Researching the Background of a Company Receiving Subsidies

Researching the Record of a Company Receiving Subsidies

Any effort to challenge a proposed subsidy deal for a specific company will be greatly aided by research into that company itself. In this section we explain how to gather basic information about a company and how to assess the firm’s social responsibility record, which can be raised as an issue when the company is being awarded a subsidy.

For a more extensive list of sources, see the Corporate Research Project’s Guide to Strategic Corporate Research.

Step 1: Find out if the company is public or private

When researching a company, one of the first things to find out is whether it is publicly traded, since this significantly affects the amount of information you will be able to obtain. Public companies (those whose shares are bought and sold by the public on stock exchanges) must divulge a lot more information about their activities and finances than private companies (those owned by a small number of people). See below for more information on researching private companies.

To find out if a company is public, first check its website for a section called Investors or Investor Relations, which will provide stock information. You can also check the EDGAR database of Securities and Exchange Commission filings that publicly traded companies must submit to the SEC and which then become public documents. (For more on SEC filings, see below.) Plug in the company name. If nothing turns up, the company is not publicly traded.

If your company is not listed in these sources, it may be a subsidiary of a public company. See Step 3 below.

Step 2: Find out the names of people associated with the company

Start by checking the About Us section of the company’s website. If the company does not have a website, check the database of business registrations on the website of your Secretary of State’s office. These will include corporations based in your state and foreign (out-of-state) corporations doing business in your state. In some states, these filings include the names and addresses of the key people in the company, such as the officers and directors. In other states, the only name listed may be that of the registered agent, which is often someone at an outside service that has no direct relationship to the operation of the company.

Step 3: Find out if the company is a subsidiary or has facilities in other locations

If a company doesn’t show up in EDGAR, it may be that it is a subsidiary of another corporation. One way to check if this is the case is to search under the company name in the Directory of Corporate Affiliations (DCA), which is available in hard-copy form in larger libraries or online via Lexis-Nexis. If the company is a subsidiary, DCA will tell you the name of its parent. You can also plug in the name of a parent company and get a list of its subsidiaries. DCA covers both public and larger private companies.

Step 4: Read the company’s website, annual report, and key SEC documents

The websites of larger companies usually include features such as a corporate profile and an archive of press releases, which often include information that did not make it into the press. The bigger public companies usually put their entire annual report online, usually in PDF format. Some firms include biographies of top executives, product descriptions, and other information. Although much of the content of these websites is essentially corporate public relations, within that is a great deal of useful information for research purposes.

For publicly traded companies, the key SEC documents to consult are:

10-K report: annual report on the company’s activities. Includes full legal name, headquarters address, total market value of stock, total number of shares outstanding, products and/or services, principal markets, significant competitors, number of employees, number of unionized employees and information about upcoming contract negotiations (sometimes), large customers, list of company locations, names of officers, major lawsuits that could affect the company’s financial conditions, and three years of detailed financial statements. The list of exhibits is important to read, because it may mention documents like employment contracts for company executives, major loan agreements, and stock option plans.

10-Q reports: quarterly updates of the company’s financial condition. 8-K reports are filed shortly after any major event that could affect the value of stock (for example, changes in control of the company, acquisition or sale of assets, changes in directors, etc.).

Proxy statement (also known as Schedule DEF 14A): sent to all stockholders prior to the company’s annual meeting, giving a run-down on the meeting agenda, and providing information on executive compensation and other data on officers and directors. It includes a fairly complete run-down on the Board of Directors, including each director’s professional background, other affiliations, compensation, and ownership of the company’s stock. It also has information on the compensation paid to the five highest-paid executives, including stock options, pensions, insurance policies, etc. The proxy statement also discloses information about transactions between officers or directors and the company. For example, a company president owns buildings he is leasing to the company.

Prospectus (or Registration) statements: these are issued when a company goes public for the first time (called the Initial Public Offering or IPO) or sells new stock to the public; they contain information similar to that in a 10-K.

