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February 15, 2007
Shareholders Ask Companies for Transparency on Corporate Political Giving
    by Anne Moore Odell

With 43 companies facing shareholder resolutions on political accountability this proxy season, a handful of companies have already reached agreements with filers on this issue.

As the 2007 proxy season begins, one of the major conversations at shareholder meetings will center on companies’ disclosure of political giving. The tangled web of political contributions is often difficult for shareholders to follow. Many companies give money directly to candidates and campaigns, and make indirect contributions through trade associations and other tax-exempt organizations. This season, institutional investors and allied shareholders have filed 43 resolutions asking companies to report on how the money from their corporate treasuries is spent on politics.

The Center for Political Accountability (CPA) worked with 25 institutional investors to file resolutions based on models created by the CPA. These resolutions urge companies to disclose soft money expenses and to require board oversight of how these moneys are allocated.

Green Century Capital Management, working with the CPA, was one of the institutional investors to file resolutions with three energy companies: American Electric Power (AEP), Xcel Energy (XEL) and FirstEnergy Corp. (FE). "Companies wield tremendous political influence, but they aren’t required by law to disclose their political contributions," said Andrew Shalit, Director of Shareholder Advocacy at Green Century Capital Management, explaining the importance of the proposals to "We think that’s wrong, not just for the public interest but also for shareholders. When political contributions are made without proper oversight, there is room for all manner of abuse. We’re gratified that more and more companies are recognizing that," he added.

The political accountability resolutions can be broken into two related camps. The first type of resolution, in front of 31 companies, urges disclosure and board oversight of company soft money contributions and full disclosure of moneys given to trade associations and allied groups. The second group of 12 companies faces a resolution that just asks for disclosure and board oversight on corporate soft money contributions.

The role that trade associations play in the political arena is especially nebulous. Trade associations hold no accountability to any company or interest group and don’t need to make public their membership rolls or their political activities. Companies—and therefore shareholders—are unable to discern how and where their contributions are being spent.

"We raised the question of political contributions made through trade associations because these associations represent another channel for political influence. Trade associations really are stand-alone groups of political operators that can significantly lag the companies that they represent," Shalit said. Without proper oversight, trade associations could be supporting causes that are antithetical to the companies funding them.

Seven companies have already reached agreement with the resolution filers on political transparency ahead of the proxy-voting season. Another 12 companies are currently in dialogues with filers. The seven companies that have already reached agreements are American Electric Power (AEP), General Dynamics (GD), General Electric (GE), Hewlett-Packard (HP), Home Depot (HD), Monsanto (MON), and Verizon Communications (VZ).

Trillium Asset Management was the lead filer on four of the political accountability resolutions at Hewlett-Packard (HPQ), General Electric (GE), DuPont (DD) and Dominion Resources (D). AEP, GE and HP reached agreements with Trillium prior to any votes, with Dupont still in discussion with Trillium and other filers.

Shelley Alpern, Vice President of Trillium, spoke to about Trillium’s success with HP and other companies. She said, "Trillium was very satisfied with the responses in regard to the trade associations. I think all of us, including the companies themselves, would like the trade associations to make contributions records available."

HP stands out by agreeing to total disclosure of its trade association donations. HP has pledged to report all of the donations it makes to trade associations, no matter how large or small the donations are. HP’s commitment is significant, because, like most major companies, belongs to hundreds of trade associations all over the country. Other companies differ in the agreed upon details of the proposal. For example, GE and AEP will only report donations of $25,000 or larger to trade associations.

Trillium decided to focus this proxy season on trade association contributions coming from corporate funds versus employee PAC giving. Although it’s a well-known fact that employees are frequently pressured to give money to the company PAC, the disclosure of PAC giving is already mandated by the Federal Elections Commission for any amount at or above $200. Next, those donations come from employees' pockets, not from corporations’ funds.

All of the companies that reached to discuss the upcoming proxy vote on political accountability either didn’t respond to interview requests or declined to release their boards’ suggestions until proxy statements are released to shareholders. Likewise, the trade associations reached by gave no comment at this time.

The shareholders working with the CPA are asking companies to recognize that the disclosure of political activity is a matter of good corporate governance and good business. Shareholders aren’t asking companies to stop giving, but rather to simply show, in a straightforward manner, where and how money from the corporate treasury is being spent. With hundreds of millions of dollars being sent to trade associations yearly, shareholders want to pierce the veil that is currently drawn over corporate donations to trade associations.


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