Even as “dark money” political spending surged in the 2014 elections, the Center for Political Accountability announced major advances in disclosing political spending by corporations.
“We’re making big strides in bringing sunlight to corporate political spending, and there’s momentum for this effort at a critical time,” said Bruce F. Freed, CPA president. “The veil is pulled back on the scale and content of companies’ political spending. Shareholders seeking to reduce their risk can begin to follow the money.”
According to figures compiled by CPA, companies have disclosed at least $57 million in previously hidden payments to six leading politically active trade associations over the past two election cycles. The payments were non-deductible and a substantial amount was used for political spending. The associations are the U.S. Chamber of Commerce, Pharmaceutical Research and Manufacturers of America, America’s Health Insurance Plans, the National Association of Manufacturers, the Business Roundtable and the American Chemistry Council.
In addition, 108 companies have adopted policies on political contributions to secretive 501(c)(4) “social welfare” organizations. The policies include disclosing these contributions; eschewing them; exercising board oversight; or restricting the recipient groups from using these payments for political purposes. These groups are a key conduit for “dark money” political spending.
And as the 2014 proxy season winds down, shareholder resolutions for corporate political disclosure and accountability have captured sustained support. After a new agreement was reached, the number of publicly held corporations adopting political disclosure and accountability policies climbed to 129.
Intuit was the latest company to adopt a transparency agreement. After Intuit announced its agreement, a shareholder resolution was withdrawn by Clean Yield Asset Management.
With a projected price tag approaching $4 billion for the 2014 elections, “dark money” political spending surged to at least $219 million, according to the Center for Responsive Politics. This secretive spending by groups that don’t disclose all or some of their donors soared to new levels from $160.8 million in 2010.
The way that nonprofit groups can be used to conceal donors while engaging in nasty hardball political tactics was illustrated in a pre-election New York Times article. It told about a Washington political consultant whose speech to a friendly energy industry audience was recorded secretly.
“People always ask me one question all the time: ‘How do I know that I won’t be found out as a supporter of what you’re doing?’ ” Richard Berman said. “We run all of this stuff through nonprofit organizations that are insulated from having to disclose donors. There is total anonymity. People don’t know who supports us.”
The Securities and Exchange Commission has not considered a petition for a rule to require corporate political disclosure, and its failure to do so is stirring up debate. The petition is strongly supported by the Center for Political Accountability.
On Oct. 30, a New York Times editorial supported the proposed rule and chastised the SEC for failing to take it up. Commissioner Daniel M. Gallagher, a Republican commissioner, then wrote letter to the editor insisting the SEC should never even consider the rule. In rebuttal, two professors who had helped draft the petition defended it, challenged Gallagher’s reasoning and said a rule would be quite consistent with past SEC actions.
The Times editorial equated corporate political disclosure and good corporate governance. That conclusion is a foundation of CPA’s effort for disclosure.
“Basic investor protection requires that shareholders know how corporate money is spent. Good corporate governance requires executives to be transparent about their use of company cash. Ignoring the need for disclosure of political spending won’t make the need go away. It only makes the S.E.C. complicit in the corrupting system of unlimited campaign donations from unnamed donors,” the editorial said.
Gallagher replied that shareholders “don’t care” about corporate political disclosure. He asserted that shareholder votes on disclosure resolutions provide proof. They have registered well under 50 percent support.
Jackson and Bebchuk dug into history and said in a Harvard Law School blog post
that “SEC’s longstanding practice has been to expand its disclosure requirements in light of shareholder proposals that have significant support—even when the levels of support were substantially lower than the support recently received by proposals related to political spending.”
“Thus,” the professors wrote, “the claim that the level of support for shareholder proposals in this area provides a good reason for opposing SEC rules requiring disclosure … has no basis in the SEC’s historical or recent approach to developing its disclosure rules. Indeed, thus far, opponents of such rules have utterly failed to provide a basis for avoiding an examination of the subject on the merits.”