The 2019 CPA-Zicklin Index of Corporate Political Disclosure and Accountability

Bruce F. Freed is President and Dan Carroll is Vice President for Programs at the Center for Political Accountability; and William S. Laufer is the Julian Aresty Professor at The Wharton School of the University of Pennsylvania. This post is based on a CPA publication by Mr. Freed, Mr. Carroll, Mr. Laufer, and Karl Sandstrom. Related research from the Program on Corporate Governance includes Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert J. Jackson Jr., (discussed on the Forum here); The Untenable Case for Keeping Investors in the Dark by Lucian Bebchuk, Robert J. Jackson Jr., James David Nelson, and Roberto Tallarita (discussed on the Forum here); and Corporate Political Speech: Who Decides? by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here).

More publicly held U.S. companies are adopting the strongest measures of transparency and accountability over their corporate political spending. These findings emerge from the 2019 CPA–Zicklin Index, an annual non-partisan scorecard released on October 24, 2019 by the Center for Political Accountability (CPA) and the Zicklin Center for Business Ethics Research at The Wharton School of the University of Pennsylvania. This year’s Index takes on added importance as companies have to grapple with today’s polarized, hyper-sensitive political environment.

Three major findings stand out in the 2019 Index:

  • The largest year-to-year increase in Trendsetter—top scoring—companies. The number stands at 73, up from 57 last year.
  • A doubling in the number of companies with improved scores of 50 points or more, from eight last year to 16 this year; and
  • 60 companies had substantive conversations with CPA about adopting or strengthening political disclosure and accountability policies.

The Index finds that companies continue to embrace disclosure and accountability at a time of extremes in political positions and tactics. At a time of great political instability and increasing polarization, companies are asked to take a stand on contentious policy issues under the watchful eyes of consumers, workers, and shareholders.

A significant finding this year is the significant association between companies making sunlight and board oversight the rule and shareholders—who want to know how their investment dollars are spent—urging companies to enact transparency. This comes as the U.S. Securities and Exchange Commission moves in the opposite direction as it considers policies to limit shareholder engagement of companies and the role of the proxy advisory services.

The importance of the trend toward political disclosure and accountability at a time when corporations are rethinking their role in society and the marketplace is underscored by a foreword to the 2019 Index by Chief Justice Leo E. Strine Jr. of the Delaware Supreme Court, who is the nation’s top corporate law judge.

Judge Strine argues that since the U.S. Supreme Court’s Citizens United decision in 2010, “American corporations have helped generate a huge increase in political spending, tilting the playing field much more heavily in favor of the wealthiest interests, and against those of the middle class.” He also notes, “Companies themselves face heightened risks from the Wild West environment that now surrounds political spending.”

Additional highlights of the 2019 CPA-Zicklin Index, which examines S&P 500 companies, include the following:

Most Transparent Companies: The number of Trendsetter companies in the S&P 500 receiving scores of 90 percent or higher rose 28 percent in the past year and by 160 percent from 2015 (from 28), when the Index began evaluating the S&P 500. Trendsetter companies span a broad cross section of the U.S. economy. Four companies scored 100 percent.

Impact of Shareholder Engagement: Of 16 companies receiving the highest scoring increase since 2018 (of 50 points or higher), shareholders engaged 12. For the 21 companies whose scores increased by 40 points or more, shareholders engaged 15. For all five years that the Index has evaluated the S&P 500, there has been a strong positive association between shareholder engagement and a company’s Index 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 229 compared to 197 in 2018. That number has increased by more than 30 percent since 2015.

Improvement Over Time: Because of turnover in companies belonging to the S&P 500, 399 companies have remained constant members since 2015. The average overall score for these 399 companies has continued to improve, from 41.6 in 2015 to 53.3 this year.

The Index continues to receive wide coverage and reach a broad audience. Here isa small sample of articles and headlines:

  • The Guardian: “More US firms than ever get transparent over political spending, study finds Protests against political associations have pushed more companies to ‘embrace sunlight’ and disclose who they give to”
  • MarketWatch: “S&P 500 companies are protecting themselves from today’s inflamed politics, study finds”
  • Corporate Counsel: “’Incendiary Political Climate’ Spurs More Companies to Disclose Campaign Contributions”
  • Center for Public Integrity: “Corporate Political Transparency: It’s Optional…”
  • Weak rules mean big companies pick and choose some of what they make public”
  • Newark Star-Ledger: “Trump era has made corporations afraid to donate to political campaigns”

Data from the 2019 Index, which is based on a survey of information publicly available on company websites, will be added shortly to the database maintained by CPA. Below are the names of companies at the top and bottom of the Index:

Trendsetter Companies:

Receiving a first-place rating of 100 percent for 2019 are Becton, Dickinson and Co.; Edwards Lifesciences Corp., HP Inc., and Northrop Grumman Corp. The other Trendsetters are AbbVie Inc.; AFLAC Inc.; Alexion Pharmaceuticals Inc.; Alphabet Inc.; Altria Group Inc.; Ameren Corp.; American International Group Inc.; Apache Corp.; AT&T; Bank of America Corp.; Bank of New York Mellon Corp.; Biogen Inc.; Boeing Co.; Bristol-Myers Squibb Co.; Capital One Financial Corp.; Celgene Corp.; Cisco Systems Inc.; Coca-Cola Co.; ConocoPhillips; Consolidated Edison Inc.; CSX Corp.; CVS Health Corp.; Dominion Energy Inc.; Edison International; Entergy Corp.; Estee Lauder Companies Inc.; Exelon Corp.; General Electric Co.; General Mills Inc.; Gilead Sciences Inc.; Hartford Financial Services Group Inc.; Honeywell International Inc.; Host Hotels & Resorts Inc.; Humana Inc.; Intel Corp.; International Paper Co.; Intuit Inc.; Johnson & Johnson; JPMorgan Chase & Co.; Kellogg Co.; MasterCard Inc.; McDonald’s Corp.; McKesson Corp.; Merck & Co. Inc.; Microsoft Corp.; Mondelez International Inc.; Morgan Stanley; MSCI Inc.; Noble Energy Inc.; Norfolk Southern Corp.; Prudential Financial Inc.; Qualcomm Inc.; Regeneron Pharmaceuticals Inc.; Regions Financial Corp.; Inc.; Sempra Energy; State Street Corp.; Tiffany & Co.; Tractor Supply Co.; U.S. Bancorp; Union Pacific Corp.; United Parcel Service Inc.; United Technologies Corp.; UnitedHealth Group Inc.; Unum Group; Visa Inc.; Walgreens Boots Alliance Inc.; WellCare Health Plans, Inc.; and The Williams Companies Inc.

Basement-Dwellers And Backsliders

The 2019 Index data show 59 companies from the S&P 500 residing solidly in the basement (with scores of zero). Six companies backslid with overall scores declining 10 points or more. They are Marriott International Inc., Baker Hughes Inc., Advanced Micro Devices Inc., Symantec Corp., Delta Air Lines Inc., and Johnson Controls International plc. Three companies that had reached disclosure agreements in the past failed to make any disclosure. They are Mattel Inc., Delta Air Lines Inc. and PulteGroup Inc.

As the CPA-Zicklin Index approaches its 10 Year anniversary in 2020, it is worth noting that our aspirations in launching this measure a decade ago remain true today. The Index recognizes and celebrates corporate accountability and transparency by incentivizing best practices. With the many successes found over the past nine years, it seems clear that effective self-regulation of corporate political spending is now not only possible, but inevitable.

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