Meaningful Corporate Political Disclosure

The following post comes to us from Bruce Freed, president and a founder of the Center for Political Accountability, and Sol Kwon, associate director at CPA. Work from the Program on Corporate Governance about corporate political spending includes Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert Jackson, discussed on the Forum here. A committee of law professors co-chaired by Bebchuk and Jackson submitted a rulemaking petition to the SEC concerning corporate political spending; that petition is discussed here.

In the aftermath of the most expensive election cycle in U.S. history, which included record amounts of “Dark Money,” the need for transparency in corporate political spending is even more urgent. Chevron made headlines in October when it gave $2.5 million to the Congressional Leadership Fund, a super PAC led by Speaker John Boehner (R – Ohio). While contributions to super PACs are required to be reported to the Federal Election Commission, contributions to their companion organizations, the so-called “social welfare” groups organized under the 501(c)(4) section of the Internal Revenue Service, remain entirely hidden.

Tellingly, the number of companies recognizing the need for more transparency and actually making the voluntary spending disclosure has increased in recent years. That trend was documented in the 2012 CPA-Zicklin Index of Corporate Political Accountability and Disclosure, which ranked the top 200 companies in the S&P 500 on their policies and practices on political activities.

Without any formal reporting template or standard thus far, there has been some confusion on what constitutes meaningful disclosure of corporate political activities. In some cases, companies faced with a shareholder resolution on political disclosure got a pass from the proxy advisors who recommended against the proposal when the company disclosed some of its spending, but not levels that would provide shareholders with a meaningful picture.

Partial disclosure of corporate political spending offers little help to shareholders concerned about accountability. Only with a comprehensive disclosure can shareholders assess the risks associated with political spending and be assured that corporate funds are being used responsibly for the benefit of shareholders.

To close the gap, the Center for Political Accountability developed a one-page summary of what it considers make up the key components of a meaningful corporate political disclosure. CPA considers all of the elements outlined in this document – covering policy, disclosure, and oversight of corporate political spending (defined as direct and indirect campaign spending from corporate treasury funds) – to be important and necessary. It does not, however, intend this document to be limit-setting for disclosure, as it recognizes that additional information on these elements and related issues, such as corporate lobbying and PAC spending, can and would still add value.

CPA hopes this concise outline of meaningful corporate political disclosure will be helpful for its various stakeholders, including shareholders, companies, proxy advisors and other interested parties.

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