PepsiCo Urged to Stop Opposing Shareholder Resolution Requesting Disclosure of Charitable Contributions

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Mutual Fund Says Pepsi Should Join Boeing, Coca-Cola and Citigroup and Allow Shareholders to Vote on Corporate Giving Transparency

Action Fund Management LLC (AFM), investment adviser to the Free Enterprise Action Fund (, called on PepsiCo Inc. to cease its opposition to a shareholder resolution requesting the company to disclose its business rationales for charitable contributions.

Filed by the National Legal and Policy Center (, the proposed shareholder resolution requests that PepsiCo report semi-annually to shareholders on its charitable contributions, including the business rationales underlying the contributions.

“Company executives exercise wide discretion over the use of corporate assets for charitable purposes,” said AFM’s Steven Milloy. “Absent a system of accountability for charitable contributions, executives may use corporate assets for objectives that are not shared by, and may be inimical to, the interests of a company and its shareholders, potentially harming long-term shareholder value.”

“PepsiCo made $71.9 million in charitable contributions in 2004,” said NLPC President Peter Flaherty. “But, in our view, the company’s current disclosure about those contributions is inadequate since PepsiCo omitted key details such as the business rationales for the contributions.”

We think PepsiCo ought to disclose to shareholders its reason for supporting a group like Jesse Jackson’s Rainbow/PUSH coalition. It’s not obvious to us how supporting Rainbow/PUSH sells more PepsiCo products or increases shareholder value,” Flaherty said.

“Principles of transparency and accountability should apply to corporate charitable contributions,” said AFM’s Tom Borelli. “Such disclosure is consistent with public policy in regard to disclosure by publicly-owned companies,” he added.

On January 3, 2006, PepsiCo asked the U.S. Securities and Exchange Commission (SEC) for permission to exclude the NLPC’s shareholder proposal from its 2006 proxy statement. (1)

“PepsiCo seems to hope that it can continue to give away significant amounts of shareholder assets without divulging the business purposes of those contributions, “said Flaherty. “Boeing, Coca-Cola and Citigroup have already agreed to permit our resolution to be voted on at their annual meetings. We can’t understand why PepsiCo is reluctant to permit shareholders to vote for more transparency concerning charitable contributions,” he added.

“We support the NLPC’s charitable contributions resolutions because we are concerned that corporate managements sometimes use charitable contributions to buy peace with external pressure groups,” said Milloy. “We don’t think such appeasement strategies are good policy. They don’t work, tend to encourage more activist attacks and waste shareholder assets,” added Milloy.

The Free Enterprise Action Fund (FEAF) is a mutual fund seeking to provide investors with financial returns while defending and advocating for the American system of free enterprise. The FEAF owns less than one percent of the outstanding shares of PepsiCo.

The Free Enterprise Action Fund seeks long-term capital appreciation through investment and advocacy that promote the American system of free enterprise.

An investor should consider the fund's investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information about the Free Enterprise Action Fund can be found in the fund's prospectus. To obtain a prospectus, please call 1-800-766-3960 or visit Please read the prospectus carefully before investing.

Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. The Free Enterprise Action Fund is a new fund with limited investment history and there is no guarantee that it will achieve its investment objectives.

The Free Enterprise Action Fund is advised by Action Fund Management, LLC, which receives a fee for its services, and is distributed by BISYS Fund Services Limited Partnership, which is not affiliated with Action Fund Management, LLC.


1. Letter from PepsiCo to the U.S. Securities and Exchange Commission, Division of Corporate Finance, Office of Chief Counsel (January 3, 2006).

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Steven Milloy