2018 CPA-Zicklin Index

Bruce F. Freed is president and co-founder of the Center for Political Accountability; Karl Sandstrom is the Center’s counsel and senior counsel at Perkins Coie; Dan Carroll is CPA’s director of programs; and Caitlin Moniz is CPA’s assistant director. This post is based on a CPA publication by Mr. Freed, Mr. Sandstrom, Mr. Carroll, and Ms. Moniz. 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.

Despite Sharp Attacks on Political Disclosure and Accountability, 2018 CPA-Zicklin Index Finds Companies Recognize its Importance

Corporate political disclosure and accountability is holding firm despite strong counter-pressure from some elements in Congress and a leading business trade association. Indeed, the number of leading publicly held companies disclosing or restricting their spending and adopting board oversight continues to increase.

Those are the chief takeaways of the 2018 CPA-Zicklin Index, an annual non-partisan study released in early October by the Center for Political Accountability (CPA) and the Zicklin Center for Business Ethics Research at The Wharton School at the University of Pennsylvania.

This year’s Index, which benchmarks S&P 500 companies on their political disclosure and accountability policies and practices, is the first to examine these trends during an entire year of the Trump Administration and a Republican majority Congress.

It finds a pattern of the largest publicly held companies making political disclosure and accountability the norm through “private ordering,” the process of setting standards through voluntary action. University of Wisconsin Law Prof. Robert Yablon first identified this development in an Iowa Law Review article last year entitled “Campaign Finance Reform Without Law.”

Following is the top line found in the data in the 8th annual Index:

MOST TRANSPARENT COMPANIES: According to the Index, 57 companies in the S&P 500 received the highest scores for political disclosure and accountability of 90 percent or above, up from 50 in 2017 and more than double the 28 companies identified in 2015. These 57 “Trendsetter” companies span all sectors of the U.S. economy. In addition, three companies received scores of 100 percent, a threefold increase over 2017, which saw the first 100 percent score.

TOP TIERS FOR SUNLIGHT: There are more S&P 500 companies with disclosure and accountability policies and practices that scored in the first and second tiers (100 percent to 60 percent), a total of 196 compared to 174 in 2015.

IMPROVEMENT OVER TIME: Because of turnover in companies belonging to the S&P 500, 414 companies have remained constant members since 2015, when this Index first examined the entire S&P 500. This makes possible the tracking of trends. The average overall score for these 414 companies has continued to edge up, from 41.6 in 2015 to 49.7 in 2018.

The number of core S&P 500 companies fully disclosing their election-related spending or prohibiting it increased for all five categories of this spending since last year, and since 2015. Similarly, there were increases for core companies having elements of political spending oversight and accountability. Further, the number of these core companies with a detailed policy governing electoral-related expenditures from corporate funds increased to 267 this year from 225 in 2015.

Launched in 2011, the Index is a helpful resource for shareholders, journalists, academics and business leaders interested in finding out which public companies lead and which settle for the legal minimum in transparency and accountability. It has gained widespread acceptance in an era of surging political spending and controversy over anonymous “dark money” contributions.

The Index has received strong media coverage from the start. The 2018 report emphasized the change in company political spending behavior and the heightened risks companies face from political spending. Following is a sample of the coverage:

  • The Wall Street Journal: “The biggest publicly traded companies are increasingly limiting their spending on elections and other political activity, a new report has found.”
  • Axios: “Companies are being more accountable of their political spending amid countervailing pressures from Washington.”
  • The Philadelphia Inquirer, quoting CPA: “’Companies are finding that disclosure and accountability policies protect them. The expenditure that they made yesterday or today can come back and really bite them tomorrow. Companies have to pay really close attention to the consequences or their spending—does it align with their core values.’”

The Index complements CPA’s Collision Course report released earlier this summer. That report warned companies of the new level of risk posed by political spending in today’s hyperpolarized environment. With consumers, the public and the media paying much closer attention to company political spending and its impact, Collision Course alerted companies to pay far closer attention to the consequences of their spending, how it conflicts with company core values and positions, with what it associates them, and the reputation and business impact. It provided examples of how political spending could like ticking time bomb with risks surfacing several years after the initial contribution.

Data from the 2018 Index, which is based on a survey of information publicly available on company websites, will be added to the TrackYourCompany.org database maintained by CPA.

Here are other central findings from the Index:

TRENDSETTER COMPANIES: Receiving a first-place rating of 100 percent for 2018 are Becton, Dickinson and Co., Edwards Lifesciences Corp., and HP Inc. The other trendsetters are Edison International; International Paper Corp.; McKesson Corp.; Noble Energy Inc.; Northrop Grumman Corp.; PG&E Corp.; Sempra Energy; State Street Corp; Walgreens Boots Alliance Inc.; Alphabet Inc.; Capital One Financial Corp.; Microsoft Corp.; United Parcel Service Inc.; Unum Group; Visa Inc.; Altria Group In.; Ameren Corp.; American International Group Inc; Exelon Corp.; Express Scripts In.; Gilead Sciences Inc.; Host Hotels & Resorts Inc.; Intel Corp. JPMorgan Chase & Co.; Kellogg Co.; Norfolk Southern Corp.; Union Pacific Corp.; United Technologies Corp.; Wells Fargo & Co.; AFLAC Inc.; Apache Corp.; Bank of America Corp.; Intuit Inc.; Symantec Corp.; Bank of New York Mellon Corp.; Biogen Inc.; Bristol-Myers Squibb Co.; CVS Health Corp.; Dominion Energy Inc.; General Mills Inc.; Morgan Stanley; Navient Corp.; Tiffany & Co.; U.S. Bancorp; AbbVie Inc.; Boeing Co.; Celgene Corp.; Coca-Cola Co.; Hartford Financial Services Group; Johnson & Johnson; Merck & Co. Inc.; Prudential Financial Inc.; Qualcomm Inc.; and, Salesforce.

BASEMENT-DWELLERS AND BACKSLIDERS: The 2018 Index data show 62 companies from the S&P 500 residing solidly in the basement (with scores of zero). Fourteen companies backslid with overall scores declining 10 points or more. They are Waters Corp., Lowe’s Companies, Kinder Morgan, CSX, Boston Scientific, Valero Energy, Eversource, eBay, Emerson Electric, Masco, Mondelez International, FMC Corp., Acuity Brands, and IDEXX Laboratories. Six companies that had reached disclosure agreements in the past failed to make any disclosure. They are PulteGroup, Kroger, Boston Scientific, CSX, Delta Air Lines, and FMC Corp.

Both comments and trackbacks are currently closed.
  • Subscribe or Follow

  • Supported By:

  • Program on Corporate Governance Advisory Board

  • Programs Faculty & Senior Fellows