Bruce F. Freed is President and Co-Founder, Jeanne Hanna is Research Director, and Karl Sandstrom is Strategic Advisor at the Center for Political Accountability. This post is based on their CPA memorandum. Related research from the Program on Corporate Governance includes Corporate Political Speech: Who Decides? (discussed on the Forum here) by Lucian A. Bebchuk and Robert J. Jackson, Jr.; Investor Protection and Interest Group Politics (discussed on the Forum here) by Lucian A. Bebchuk and Zvika Neeman; and The Untenable Case for Keeping Investors in the Dark (discussed on the Forum here) by Lucian A. Bebchuk, Robert J. Jackson, Jr., James David Nelson, and Roberto Tallarita.
With corporate political disclosure and accountability accepted as the norm, the next step for companies is to put in place a framework for approaching, governing and assessing their election-related spending. The framework would establish policies for when or whether to spend and a process for evaluating the benefits and risks associated with a decision to use corporate resources to advance a political cause or candidate.
It would also provide companies with the internal controls to assure that the spending comports with its public values and its duties legal and fiduciary. An added benefit it that it provides corporate leadership with the opportunity and time to reflect on the full consequences of its spending and to resist any undue pressure from powerful political figures to contribute.
The framework spells out the full range of factors that management and the board need to consider when they are deciding to expend shareholder money to support candidates for public office. It assures that the same due diligence is brought to the company’s political spending as the company gives to its charitable giving. As recent events have demonstrated election- related spending is fraught with risks, legal and reputational.
