Risk & Compliance

Political Straight Shooters

Larger companies appear to be more forthcoming about their campaign financing following a 2010 Supreme Court ruling.
Sarah JohnsonOctober 28, 2011

Nearly two years after a Supreme Court ruling loosened restrictions on corporate political spending, almost one-fourth of the largest publicly traded companies have a formal policy of not designating their funds toward the type of spending the case allowed, such as paying an outside group for advertising that could help a favored candidate.

This finding comes from a study released today by the Center for Political Accountability (CPA) and the Wharton School’s Zicklin Center. The report lists Colgate-Palmolive, Exelon, IBM, and Merck at the top of its ranking of S&P 100 companies’ level of disclosures about their corporate political-spending policies and habits. Those companies have met seven key indicators, or best practices, in the CPA’s view. For instance, they disclose independent expenditures (or funding of advertising that was not coordinated by a candidate or political party), contributions to political committees, and payments to ballot-measure committees. They also archive that reporting on their website, which allows investors to track any patterns in the companies’ political-spending behavior, says CPA president Bruce Freed.

The CPA also looks favorably on companies that disclose the titles of managers who oversee political spending and whose boards are explicitly responsible for overseeing such spending.

While the Supreme Court ruling in Citizens United v. Federal Election Commission freed up companies’ ability to financially support political campaigns, it has also indirectly put pressure on them to be more upfront about this type of spending. The controversial opinion led to legislation in both the House and Senate that would let shareholders approve spending on political campaigns and require companies to expand related disclosures in regulatory filings. Companies still cannot give money directly to politicians.

Indirect spending can backfire on companies, since they don’t have full control over an outside group’s policies. Last year, for example, Target’s reputation was temporarily smudged after the public found out that the retailer had given $150,000 to a political group that supported a Minnesota gubernatorial candidate who wanted to bar civil unions for gay couples.

In the meantime, companies have become more transparent, according to Freed. Just over half of the S&P 100 companies share information about their political spending on their websites. Voluntary disclosure is becoming a “mainstream practice,” he claims. Seven years ago, the CPA could not find a company that voluntarily shared information with the public about its contributions to political campaigns through trade associations or political action committees. (Some states require certain disclosures from companies whose funds go toward state and local races and ballot measures.)

The researchers gave companies a heads-up that they were doing the study and also gave them a couple of chances to dispute their initial findings and adjust their policies before the final report was released. “This was not a gotcha,” says Freed. “We’re seeing progress.”