September 17, 2004
SEC Asked to Let the Sun Shine on Corporate Political Contributions
by William Baue
A group of state and city treasurers and a watchdog group sent letters to the Securities and
Exchange Commission requesting mandatory political contributions disclosure.
This election year, shareowners might wisely wonder how corporate contributions influence the
political process. Logical questions include: how much money do the companies I invest in
contribute to political
organizations? Those organizations include 527s, so-named after the tax code regulating them,
as well as politically active 501 (c) 4s and 501 (c) 6s. What policies guide such corporate
political contributions, and what officers control decisions? In what ways do such political
contributions align with other corporate policies, with shareowner interests, and with my own
Answers to these questions, alas, are not easy to come by, as
corporations are not required to disclose this information in anything but piecemeal fashion. To
address this lack of transparency, 11 state and city treasurers and pension funds wrote Securities
and Exchange Commission (SEC) Chair William
Donaldson late last month asking him to require comprehensive disclosure of corporate political
contributions. Signatories included California Treasurer Phil Angelides, New York State Comptroller Alan Hevesi, Connecticut Treasurer Denise Nappier, and California Public
Employees Retirement System (CalPERS)
Boardmember Sean Harrigan.
"Although federal, state, and local laws require candidates
and/or contributors to report political contributions at various thresholds, there is no way for
shareholders to learn how much the companies they own contribute to political campaigns and causes
short of combing through the records of hundreds of jurisdictions," the letter states. "We ask
you and your fellow SEC commissioners to let the sun shine on corporate contributions so that the
tens of millions of shareholders in America's public companies can know how their money is being
used in the nation's political life."
This week, the Center for Political Accountability
(CPA), a nonprofit,
nonpartisan organization advocating political contributions transparency, sent Mr. Donaldson a letter
similarly requesting required disclosure. This letter extends CPA's work this proxy season on a shareowner
resolution asking companies to disclose their political donations and contributions policies,
explain the business rationale behind them, and identify the corporate officers making the
Voting results for this first-year resolution at the 26 companies where it
was filed significantly surpassed the 3 percent threshold needed to qualify for resubmission next
year. It received 16 percent support at Verizon (ticker: VZ), 15.6 percent at Morgan Stanley
(MS), and 15.4
percent at Textron (TXT), 15.1 percent at BellSouth (BLS), 13.3 percent
at Wachovia (WB), and 13.1 percent at Pitney
CPA research reveals what appear to be conflicts between corporate donation agendas and
the interests of companies, their major shareowners, and other stakeholders. Take Altria (MO), where the
resolution received 7.2 percent support, for example.
"A top ten soft money contributor
[according to the Center for Responsive
Politics], Altria donated $3,741,353, to various party and political committees in 2001-02, the
most recent fully reported election cycle," the research
states. "However, a close look at company contributions shows that a significant amount went to
candidates and causes that appeared to conflict with the firmís employee and shareholder profile
and its policies and practices."
For example, Altria extended health benefits to same- and
opposite-sex domestic partners in 2001, and Human
Rights Campaign, a gay, lesbian, bisexual, and transgender (GLBT) advocacy organization,
praises the company on its progressive record on GLBT issues. However, Altria contributed $100,000
to Americans for a Republican Majority, which filtered $75,000 to Texans for a Republican Majority
and $7,000 to the Traditional Values
Coalition, both of which oppose gay rights.
CPA research also reveals a significant
discrepancy between soft money contributions to party committees that makes Altria appear partisan.
According to the Center for Responsive Politics, 79 percent (almost $2.3 million) of such
contributions went to Republican organizations, with only 21 percent (just over $600,000) going to
Democratic ones. Soft money contributions to 527 committees were much more balanced, with 52
percent (more than $435,000) going to Democratic committees and 48 percent (just over $405,000)
going to Republicans.
Altria spokesperson Lisa Gonzalez was unable to provide
SocialFunds.com with company commentary before the posting of this article.
clean solution to this mess is to bar political contributions altogether, as UK energy company BP
However, such a move is exceedingly rare in the US.
"I know of one company that does not
give soft money: Procter & Gamble [PG]," said Bruce Freed, co-director
of CPA. However, this case is an anomaly. "My sense is that few companies in the US have bans on
soft money contributions."