Corporate political spending targeted
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Investors and corporate governance experts are asking the Securities and Exchange Commission to require public companies to provide detailed disclosure of their political spending.
The initiative comes two years after the U.S. Supreme Court ruled that restrictions on corporate campaign spending violated the First Amendment rights of corporate America. The 5-4 decision in the Citizens United v. Federal Election Commission case sparked freewheeling, anonymous spending on campaigns and lobbying, raising concerns about the influence money is having on election outcomes, legislation and regulation.
"We don't know anything about which companies give money to the [U.S.] Chamber of Commerce, the Business Roundtable or other intermediaries. We know how much the chamber spends, but we don't know where it comes from," said Columbia Law School professor Robert J. Jackson Jr.
Mr. Jackson was one of 10 law professors who asked the SEC in August to develop rules for how much information public companies should disclose about their political spending, and how often they should disclose it. The professors said the SEC has the authority to establish disclosure requirements for other matters shareholders are interested in, such as how much top executives are paid and what factors are used to determine their pay.
The proposal has drawn support from John Bogle, founder of mutual fund giant The Vanguard Group. In a letter to the SEC last week, Mr. Bogle wrote that "corporate managers are likely to try to shape government policy in a way that serves their own interests over the interests of their shareholders."
"Transparency in corporate political spending is in the best interests of investors, companies and the general public," he wrote.
Mr. Bogle would go even further, requiring that public companies make no political contributions without the approval of investors who own at least 75 percent of the company's stock.
S&P 500 companies spent $1.1 billion on political contributions and lobbying in 2010, according to the Investor Responsibility Research Center Institute, a New York nonprofit that promotes corporate responsibility and informed investing.
The Corporate Reform Coalition, a group of institutional investors who manage $800 billion in assets, hosted a conference call Thursday to explain why shareholders should know more about that spending.
"Americans need to know who is giving huge amounts of money ... why they are giving it, what are their purposes," said U.S. Sen. Robert Menendez, D-N.J., one of the speakers on the call.
While the FEC requires some disclosure of campaign contributions, "It is incredibly difficult to get this information," said Adam Kanzer of Domini Social Investments, another speaker on the call.
To get a complete view, investors have to examine disclosures on campaign contributions in all 50 states, he said. Moreover, there is no disclosure about how much money corporations contribute to special interest groups that lobby Congress and state legislatures.
Mr. Kanzer said disclosure would help investors determine whether a company is performing well because it has the best products or because of its competitive advantage in the halls of government.
"We'd like to see companies compete and win based on better products and services, not on better access to lawmakers," he said.
A recent study by the Center for Political Accountability indicates more companies are voluntarily disclosing details of their political spending and that some are placing limits on how that money is spent. The trends offer hope "at a time when everyone expects massive hidden spending to influence elections," center President Bruce Freed said.
A coalition that includes the New York state pension fund, union pension plans, investment firms, foundations and other investors said last week it is filing shareholder resolutions at 40 companies that would require those companies to disclose lobbying expenditures, including payments they make to trade associations that are used for lobbying.
As one investor who supports the disclosure proposal told the SEC: "Corporate executives should not have the power to spend shareholders' money on political activities that the shareholders don't support, and to hide those expenditures from the shareholders."
Two things should be noted: Mr. Jackson and his fellow law professors are not asking for curbs on political spending, just that it be more fully disclosed; and the SEC's broadening of requirements for executive pay disclosure coincided with a significant escalation of executive pay.
Mr. Jackson said because there is so little information on who is spending what, it is difficult to speculate whether political spending would increase dramatically if the SEC requires disclosure. But if companies detailed that spending, he and other researchers could study whether it is money well spent.
"The little evidence we do have suggests that higher levels of corporate spending on politics is associated with lower firm value. So I'm skeptical that corporate spending on politics will rise if the SEC adopts the type of rule we have proposed," Mr. Jackson said.
First Published January 22, 2012 12:00 am
