Capping an exceptionally strong opening of the 2015 proxy season, the storied U.S. Steel Corp. agreed to adopt a political disclosure policy. Bloomberg View reported on the agreement in spotlighting the “increasingly active” shareholder movement for corporate disclosure.
“Shareholders need transparency in order to determine whether corporate political spending benefits the company’s long-term value,” Thomas DiNapoli, the state comptroller in New York, said in announcing the U.S. Steel agreement. The New York State Common Retirement Fund, headed by the comptroller, filed the Center for Political Accountability’s model political disclosure resolution at U.S. Steel.
The Bloomberg View article, “Transparent Win for Political Disclosures,” suggested that the Supreme Court’s landmark Citizens United ruling in 2010 may have helped the political disclosure movement at the same time it “opened the financial floodgates” on election spending.
Published in outlets from coast to coast as well as online, the article showcased the CPA-Zicklin Index of Political Accountability and Disclosure for its benchmarking the political transparency of leading public corporations.
Bloomberg View also noted firm resistance to disclosure from the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers. Those groups “have typically relied on anonymous donations to fund their activities,” wrote Bloomberg View’s Jeanne Cummings.
To indicate the successes of the disclosure movement so far, Cummings wrote, “Almost half of S&P 500 companies have adopted some kind of guidelines for political giving in recent years, but the degree of disclosure varies greatly.”
She added, “[t]he tide of undisclosed money won’t easily be turned back,” and noted, “Political spending by 501(c)(4) groups rose from $5.2 million in 2006 to $300 million in 2012.” These so-called “social welfare” organizations are not required to disclose their donors.
"U. S. Steel is unequivocally committed to transparency at every level of corporate operations, including disclosure of political contributions," said U. S. Steel's General Counsel, Chief Compliance Officer and Senior Vice President of Government Affairs Suzanne Rich Folsom. As a result of the agreement, the New York State Common Retirement Fund withdrew a shareholder proposal for disclosure.
By Jeanne Cummings
Campaign finance reformers often blame the Supreme Court's decision in Citizens United for opening the financial floodgates, enabling big donors to remain anonymous even as they increase their funding of political causes. Now, Citizens United may be the catalyst for somethamount ing else -- increased disclosure of political funding by American corporations.
U.S. Steel Corp. today becomes the latest corporation to agree to disclose its spending on candidates, political parties, ballot measures and other political activities. Ten other companies, including McGraw Hill Financial Inc. and Eastman Chemical Co., have adopted similar disclosure standards since the start of 2015.
A shareholder movement for corporate disclosure has been increasingly active since Citizens United was decided in 2010. The average percentage of shareholders voting for disclosure has roughly doubled, from 20 percent to 40 percent, since 2005. "The activist shareholders got a shot in the arm from Citizen United," said Ken Gross, a Washington attorney who advises corporations on election law. "It was one of the unintended consequences of the case."
The Center for Political Accountability, which promotes disclosure, has joined with the University of Pennsylvania Wharton School's Zicklin Center for Business Ethics Research to produce an annual index ranking companies based on their disclosure policies. But not everyone is pleased at the attention. The Chamber of Commerce, Business Roundtable and the National Association of Manufacturers have typically relied on anonymous donations to fund their activities. Now, some of those donations are being revealed in corporate annual reports.
In a 2013 joint letter to Fortune 500 companies, the trade groups' presidents accused CPA and Zicklin of trampling their members' free speech rights; they urged corporations to resist the transparency campaign. The next year, Microsoft reported giving about $80,000 to NAM, $50,000 to the Roundtable, and $255,000 to the Chamber -- with instructions that the contributions not be used for politics.
The pro-disclosure forces are also benefiting from an activist state comptroller in New York, Thomas DiNapoli, who manages one of the world's biggest pension funds, estimated at $181 billion. "Shareholders need transparency in order to determine whether corporate political spending benefits the company's long-term value," he said in a statement. In addition to U.S. Steel, DiNapoli previously announced the addition of five other companies to the disclosure regime, including Valero Energy and H&R Block.
Almost half of S&P 500 companies have adopted some kind of guidelines for political giving in recent years, but the degree of disclosure varies greatly. Of several dozen companies that the CPA/Zicklin index ranks in the top tier of disclosure, most give a full accounting of their political activity. Some list trade groups to which they belong without revealing the size of their donations. Others contribute to so-called social welfare committees organized under 501(c)4 of the tax code, which are politically active but don't disclose donors. JPMorgan Chase and 107 other companies have banned contributions to such groups.
But the tide of undisclosed money won't easily be turned back. Political spending by 501(c)4 groups rose from $5.2 million in 2006 to $300 million in 2012. Virtually everyone who raises money expects it to rise again -- significantly -- in the 2016 election.