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May 16, 2006
Amgen Recommends Support for Political Donations Resolution, Bolstering Broader Campaign
    by Bill Baue

The Center for Political Accountability, which coordinates the political contributions campaign, released a report on trade association contributions that previews its 2007 proxy season strategy.


The shareowner resolution campaign coordinated by the Center for Political Accountability (CPA) requesting transparency and board oversight of corporate political contributions has experienced significant developments this past week. First, in an incredibly rare move, Amgen (ticker: AMGN) recommended voting "for" a political contributions resolution filed by Green Century Capital Management. At the company's annual meeting last week, 75.5 percent of voting shareowners supported resolution (Amgen's count of 67 percent support included abstentions, while SEC guidelines call for counting only "for" and "against" votes).

"Amgen's move sets a very important precedent that a corporate board appreciates the importance of political disclosure and accountability," said Bruce Freed, co-director of CPA. "This is the first time that a board has taken this action."

"Up to now, agreements for disclosure and board oversight have been reached through
dialogues with management," Mr. Freed told SocialFunds.com. "The action adds to the momentum building for companies to disclose and seriously examine their direct and indirect political spending."

Average support for the resolution thus far this year is 29.85 percent, up from 11.15 percent in 2005 and 10.61 percent in 2004, the campaign's inaugural year. Seven companies have adopted transparency and board oversight of political contributions this proxy season, including Bristol-Myers Squibb (BMY), Coca-Cola (KO), Eli Lilly (LLY), McDonald's (MCD), PepsiCo (PEP), Southern (SO), and Staples (SPLS). Three companies--Morgan Stanley (MS), Johnson & Johnson (JNJ), and Schering-Plough (SGP)--adopted the measures last year.

In the second major development, CPA yesterday released a report that digs deeper into the subterranean world of corporate political giving and maps out the next generation of shareowner advocacy for next year.

"We'll be expanding our focus in the 2007 proxy season to include not just company soft money contributions, but also payments to trade associations and other tax-exempt organizations that are used for political purposes," said Mr. Freed. "We're looking to get companies to disclose the full range of their political spending."

The report, entitled Hidden Rivers, spotlights how company contributions to trade associations can support causes that may be unaligned with companies' stated values. More disturbingly, these contributions are hidden from shareowners and even companies' own boards.

"Hidden Rivers is the first in-depth examination of how trade associations have become the Swiss bank accounts of American politics and the threat this poses to shareholders, directors, and companies," the report states. "In 2004, more than $100 million was spent by just six trade associations on political and lobbying activities, including contributions to political committees and candidates."

The trade associations include the US Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers, the American Tort Reform Association, the Pharmaceutical Research & Manufacturers of America, and Americans for Job Security. The report focuses on contributions to these trade associations by 18 companies, including Johnson & Johnson (one of the few that has implemented board oversight and transparency), 3M (MMM), DaimlerChrysler (DCX), Dow (DOW), Pfizer (PFE), and Weyerhaeuser (WY).

The report specifically examines judicial elections in seven states (Illinois, Ohio, West Virginia, Alabama, Mississippi, Louisiana, and Texas ) supported by trade associations and related organizations to expose judge's platforms that are out of sync with corporate policies. For example, companies with Equal Employment Opportunity (EEO) statements prohibiting discrimination on the basis of sexual orientation supported judicial candidates running campaigns that opposed gay rights indirectly via trade association contributions.

"In another case, the report looks at direct and indirect funds provided by several high-profile companies to a Mississippi Supreme Court race where the candidate was alleged to have run a racist campaign," the report states. "The use of trade associations as conduits for political spending allows companies to give political money and then claim they didnít know that it ended up supporting organizations and candidates with which they may not want to be publicly associated."

The report ends with seven action steps. Among other things, it calls on companies to disclose and explain payments to trade associations and other tax-exempt groups used for political activity, require board oversight of these expenditures, and demand that trade associations inform and consult members about the group's political activities and spending. If trade associations refuse to comply, CPA urges companies to drop their memberships.

 

 
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