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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 personal values?

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 decisions.

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 Bowes (PBI).

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 with company commentary before the posting of this article.

One very clean solution to this mess is to bar political contributions altogether, as UK energy company BP (BP) did. 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."


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