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August 13, 2011
The Conference Board Forms Committee on Corporate Political Spending
    by Robert Kropp

After collaborating last year with the Center for Political Accountability on a Handbook on Corporate Political Activity, the Board seeks to educate its member businesses on the issue in advance of the 2012 elections.

It comes as no surprise that the Center for Political Accountability (CPA) has been in the forefront of a growing movement to bring transparency to the issue of corporate political spending. The organization has, since 2003, worked with shareowner advocates and nongovernmental organizations (NGOs) to address corporate political spending through engagement with companies and shareowner resolutions.

Proof of CPA's success can be found in the fact that more than half the companies in the S&P 100, and over 80 companies overall, have adopted policies addressing political spending that require transparency and board oversight.

It is difficult to overestimate the impact of CPA's efforts. As its president, Bruce Freed, stated, "Seven years ago, political disclosure was not on the radar screen of companies. Today, leading companies consider it a corporate governance standard."

Still, the fact remains that those leading companies have voluntarily adopted policies to define and make public their activities in the political realm, and an organization whose membership includes well over 1,000 companies has devoted considerable resources in recent years to educating businesses about the issue.

The Conference Board formed in April a Committee on Corporate Political Spending, a committee of corporations "dedicated to accountability, transparency, education, and engagement on issues of political activity." The Advisory Panel to the Committee is chaired by Freed of CPA.

Last year, before forming the Committee, The Conference Board collaborated with CPA in the authorship of a Handbook on Corporate Political Activity, which states, "Companies that adopt robust approval and oversight policies that cover the full range of corporate political activity and accountability are better positioned to avoid the serious financial, legal, and reputational risks associated with political spending while protecting shareholder value and promoting the company's best interests."

At the time of the Handbook's publication, Freed told, "That the Handbook comes from the nation's leading business research organization is extremely important. Within The Conference Board there is a commitment to pursue best practices and spread the word within the corporate community."

Marcel Bucsescu, Manager of Corporate Leadership for The Conference Board, told this week, "Bruce Freed engaged us back in 2008 on the issue that was then emerging. We did a report in April 2008, and out of that, under the auspices of the Governance Center, there was a series of roundtables in 2009 and early 2010."

"The Committee is an outgrowth of the Handbook and the roundtable discussions," Bucsescu continued. "Companies are thinking through this issue now—some more than others—and we'd like to make this a practical tool for companies. How can we make this information accessible, relevant, and useable by companies, and how can we deepen our understanding and engage with companies to move the dialogue forward in a productive way?"

While The Conference Board itself "is committed to general principles around transparency and public engagement," Bucsescu said that it refrained from prescribing solutions for its members.

"Perhaps disclosure doesn't always make the most sense when you balance the risks and benefits," Buscescu observed. "We do say that companies should develop processes and initiatives that address their corporate political activity. We're not advocating that companies not participate, and we're not advocating that companies necessarily disclose. We are saying that companies should be having conversations about the issue and thinking it through."

"Ultimately, companies have to make decisions that make the most sense for their organization and their stakeholders," he added.

As an influential group of key stakeholders, shareowner advocates made their concerns known this past proxy season, when resolutions addressing political spending and disclosure were included on the ballots of 32 companies. Vote totals for eight of the resolutions exceeded 40%, and an additional 14 resolutions gained more than 30% of shareowner support.

With the first presidential election since Citizens United occurring next year, it can be expected that investors will become even more concerned about the risks associated with corporate political spending. As Freed told last week, "We're heavily involved in planning for the 2012 proxy season. There will be a significant number of companies engaged, as there is even greater interest in the issue because nothing will be done on legislative and regulatory fronts."

Last week, the Committee on Disclosure of Corporate Political Spending, an influential group of corporate governance academics, sent a petition to the Securities and Exchange Commission (SEC), requesting that it "develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities."

"While many large public companies have begun to provide such information," the academics stated, "No existing rule requires disclosure of this information to investors, and corporate political spending remains opaque to investors in most publicly traded companies."

Buscescu said, "In 2012, companies are going to be wondering how to address proposals and concerns from their shareholders. Companies are trying to figure out how to play a responsible role in an important issue for the society of which they are a part."

The Conference Board's Committee on Corporate Political Spending plans to publish a report on the issue in early October, and, on October 20, will host a public symposium in New York, "to discuss how corporations and shareholders can best develop good governance practices, increase shareholder value, and manage the risks related to corporate political spending."


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