Published February 24, 2010
Big business support of President Obama’s health care and energy policy has put CEOs on the front lines of the nation’s biggest political battles. Big PhRMA – the drug industry trade group – is credited with bringing Obama’s health care plan to the precipice of passage and the United States Climate Action Partnership (USCAP) – a coalition of business and environmental special interest groups – played a key role in passing the Waxman-Markey cap-and-trade bill in the House of Representatives last year.
Clearly, CEOs see big bucks in big government.
Beyond dreams of fortune, chief executives also proved to be a national risk when their mismanagement drove our nation into greater debt through taxpayer-funded bailouts.
While liberty-minded citizens can seek to elect politicians that support limited government, big government CEOs (or, perhaps, progressive CEOs) remain largely beyond our reach.
Because CEOs can represent as much of a risk to liberty as elected officials, limited government advocates need a voice in the boardroom.
For this reason, my wife Deneen and I are attending the John Deere annual shareholder meeting today in Moline, Illinois on behalf of the National Center for Public Policy Research, a free-market think-tank that owns shares in John Deere.
Our goal is to press management to justify why John Deere remains a member of USCAP and why these executives believe a cap-and-trade scheme is in the company’s best interest. These questions are especially timely, as BP, Caterpillar and ConocoPhillips made national news this month, after they abandoned USCAP.
These companies followed Marsh and Xerox, which quietly exited the coalition last year.
As it is a major supplier of agricultural equipment, Deere’s USCAP membership is especially puzzling because an abundance of evidence shows carbon emissions restrictions would harm its business.
Economic studies consistently report that cap-and-trade results in higher energy prices, lower economic growth and job losses.
The Heritage Foundation’s analysis of the Waxman-Markey bill found “the GDP loss in 2020 was $161 billion (in 2009 dollars).”
Additional analysis by Heritage on the impact of cap-and-trade on the farming industry “found that farm income (or the amount left over after paying all expenses) is expected to drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28 percent, 60 percent, and 94 percent, respectively. The average net income lost over the 2010-2035 timeline is $23 billion -- a 57 percent decrease from the baseline.”
Obviously, such a decline in farmers’ income would have a significant negative impact on Deere’s business.
What’s even more baffling is Deere’s description of its business risks, which the company provides via its 10-K filing with the Securities and Exchange Commission (SEC).
Deere states that demand for its products could be negatively impacted by “an economic environment characterized by higher unemployment, lower consumer spending, lower corporate earnings and lower business investment.”
Deere is pursuing legislation that will bring about the business risk that it warns its shareholders about.
There is a disconnect between the economic consequences of cap-and-trade and Deere’s business interest. But maybe Deere has a good answer for this paradox.
Maybe Deere has a different economic analysis that shows cap-and-trade is good for business?
Perhaps the company took to heart the conclusion of Al Gore’s “Inconvenient Truth” documentary and the company is willing to sacrifice its business for the sake of the planet?
Of course, it’s possible that Deere jumped on the fossil fuel crusade to curry favor with progressive politicians and their environmental special interest allies.
Whatever its rationale, Deere should provide its shareholders with information that will allow investors to judge the quality of its management decisions.
Thanks to a new guidance from the SEC on climate change disclosures, the shroud of mystery surrounding companies’ support of global warming regulations should be removed.
The SEC is now encouraging companies to tell shareholders about the business risk of global warming, including the risk of regulations such as cap-and-trade on its business.
If it follows the intent of the SEC guidance, Deere will disclose the economic impact of capping emissions on its business.
Being honest with shareholders would be a refreshing change from corporate America.
In the meantime, we will take advantage of the access to management that the shareholder meeting offers investors to determine if the company has a real global warming business strategy or if Deere is sacrificing its business interests, and risking the economic well-being of the American public, simply to curry favor with liberal politicians.
Tom Borelli is director of the National Center for Public Policy Research's Free Enterprise Project.