For several years, CPA has said that leading American businesses are making voluntary disclosure of political spending a mainstream practice. This month, the New York Times highlighted this trend.
“Corporations Open Up About Political Spending,” declared the headline for a New York Times Economic Scene column by Eduardo Porter. Relying heavily on data from the CPA-Zicklin Index and statements by corporate executives, the column charted the success of CPA and its shareholder partner organizations in establishing disclosure as a corporate governance best practice. Here are key excerpts:
“Corporate governance, it seems, can impose at least some of the restraint that Congress and the Supreme Court — in lifting limits on corporations under the argument that they have many of the same rights as people — have refused to demand.”
“Business executives seem to have realized that secret political contributions carry real risks to corporations and their shareholders.”
“Watertight anonymity might protect a corporation from damaging its reputation through some ill-conceived donation. But anonymity is often breached. Moreover, it carries risks of its own by exposing companies to extortion by the operatives running politicians’ dark pools of cash, who know exactly who contributed or refused to contribute to their efforts.”
Since the Center for Political Accountability “started banging the drum in 2003,” the column continued, “it has reached disclosure agreements with 141 companies in the Standard & Poor’s 500-stock index, according to Bruce F. Freed, who runs the center.”
“In an evaluation of the top 300 companies in the S.&P. 500, the group found that more than six out of 10 either disclose political spending made directly to candidates, parties and committees, or do not make such contributions. Almost half disclose at least some information about payments to trade associations, like the United States Chamber of Commerce, that put money into election campaigns.”
“Perhaps the increased transparency will also instill more moderation. Forcing executives to justify political activities on the corporate dime, and allowing shareholders to object, could limit political spending altogether.”
The Times column said plenty of corporate political cash remains in the shadows. “But as Mr. Freed noted, the disclosure effort has the wind at its back. ‘We have surmounted the major obstacle, the acceptance that political spending poses a risk,’ he said.”
Founder's Column by Bruce Freed
In a month of major national news from Charleston to the Supreme Court, it would be easy to overlook a Washington story with big repercussions for corporate political activity and for shareholders. Lest that happen, I’ll reprise it here.
“The primary Senate and House Republican super PACs,” the Congressional Leadership Fund and Senate Leadership Fund, “are joining forces in a major campaign to get Big Business to open its checkbook to the party,” Politico reported.
They will focus on holding their majorities. “The message isn’t subtle: the left is shelling out tens of millions of dollars to pummel Republicans and it’s time for corporate America to fund a counteroffensive,” the article continued.
When this effort to woo corporate political money is added to that of campaigns and superPACs in the presidential election, the result is that American companies are coming under greater pressure to give politically than at any other time in memory. You don’t need to take our word for it that that spells r-i-s-k for shareholders, because the Politico article affirmed it from the vantage point of corporations:
“Corporate honchos feel that such open political activity could negatively impact their bottom line or rile up shareholders.
“’I still feel like a lot of these companies have not overcome that hurdle,’ said one attendee [at a private briefing by the superPACs for corporate representatives] of giving to super PACs. ‘I know ours hasn’t. We do individual giving, not corporate giving. I’m not sure how some of these other guys do it.’”
Recent polling suggests that the unnamed attendee and his risk-averse compatriots may also be listening to public opinion.
According to a Wall Street Journal/NBC News poll, “Asked to rank their top concerns about the upcoming presidential election, one-third of Americans pointed to the sway that companies and wealthy individuals may have over the outcome, more than for any of five other issues tested.”
Especially with Republicans girding to keep their Senate majority in 2016, look for even more ratcheting up of pressure on American companies to give political cash.
This volatile climate poses risky terrain for companies to navigate safely. Political disclosure and accountability are two of the best navigational aids they can deploy.