to reputational, legal and business risks associated with making political contributions.”

Wyndham would not provide information on which groups have requested increased transparency, and New York State did not respond to requests for clarity on the reasoning behind its request.

The board of neither hotel company endorses shareholders to vote for increased transparency.

“Public policy issues have the potential to impact our business, our employees and the communities in which we operate,” states the latest proxy statement from Wyndham Worldwide. “Therefore, we believe that in certain cases it may be appropriate and in our best interest to participate in the political process to both protect and promote our business, our employees and these communities.”

The boards of both companies state in their proxy filings that increased disclosures surrounding political issues could put their companies at a disadvantage compared to companies with the ability to be more opaque.

The reality is that increased clarity could cause a problem for corporate leadership, particularly for the Wynn family, which has ties to the Republican political machine in Nevada. In the midst of a battle over the future of the company after Steve Wynn’s departure, extra scrutiny is the last thing its board wants.

“You can always advocate issues but you can’t support a specific candidate, that’s what gets a company in trouble,” said Elson. “It varies depending on the personal taste of the CEO, and that’s the problem. They probably shouldn’t be involved at all. There are going to be certain issues you have to lobby about; the concern is when you use someone else’s money to advance the politics of the CEO.”

Media giant Comcast Corp., which has ties to travel through its ownership of Universal Parks & Resorts, has also received shareholder resolutions calling for increased disclosure through a report on its lobbying efforts.

“Comcast’s lack of transparency poses risks to the Company,” states a response document from Friends Fiduciary Corp., an investment firm that raised the proposal. “Investors are increasingly examining companies’ indirect and direct lobbying and political spending, and Comcast faces reputational risk as a result. A growing number of companies are recognizing these risks– since 2011, the number of companies disclosing at least some of their trade association and other non-profit group memberships have more than doubled.”

Comcast wrote in its proxy statement that such a proposal “would require us to incur unnecessary expense, would divert management attention away from our primary business activities, and would raise potential competitive concerns.”

Political Matters

Chris Cernich, founding partner and managing director of Strategic Governance Advisors, a company advising institutional investors, suggested that the Citizens United decision which allows companies greater influence over elections has caused some investor groups to become more interested in the behavior of the companies they invest in.

Data provided to Skift by Strategic Governance Advisors shows that around 90 percent of calls by investor groups for increased political contribution and lobbying transparency have failed or stalled since 2014 across all industries.

Elson agreed that the highly politicized culture in the U.S. has led investors to become more aware of the potential risks caused by a public company’s political presence.

The 2017 CPA-Zicklin Index of Corporate Political Disclosure and Accountability from the Center for Political Accountability measures the transparency of public companies annually on political contributions and disclosures.

Host Hotels & Resorts is the only travel company in the first tier of the index, which denotes a strong commitment to disclosure, policy, and oversight. Host Hotels was also the second most improved company year-over-year after clarifying its policy on independent political expenditures.

Marriott International, Priceline Group, Wyndham, and Wynn, sit in the index’s third tier, denoting an average level of transparency.

The State of Travel in Politics

A look at recent political spending by travel companies and trade groups shows the influence wielded by the sector.  So far, about two-thirds of the money send to Congressional candidates has been sent to Republicans. All data is from the Federal Election Commission and collected by Open Secrets, inclusive of April 2018 filings.

Source: Open Secrets / FEC

Last year’s lobbying totals are similar to the overall cycle contributions for this election, although Airbnb has become a top spender on lobbying efforts in recent years.

Source: Open Secrets / FEC

So far, one candidate has received the most contributions so far from the travel industry: Suraj Patel, who is running for a House seat from a New York City district. Patel has ties to New York University’s Stern School of Business, and has received contributions from a variety of employees and managers across the hotel industry, according to filings.

Source: Open Secrets / FEC