Why companies must be transparent about political spending
<p>Companies spend millions of dollars on marketing, but their images could be undone with revelations of unseemly political contributions.</p>
If most Americans believed that corporate political spending drowns out the voices of average citizens, you'd think that the three branches of government — designed to serve the public interest — would consider this a systemic crisis that needs immediate amelioration. But despite a 2012 Public Citizen poll finding that 84 percent felt this way, their concerns remain unaddressed.
Several strategies are underway to fix this, but headwinds face them all. The grassroots Move to Amend movement, for example, aims to amend the U.S. Constitution to clarify that corporations are not individuals and not entitled to the same rights as individuals. This might take a while because two-thirds of Congress and three-quarters of all state legislatures would need to support this amendment. Only five states have passed related resolutions thus far, with three more in progress, while 209 cities have passed such resolutions, with 40 more in the process.
The amendment is a direct response to the Citizens United Supreme Court decision, which gave corporations the same rights as individuals and equated political contributions with free speech. The ruling also found public value in the transparency of such contributions as regulated by the legislative branch. Congress introduced such legislation, including the DISCLOSE Act in 2010 and again in 2012, but Republicans in both chambers killed it on arrival, largely citing the Supreme Court's free speech argument.
In the executive branch, the Securities and Exchange Commission appeared prepared to issue a 2014 rule requiring political spending disclosure. Despite nearly 400,000 public comments of support, the SEC seems to be balking. Rumors abound that the government is intimidated by lawsuit threats by business interests claiming that political spending should not be regulated because it has nothing to do with a company's bottom line or share value.
The remaining advocacy strategy is direct engagement with companies. In 2013, shareholders filed nearly 130 resolutions with corporations requesting disclosure of political spending on campaigns and lobbying groups, such as trade associations. Investor interest in disclosure of all corporate efforts to influence the political landscape grew significantly in 2013 for the fourth consecutive year to 128 proposals, more than double resolutions in 2010, according to the Sustainable Investments Institute. It was the second highest category of resolutions filed in 2013, following the 147 environment and sustainability resolutions filed. Significantly, about a third of all environmental and social proposals filed related to reporting on governance and contributions to lobby groups and political campaigns. While most votes earned only 25 percent approval, there were majority votes at CF Industries (66 percent) and Alliant Techsystems (64 percent), with votes of 40 percent or more at eight other companies, including Marathon Oil, McKesson, Valero Energy and Peabody Energy.
The Public Citizen poll found that 77 percent of Americans support requiring companies to publicly disclose contributions to groups that use money to influence campaigns and regulators, such as the U.S. Chamber of Commerce. Bolstering the results, 60 lobbying transparency proposals were filed at corporate annual meetings last year. Half of the 18 shareholder proposals earning more than 40 percent support related to lobbying transparency, while 28 proposals were withdrawn after management agreed to disclose the information.
The central element of this issue is acknowledging the significance of the business risk of such contributions, as we learned when Target got into hot water for its 2010 political contributions to a Minnesota gubernatorial candidate who opposed same-sex marriage. There are well-understood internal business risks that a company can control, such as labor practices, supply chain management and energy use, but clearly many unexpected issues can affect profitability and share value, such as customer purchasing patterns, geopolitical circumstances, natural disasters, judicial rulings, legislation and competitor innovation.
Managing public perception is more art than a science. Companies spend millions annually on marketing consultants and public relations firms to test opinions of products, services and ad campaigns. Yet, consumer's perception of a company and their loyalty can change instantly when distasteful practices are revealed, such as poor labor practices or a shoddy environmental record. The public pays more attention to these issues than ever before and want the companies they like and invest in to be responsible. Making money at all costs is an old, tired way of doing business, and while companies spend millions exerting political influence to deregulate industry, governments wouldn't need regulations if businesses operated in a socially and environmentally responsible manner.
When it comes to political spending, the Public Citizen poll found that 81 percent of Americans agree that companies should spend money on political campaigns only if they disclose their spending immediately, while 80 percent said companies should spend money on political campaigns only with prior shareholder approval. There is clearly a desire for shareholders to have a voice in such decisions, primarily because they want to know the justification. Nearly 87% also agree that prompt disclosure of political spending would help voters, customers and shareholders hold companies accountable for political behavior. People want the political stance of a company to be consistent with what's best for society and not merely the financial self-interest of the company. These should be common goals, not competing ones.
The Center for Corporate Political Accountability has compiled a CPA-Zicklin Index to highlight the leaders and general voluntary progress made towards voluntary disclosure among the largest 200 American companies. Companies such as Baxter, Capital One, Merck, PG&E and UPS disclose all types of political contributions and are generally lauded for their leadership in this arena. Other companies that either won't reveal their policy or are unwilling to disclose contributions include Accenture, Amazon, Apache, Bank of America, Berkshire Hathaway, Carnival, Comcast, Costco, Ford, IBM, Morgan Stanley, Praxair, Priceline, Goldman Sachs, Time Warner Cable, Tyco, Walgreens, Walmart, Waste Management and Yahoo.
Dollar bill image by Ricardo Reitmeyer via Shutterstock.