Researching private companies

The most valuable source of information on most private companies – from the billion-dollar giants down to mom-and-pop operations – is D&B (formerly known as Dun & Bradstreet). The primary business of D&B is to formulate credit ratings for companies by finding out how promptly they pay their bills. In the course of doing this, D&B also collects basic data on millions of firms.

If you do not have access to a D&B subscription, you can purchase individual Business Information Report Snapshots, which include not only credit ratings but company profiles.

One caveat about D&B information: it is not as reliable as the information a public company puts in its SEC filings. It is against the law to deceive the SEC; there is no legal penalty for embellishing the truth when filling out a D&B questionnaire. Companies will not lie with abandon since they don’t want to damage their credibility, yet it is always worth taking D&B data with a grain of salt.

Step 5. Read Media Coverage and Scan Social Media

It is always worth checking media coverage to see what has been reported about a company and its practices. The fact that the full texts of thousands of newspapers, newswires, magazines, trade publications, and broadcast transcripts are available online makes it possible to search through a large portion of the published material on a company in a matter of minutes. Some, but far from all, of these sources can be found using search engines such as Google. Across social media platforms, search for company mentions, accounts of executives or employees, and explore hashtags that could be related to campaigns mounted against companies.

It is much more efficient to search fee-based information services such as Lexis-Nexis or Factiva. A subscription to these services may be too expensive for smaller organizations, but you can try to gain access through a university library or a larger public library. Both Lexis-Nexis and Factiva allow you to simultaneously search thousands of publications using a company name or other keywords. In addition to published materials, they include the text of company press releases. Although these releases are, strictly speaking, corporate public relations, they often turn out to be the best source of information on aspects of the company that the media did not consider newsworthy but which tell you what you need to know.

Step 6. Investigate the Company’s Social Responsibility Record

If you are organizing around a particular deal or company, it’s useful to know about the company’s general reputation and track record. If the company has a history of violating environmental regulations, mistreating workers or otherwise operating contrary to the public interest, those may be relevant issues in a subsidy debate.

The most efficient way to do this research is with Violation Tracker, the database on business misconduct produced by the Corporate Research Project of Good Jobs First. It contains hundreds of thousands of records of actions by federal, state and local regulatory agencies as well as selected categories of class action and multi-district litigation.

Increasing in popularity are firms that claim to rate companies based on Environmental, Social and Governance (ESG) practices. Such ratings may be based on a company’s self-evaluations and other dubious metrics, so take them with a grain of salt.

In addition to regulatory actions and lawsuits, you should also check issues such as the following:

Government Contracts: Subsidies can become even more controversial when the recipient company is also the beneficiary of government contracts. At the federal level, use the USA Spending site to find information on contracts. You can also determine whether an individual or company has been barred from doing business with the federal government by searching the GSA’s Excluded Parties List. Some states put procurement information on the web.

Campaign contributions and lobbying activities: At the federal level, campaign contributions by corporate executives and their company’s political action committee may be tracked using a database compiled by the Federal Election Commission. This database is available via the FEC itself, but several private groups have enhanced the information in very useful ways. See, especially, the Open Secrets website of the Center for Responsive Politics, which also has data on lobbying. State campaign contribution data can be found at Follow the Money.

Executive Pay: The outrageously inflated compensation paid to top executives of large companies is a familiar story, but it is an issue still worth raising in any corporate-related campaign. For publicly held companies, documenting this aspect of corporate greed is made easy by the extensive disclosure requirements imposed by the SEC. There is no public source for information on executive compensation in private companies.

A detailed account of pay and benefits to a company’s top executives can be found in the proxy statement (also known as Schedule DEF 14A) that is issued in preparation for each annual stockholder’s meeting and that is available on the EDGAR database (see above). The proxy includes a summary compensation table listing salary, bonus, other forms of incentive pay and other types of compensation that were given to the five highest-paid executives. Following that are tables showing the number of stock options (the right to purchase shares at an advantageous price) awarded to executives and the value realized by executives in the exercise of previously awarded options. The proxy statement also lists the number of shares owned by each officer and director.