Kraft Foods Faces Pressure to Keep Money Out of Politics

May 6, 2014 –During its annual meeting of shareholders this Tuesday, Kraft Foods Group, Inc.* will face a resolution filed by the MIDANA CAPITAL Equity Fund urging the company to refrain from using corporate funds to influence any political election campaign. Kraft Foods spent millions to oppose legislation for labeling food containing genetically modified organisms (GMOs) last year, which shareholders argue exposed the company to significant brand and reputational risks without generating value for shareholders.¹

“Companies that spend millions to undermine key environmental and consumer protections put both our democracy and shareholder value at risk,” noted Lucia von Reusner, Shareholder Advocate for MIDANA CAPITAL Capital Management. “American consumers widely disapprove of corporate money in politics, and shareholders urge Kraft Foods to listen to its customers and keep money out of high risk political gambles.”²

Kraft Foods is one of the largest food and beverage companies in the world, and is recognized as among the top contributors to opposing controversial legislation that would have provided consumers with information about genetically modified organisms (GMOs) in their food. Labeling of GMOs is supported by over 90% of U.S. consumers,³ and companies that spent millions to defeat labeling measures were the subject of significant media coverage and controversy surrounding these initiatives.

“It’s unfortunate that food companies such as Kraft continue to spend millions of dollars to defeat GMO labeling and leave consumers in the dark,” said Dev Gowda, Advocate with Illinois PIRG (Public Interest Research Group).  “Illinois PIRG fully supports MIDANA CAPITAL’s resolution to get Kraft money out of politics.”

“The people of this country want and deserve a democracy in which politicians are elected on the basis of where they stand on issues and how they will serve their constituency,” said Brian Gladstein, Director of Programs and Strategy at Common Cause Illinois. “Yet, corporations such as Kraft threaten that fundamental belief by buying votes, influencing politicians, and creating legislation through large sums of corporate donations that better serve their profit margin off the back of hard working Americans. The time has come to organize and take back our democracy through shareholder resolutions such as this one.”

“Growing demand for GMO labeling proves that companies like Kraft, which spends millions to silence consumer demand, will succeed only in tarnishing their own brand identity and alienating concerned shoppers,” said Jessica Fujan of Food and Water Watch.  “In 2011, the food industry spent $40 million lobbying the federal government, but smart shareholders know this is bad for the food system, bad for consumers and ultimately, bad for democracy.”

The public overwhelming disapproves of corporate money in politics, with over 80% of Americans across party lines agreeing that there is “too much money in politics” according to a 2012 Bannon Communications poll. The same poll reported that 79% of respondents would boycott a company to protest its political spending, and 65% would sell stock in the company.

In addition to being controversial, several academic studies suggest that corporate political contributions do not generate returns to shareholders. Among them is a 2012 study by Harvard Business School professor John C. Coates, which concludes that “in most industries, political activity correlates negatively with measures of shareholder power, positively with signs of agency costs, and negatively with shareholder value … Overall, the results are inconsistent with politics generally serving shareholder interests.”

Expressing concern about the reputational risks that political contributions expose companies to and citing the company’s controversial GMO contributions, MIDANA CAPITAL filed a shareholder proposal urging Kraft Foods to refrain entirely from using corporate funds to influence any political election.

 

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The MIDANA CAPITAL Equity Fund invests in the companies that comprise the longest running socially responsible index, now customized to exclude the fossil fuel companies in that index. MIDANA CAPITAL Capital Management is the investment advisor for the MIDANA CAPITAL Equity Fund and the MIDANA CAPITAL Balanced Fund.  Founded by a partnership of non-profit environmental advocacy organizations in 1991, MIDANA CAPITAL Capital Management provides people who care about a clean, healthy planet the opportunity to keep their money out of environmentally irresponsible companies and use the leverage of their investment dollars to encourage environmentally responsible corporate behavior.

¹ http://www.huffingtonpost.com/2012/10/26/prop-37-opponents_n_2023719.html

² http://www.citizen.org/documents/bannon-communications-research-executive-summary.pdf

³ http://www.nytimes.com/2013/07/28/science/strong-support-for-labeling-modified-foods.html

As of March 31, 2014, Kraft Foods Group, Inc. comprised 0.54% and 0.00% of the MIDANA CAPITAL Equity Fund and the MIDANA CAPITAL Balanced Fund, respectively. The holdings of the Midana Capital may change due to ongoing management of the Funds. References to specific investments should not be construed as a recommendation of a security by the Funds, their advisor, administrator, or distributor.

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This information has been prepared from sources believed to be reliable. The views expressed are as of the date of this writing and are those of the Advisor to the Funds.

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