part 2:
At a meeting on infrastructure at Trump Tower in August 2017, Elaine Chao stands with (left to right) Director of the National Economic Council Gary Cohn, Treasury Secretary Steve Mnuchin and President Donald Trump. - Drew Angerer | Getty Images
Ethics experts say when subordinates flout long-held guidelines, they're usually taking the lead of their boss. Trump, for example, in a departure with his immediate predecessors, has refused to release his tax returns. He also hasn't fully divested from his businesses and has given preferential treatment to his Trump-branded properties for vacations and events during his time as president.
An Securities and Exchange Commission
filing shows that Chao's stock awards came in the form of 3,041 deferred stock units in Vulcan Materials.
Chao served on Vulcan's board of directors in 2015 and 2016 and, in addition to an annual salary of $110,000, she received
$150,982 in deferred stock compensation — the stock units — for each year she served as director. She resigned her position on the board after the U.S. Senate voted on Jan. 31 to confirm her.
While ethics officials question Chao's conflicts in her role as a Cabinet secretary, corporate governance experts say delayed transactions are commonplace to protect investors.
Charles Elson, a corporate governance expert at the University of Delaware, said companies create such plans to prevent a director from cashing out before investors learn of any potential bad news. "If she were allowed to sell immediately, that would defeat the whole point of the company's plan," he said.
A multi-millionaire who's served business and government
Chao, who is married to Senate Majority Leader Mitch McConnell, did not respond to repeated requests for an interview. Her spokeswoman did not respond to questions about Chao's holdings, but in a written statement said that Chao is following applicable ethics requirements and federal law.
Chao reported assets between $11 million and $48 million on her financial disclosure form.
Chao has been active in corporate and nonprofit circles and held several positions in the government. She served as Secretary of Labor from 2001 through 2009 under George W. Bush and Deputy Secretary of Transportation from 1989 to 1991. She also was president and chief executive of the United Way of America and director of the Peace Corps. Chao has also served on several corporate boards, including Protective Life Corp., Centerra Group and Dole Food Co.
Departing the boards, keeping some pay
When Elaine Chao was confirmed as U.S. Transportation Secretary in January, she quit four corporate boards, but kept a financial relationship to two. One was Vulcan Materials, a transportation construction company. Chao could still benefit from her compensation as a director there for nearly two years — $300,000 in deferred stock awards — if she helps push an infrastructure bill through Congress.
ORGANIZATION POSITION START DATE LEFT POSITION
UPON CONFIRMATION? COMPLETE
FINANCIAL SEPARATION?
News Corporation Director Oct. 16, 2012 Yes Yes
Wells Fargo & Company Director June 28, 2011 Yes No
Ingersoll Rand Director June 4, 2015 Yes Yes
Vulcan Materials Director Feb. 13, 2015 Yes No
Chao, 64, is an immigrant who arrived in the U.S. at age 8 and became a citizen at 19, according to a
questionnaire she submitted to the U.S. Senate. Her father — James Chao — founded a shipping company. In 2008, he gave Chao and McConnell between $5 million and $25 million,
according to Politico.
She has been a leading advocate for the infrastructure plan, a role she naturally assumed as head of the Transportation Department.
Since she took office, she's discussed infrastructure in House and Senate committees, met with city and state officials at the White House, traveled to Kentucky and Nebraska to pitch the plan and appeared by Trump's side at infrastructure-related events. "The president has made this his top priority,"
Chao told CNBC in May. "He has said that he's challenging our country and his advisers that he wants $1 trillion in investments over the next 10 years."
The findings from the APM Reports investigation come as Trump is trying to win general support for an infrastructure plan. For months, the White House has pushed for increased private investment — such as public-private partnerships, referred to as P3s — to pay for the public projects. But this week, Trump started to back away from that approach.
The shift occurred for a number of reasons: rural lawmakers openly worried that private investment wouldn't land in their districts, a privately financed project in Indiana faced significant delays, and the Texas Legislature rejected efforts to authorize additional private investment for roads.
"Just like with any new policy, there are legitimate questions about how P3s can best be incorporated into our nation's infrastructure program," said a White House official who asked not to be named. He added that public-private ventures were not "the silver bullet for all of our nation's infrastructure problems."
An APM Reports analysis in May found that states, cities, unions and infrastructure consultants
submitted more than 500 projects to the White House for consideration.
Then in July, APM Reports found that the bulk of the requests considering private investment were
primarily in urban areas around the country.
The White House has not released any specifics about its plan, and Congress has shown little interest in taking it up. House and Senate leaders have been focused on a new federal health care law and a plan to cut taxes. Some congressional leaders have said it's unlikely Congress will consider the infrastructure bill until early next year.
Construction stocks at the mercy of infrastructure plan
The stock market rallied after Election Day as investors grew excited about the prospects of a Trump presidency and a Republican-controlled Congress. Companies tied to the construction industry fared particularly well, boosted by Trump's pledge to inject $1 trillion into roads, bridges and airports.
In the days following Trump's election, Vulcan Materials' stock price spiked 14 percent, from $119 a share on Election Day to $136 a share two days later. The increase signaled optimism that the company would capitalize on Trump's plan.
The word 'infrastructure' and Vulcan share prices
Whenever U.S. Secretary of Transportation Elaine Chao or President Donald Trump talk about infrastructure, shares of Vulcan Materials stock jump. Red dots below indicate events that may have affected the share price.
During a conference call in February with investors, Vulcan's chief executive Tom Hill said the country "desperately needs" a federal infrastructure bill to pass. "When it happens, there's nobody better positioned to serve these projects than we are. It's what we do. It's who we are," he said.
Vulcan has spent $630,000 lobbying Congress and the U.S. Department of Transportation over the past two years, according to disclosure records filed with the U.S. Senate, though a spokesperson for the company said it hasn't lobbied Chao or her department since she was nominated to the position.
In a written statement sent to APM Reports this week, the company downplayed the impact of an infrastructure bill on Vulcan's bottom line. "While Vulcan Materials joins numerous experts in our belief that infrastructure investment is needed in our country, the company has noted on numerous occasions that it is well positioned for growth with or without a $1 trillion federal infrastructure bill."
While share prices for many construction-related firms surged in anticipation of an infrastructure bill, they've dropped as Trump's plan is yet to materialize. On Thursday, Vulcan shares closed at $119.12 a share, down 7.7 percent since Inauguration Day.
Kathryn Thompson of Thompson Research Group advises managers of hedge funds, mutual funds and pension funds on the construction and industrial sector. She said some investors anticipated quick action on an infrastructure bill but were disappointed with the lack of action in Congress. Thompson said, though, that she expects construction-related stocks, including Vulcan Materials, to jump again when Trump releases his plan. "It would certainly be a psychological boost to the stocks," she said.
Follow Tom Scheck, APM Reports at
@tomscheck.