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Valero Political Spending 2011

Whereas: The issue of “political spending” by companies is increasingly controversial. The Citizens United Supreme Court decision, which allows companies to make independent expenditures in favor of or in opposition to candidates, only added to the controversy. So too has the use of shareholder money to support Proposition 23, a controversial ballot initiative in California.
 
In Valero’s case, company political spending includes support for California Proposition 23. Valero contributed at least $4 million promoting the Proposition, which would suspend a law requiring companies to cap their emissions and cut carbon in gasoline until state unemployment falls to and remains at 5.5% or lower for 4 consecutive quarters. This requirement would have the effect of killing the law as this condition has only been achieved three times over the last 40 years.
 
The debate about Proposition 23 has split the business community and a number of oil majors have remained neutral. Some believe the attempt to roll back this bill, which sets an economy-wide cap on greenhouse gases, will harm employment and investment in clean technologies. It could also cause California to lose investment and jobs to areas that have strong commitments to clean energy policy, thereby harming the business environment in California, a state in which our company has both refining and retail operations.
 
We are concerned that shareholder funds are being used in confrontational and controversial political initiatives of this sort. We are also concerned that management may use the Citizens United decision to intervene in controversial election contests that could eventually harm the Valero brand. Since Valero management is using shareholder monies for political spending on initiatives and potentially for candidates in the aftermath of Citizens United, we believe it prudent to undertake a comprehensive review of the implications of such expenditures on our company’s reputation and business competitiveness.
 
Over the past 5 years, investor support for the disclosure of corporate political spending has steadily increased and in 2010, support for proposals requesting this type of disclosure averaged 30 percent. Disclosure and oversight of political spending, both directly and indirectly, is considered good governance.
 
Resolved: Shareholders request that the independent members of the Board of Directors institute a comprehensive review of Tesoro’s political expenditures and spending processes and present a summary report for investors by September 2011. Items for review include:
 
• The process used for determining the approval of expenditures supporting or opposing candidates and an assessment of the impact such expenditures may have on the company’s reputation, public image, business sales and profitability;
• Direct or indirect expenditures, including payments made to trade associations such as the U.S. Chamber of Commerce, social welfare organizations and political organizations, supporting or opposing candidates, or for issue ads aimed at affecting political races;
• Expenditures for state-level ballot initiatives, including an analysis of the impact on the company of any such initiatives;
• Oversight processes by management and Board for all political spending.