Trump Legacy: Boom in Corporate Political Disclosure

Bruce F. Freed is President, Karl J. Sandstrom is counsel, and Dan Carroll is Vice President for Programs at the Center for Political Accountability. This post is based on their CPA memorandum. 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) and 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).

How has the Trump presidency impacted corporate political disclosure and accountability? The answer might come as a surprise. It’s been a boon and a boom.

Over the past four years, more large publicly held U.S. companies than ever before have adopted sound transparency and oversight practices for their political spending. This trend has strengthened between the 2016 presidential election and next month’s, according to the 2020 CPA-Zicklin Index released this month.

The annual benchmarking of the S&P 500 companies is conducted by the Center for Political Accountability and The Wharton School’s Zicklin Center for Business Ethics Research. It rates the largest U.S. public companies for their political disclosure and accountability and includes these major findings:

  • The number of companies with the best transparency and accountability policies, labeled Trendsetters for scores of 90 percent or higher, more than doubled to 79 this year from 35 in 2016. Five companies scored 100 percent. (The number of Trendsetters nearly tripled from 28 when the S&P 500 were first scored by the Index in 2015.)
  • Companies adopting board oversight and a more detailed board committee review of political spending have increased 46 percent in the four-year period.
  • Companies getting scores in the first tier (80 percent to 100 percent) totaled 156 this year, up two-thirds from 94 companies in 2016.
  • For those companies that have stayed constant in the S&P 500 over recent years, there is steady improvement over time; their average score has risen from 46 percent in 2016 to 57.0 percent now—an increase of nearly 25 percent.

Overall, the Trump years spurred the growth of corporate political disclosure and more robust oversight by company boards and review by committees of how company political money is spent or whether the company should engage in political spending.

What’s behind these developments? The recognition by companies that the risk posed by political spending has grown exponentially. The new level is a result, to a great degree, of the rise of social media and millennial activism and a hyperpolarized political environment. This is examined in the Center for Political Accountability’s Collision Course and Conflicted Consequences reports.

Despite the substantial progress achieved so far, much work remains for companies to be able to navigate political spending safely. While the Trump boom has made corporate political disclosure and accountability the norm, disclosure needs to be made uniform and universal and companies need to tackle the risks of conflicted spending. That problem arises when the consequences of a company’s spending clash with its core values and positions or associate it with controversial outcomes. This involves dealing with how companies approach the assessment by management and the board of the impact of, policies for and whether or how to engage in political spending.

A new Model Code of Conduct released by CPA and the Wharton School’s Zicklin Center in conjunction with the Index addresses this. The Code suggests political spending safeguards for companies adapting to a vastly changing political, business and legal climate. It will be the focus of a subsequent blog post.

Professor Rebecca Henderson of Harvard Business School recognized in the foreword the role of the Index in spurring companies to change the way they approach election-related spending. The annual scorecard, she wrote, “potentially catalyzes a race to the top, driving increased disclosure and accountability across the entire universe of publicly traded firms.”

Noting the Index’s role in shaping company political spending behavior, Wharton Professor William S. Laufer, said, “Corporate political disclosure, codes, and compliance practices are the new benchmarks for organizational integrity.” He is also Director of its Carol and Lawrence Zicklin Center for Business Ethics Research.

“These benchmarks now have well established standards in the long-standing CPA-Zicklin Index, offered this year with the guidance of a Model Code,” he added. “Leadership in some of the largest and most powerful companies in the world are increasingly embracing disclosure practices that reflect a new level of transparency.”

The Index divides companies into two categories for analytical purposes:

  • “Core” Companies which have been on the S&P 500 since 2015 when the Index was expanded to cover that universe. For the 2020 Index, the group totaled 378.
  • All S&P 500 Companies. For the 2020 Index, that totaled 492.

Core S&P 500 Companies

Analyzing the Core Companies identifies trends in company adoption of political disclosure and accountability policies from 2015 to today. Here are key findings.

OVERSIGHT: In 2020, 228 (over 60 percent of the core companies) had policies for general board oversight of political spending. Meanwhile, core companies with specific committee review of different types of political spending increased between 32 and 48 percent depending on the recipient type between 2016 and 2020.

DISCLOSURE: Two hundred forty, or nearly two-thirds of core companies had policies in 2020 for fully disclosing or prohibiting donations to candidates, political parties and committees; 224 companies had them for donations to 527 groups; and 211 companies had them for independent expenditures. The biggest increase in any category – 50 percent, to 135 companies from 90 in 2016 – came in disclosure or prohibition of donations to tax-exempt 501(c)(4) groups also known as “social welfare” organizations, often a focus of scrutiny over their “dark money” spending.

