Bruce F. Freed is president of the Center for Political Accountability (CPA) and Karl Sandstrom is senior counsel at Perkins Coie and counsel to the CPA. This post is based on a CPA publication. Related research from the Program on Corporate Governance includes Shining Light on Corporate Political Spending and Corporate Political Speech: Who Decides?, both by Lucian Bebchuk and Robert Jackson (discussed on the Forum here and here); and Corporate Politics, Governance, and Value Before and after Citizens United by John C. Coates.
No publicly traded company would consider a request for a sizable donation from a newly formed charity without exercising rigorous due diligence on how its money will be spent. Doing otherwise would risk its reputation and violate the managers’ fiduciary duties to the company shareholders. Good business practice requires no less of a company when it engages in political spending. Indeed, when it comes to political spending, the risks may even be greater because of the myriad of laws, federal and state, that regulate political spending and reputational challenges posed by greater media scrutiny.
This election season has seen the emergence of new political players, shadowy advocacy organizations, newly minted traded associations and Super PACs dedicated to the election of a single candidate. Some of these organizations promise that their donors will never be disclosed. Others confidently assure their donors that they operating in full compliance with all applicable laws. What is often missing from their requests is basic information about the organization’s internal governance, its actual pre- and post-election plans and any financial or reporting commitments to the donors.
