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January 18, 2012
Shareowners to Corporations: Say No to Political Expenditures
    by Robert Kropp

Trillium Asset Management and Green Century Capital Management file resolutions with Bank of America, 3M, and Target, requesting that they refrain from making political donations.

Since the US Supreme Court decided the controversial Citizens United case two years ago and removed longstanding limits on corporate political spending, shareowners and other governance advocates have engaged with companies in efforts to limit the effects on corporate reputation and shareowner value of unlimited political expenditures.

Among the most noteworthy efforts has been that of the Center for Political Accountability (CPA). CPA engages with corporations, not to prevent them from spending on political elections, but to have them disclose their policies on the issue and provide board oversight of corporate political spending. The organization has thus far engaged successfully with 90 major US corporations, convincing them to voluntarily adopt policies addressing political spending and board oversight of the issue.

During the 2011 proxy season, 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. At Sprint Nextel, a majority of shareowners approved the resolution.

But until this year, no institutional shareowners had introduced resolutions requesting that corporation completely refrain from political spending. On Tuesday—the second anniversary of the Citizens United decision—Trillium Asset Management and Green Century Capital Management announced that they have filed resolutions with Bank of America, 3M, and Target, requesting that they refrain from making political donations.

Meanwhile, two government watchdog groups—Common Cause and the US Public Interest Research Group—announced that they have sent letters to more than 700 businesses, including all the companies in the S&P 500, asking them to sing a pledge to refrain from political spending. The groups also asked the companies to specify that trade associations such as the US Chamber of Commerce not use their dues for political purposes.

A letter to the Securities and Exchange Commission (SEC) concluded that analyses of corporate political spending "strongly indicate that firms' political spending, in particular contributions to policy makers, at best has an insubstantial impact on their bottom line and more often results in a negative effect of firm financial performance, as well as an increase in firm risk taking which will also erode future earnings."

And the shareowner resolution filed at Target noted, "Corporate political contributions can backfire on a corporation’s reputation and bottom line. In 2010, Target Corporation experienced such risks directly after it received unwanted attention, consumer boycotts, and protests for its support of a controversial candidate."

Larisa Ruoff of Green Century, which filed the resolution at Target, said, "Given that corporate political spending may indeed have a long-term negative correlation to shareholder value and Target's firsthand experience with contribution-related backlash, we believe companies should protect against risk and refrain from using treasury funds for political purposes."

Shelley Alpern of Trillium, which filed the proposals at 3M and Bank of America, said, "Better means exist for those in the business community to express their political and policy preferences that do not divert shareholder resources toward political ends that they may not support and which may cause public controversy."


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