AVERAGE SCORE: The average score evaluating overall political disclosure and accountability for the core companies has risen steadily from 46.0 percent in 2016 to 57.0 percent in 2020, an increase of nearly 25 percent. FIRST TIER: In 2020, 144 core companies placed in the first Index tier (scoring from 80 percent to 100 percent) a dramatic increase of almost 80 percent compared to 79 core companies in 2016.

All S&P 500 Companies

For all S&P 500 companies, there too was continuing improvement in many key Index measures between 2016 and 2020, and in the past year, companies generally held their own. Here are the key findings:

FIRST TIER: In 2016, a total of 94 companies in the S&P 500 placed in the top tier (with scores between 80 percent and 100 percent). That number has increased to 156 companies this year, a major gain of two-thirds. OVERSIGHT: In 2016, 111 companies had policies for general board oversight of political spending and for board committee review of company policy, political expenditures and trade association payments. In 2020, this number has risen to 162 companies, an increase of 46 percent. The number of companies adopting general board oversight or more granular committee review of political spending has increased between 13 and 35 percent depending on the type of spending.

DISCLOSURE: The number of companies that fully or partially disclosed their political spending in 2020 or that prohibited at least one type of spending was 332, up from 304 in 2016.

AVERAGE SCORE: For all S&P 500 companies, the average overall score for political disclosure and accountability has risen from 42.3 percent in 2016 to 50.1 percent in 2020.

MOSTIMPROVED COMPANIES: Rated “most-improved” for gains in their overall scores of 50 percentage points or more from last year to this year are 19 companies: Welltower Inc., Corteva, Inc., DuPont de Nemours, Monster Beverage Corporation, Cognizant Technology Solutions Corp., Evergy, MGM Resorts International, Hilton Worldwide Holdings Inc., Brown-Forman Corp., Avery Dennison Corp., Nucor Corp., Baker Hughes Company, Gartner Inc., J.M. Smucker Co., Leidos Holdings, Broadridge Financial Solutions, Inc., Ametek Inc., Expedia Inc., and Amphenol Corp.

Following are companies at the top of the Index, earning Trendsetter status:

Receiving a first-place rating of 100 percent for 2020 are Becton, Dickinson and Co.; Edwards Lifesciences Corp.; Honeywell International Inc.; HP Inc.; And Northrop Grumman Corp. The other Trendsetters are Ameren Corp.; American International Group Inc.; AT&T; Capital One Financial Corp.; Edison International; Electronic Arts Inc.; Estée Lauder Companies Inc.; General Electric Co.; International Paper Co.; JPMorgan Chase & Co.; McKesson Corp.; Noble Energy Inc.; State Street Corp.; Alphabet Inc.; Cognizant Technology Solutions Corp.; Host Hotels & Resorts Inc.; Phillips 66; Sempra Energy; Unum Group; Altria Group Inc.; Cisco Systems Inc.; ConAgra Foods Inc.; Consolidated Edison Inc.; Exelon Corp.; Gilead Sciences Inc.; Intel Corp.; Kellogg Co.; Mastercard Inc.; U.S. Bancorp; Union Pacific Corp.; Visa Inc.; AFLAC Inc.; Coca-Cola Co.; Corteva, Inc.; CVS Health Corp.; General Mills Inc.; Intuit Inc.; KeyCorp; Microsoft Corp.; Norfolk Southern Corp.; United Parcel Service Inc.; Walgreens Boots Alliance Inc.; WestRock Co.; AmerisourceBergen Corp.; Bank of New York Mellon Corp.; Biogen Inc.; Boeing Co.; Bristol-Myers Squibb Co.; Dominion Energy Inc.; Hartford Financial Services Group Inc.; Mondelez International Inc.; Morgan Stanley; PPL Corp.; Regions Financial Corp.; UnitedHealth Group Inc.; Wells Fargo & Co.; AbbVie Inc.; American Express Co.; Apache Corp.; Bank of America Corp.; ConocoPhillips; CSX Corp.; Entergy Corp.; Humana Inc.; Johnson & Johnson; Kohls Corp.; McDonald’s Corp.; Merck & Co. Inc.; Prudential Financial Inc.; Qualcomm Inc.; Regeneron Pharmaceuticals Inc.; Inc.; Tiffany & Co.; Williams Companies Inc. (The).

Consistent bottom-tier companies are outliers:

There are 163 companies from the S&P 500 residing in the bottom tier (with scores of zero to 20 percent), down from 194 in 2016. A number of them are large or well known and have consistently scored in the bottom tier since 2016. These include: Berkshire Hathaway Inc. (0.0 percent); Nvidia Corp. (2.9 percent); Netflix Inc. (0.0 percent); Tyson Foods Inc. (8.6 percent); M&T Bank Corp. (0.0 percent); Hanes Brands Inc. (2.9 percent percent); and Molson Coors Brewing Co. (18.6 percent).

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