|
February 05, 2010
In Wake of Controversial Supreme Court Decision, Shareowner Activists Develop Plan for Corporate Disclosure of Political Spending
by Robert Kropp
Asserting that excessive corporate political spending reduces shareowner value and weakens
corporate governance, shareowner advocates call on corporations to adopt a framework for
disclosure developed by the Center for Political Accountability.
|
Shareowner activists are wasting little time in responding to the Supreme Court’s recent decision
removing limits on corporate political spending. An influential group of activists announced an
action plan that will improve corporate disclosure of political spending, engage with the
Securities and Exchange Commission (SEC) for rulemaking on corporate political spending, and ask
Congress to consider legislation to ensure that political spending by corporations does not erode
shareowner value and long-term corporate sustainability.
Last month’s Supreme Court
ruling on Citizens United vs. Federal Election
Commission effectively prevents the government from regulating corporate expenditures on
election campaigns.
At a news event announcing the action plan, hosted yesterday by ShareOwners.org, Robert A.G. Monks,
shareowner advocate, attorney, and founder of Lens Governance Advisors, said, “There’s good news and bad
news. The bad news is the worst judicial decision since Dred Scott. The good news is that the
Supreme Court has held that there is such a thing as corporate democracy.”
“By corporate
democracy, presumably the Supreme Court means the rights of shareholders to vote and bring suits
for breaches of fiduciary duty,” Monks continued. “In reality, shareholder rights are so limited as
to be almost nonexistent.”
“A corporation is not a person,” Monks said. “The notion that a
creature of legislation would be accorded comparable rights is grotesque and harmful.”
New
York City Public Advocate Bill de Blasio, who is a trustee of the New York City Employees’ Retirement System (NYCERS), said,
“Companies have already spent so much, even before the Supreme Court ruling, and despite studies
that link high levels of corporate political spending with reduced shareholder value and decreased
corporate governance.”
In a report
issued yesterday by de Blasio, he pointed out that “Last year, New York City’s public pension funds
filed shareholder resolutions requiring disclosure of political spending by twelve corporations in
which they are invested.”
In response, three of the companies agreed to adopt policies to
disclose political spending to investors. Even with the strict caps on corporate political spending
that was still in place last year, corporate Political Action Committees (PACs), boards of
directors, and management at the other nine corporations made political contributions totaling
nearly $10 million.
Political contributions at four of the nine companies exceeded $1
million. One of the four companies was Bank of America, a recipient of $45 billion from taxpayers
as provided for by the Troubled Asset Relief Program (TARP).
“What can happen as a result
of the Supreme Court decision will not only warp the electoral process, but could lead to such
counterproductive actions as lobbying to reduce regulatory oversight,” de Blasio said. “We have to
move to a position of full disclosure of political spending.”
At the news event, Maureen
Thompson, acting executive director of ShareOwners.org, said, “Corporate boards must be fully
accountable about political spending.”
Referring to the strategy of engaging with
companies to request disclosure of political spending, Thompson said, “Direct engagement with
management of publicly traded companies is modeled on the work done by Bruce Freed at the Center for Political Accountability
(CPA), and will in fact be led by the CPA.”
The CPA’s initiative was launched in 2003,
and seeks to bring transparency and accountability to corporate political spending. Thus far, 70
companies have voluntarily adopted the framework for political disclosure, including almost half of
those listed on the S&P 100.
Freed said, “In its decision, the Court affirmed the
constitutionality of disclosure and the importance of it to the rights of shareholders. But the
decision has a double-edged impact on companies as well. It removes all but a handful of restraints
on political spending by companies, but it also exposes them to much greater pressure to spend
politically, and makes that spending much riskier.”
Freed continued, “The decision places
companies under immense pressure to use shareholder funds to support candidates, groups and causes
whose positions and activities could end up threatening a company's reputation, bottom line and
shareholder value.”
“This year, we are engaging with 80 companies to urge them to adopt
political disclosure,” Freed said.
Freed also spoke about political spending by trade
associations, which, he said, allowed companies to contribute to electoral campaigns without having
to disclose their expenditures.
“Trade associations are secrecy incarnate, and the
antithesis of accountability,” he said. As an example, he pointed to lobbying expenditures by the
US Chamber of Commerce, which totaled $144 million last year, more than that of the National
Committees of the two major political parties combined.
The policy of direct engagement
with companies espoused by the group includes requests for disclosure of payments to trade
associations and other tax-exempt organizations that are used for political purposes. In addition,
it requests disclosure of a company’s policies and procedures for political contributions, and
board oversight of the company’s political spending.
“It is critical to harness corporate
governance at a time when the rules for companies and shareholders have changed dramatically
overnight,” Freed said.
Other organizations that have joined with Shareowners.org in
calling for corporate political spending reforms include Domini Social Investments, the Interfaith Center on Corporate Responsibility (ICCR), the Social Investment Forum (SIF), Calvert, Pax World Management, and Walden Asset Management.
|
|
|
