United States: Report Finds Clear Trend Toward Increased Transparency In Corporate Political Spending

Overview 

A recent report by a pro-transparency group and The Wharton School found a clear trend among S&P 500 companies toward increased disclosures and oversight regarding their political spending. Per the report, more than half of such companies now disclose some or all of their election-related activities, which was an increase of nearly 10% from last year. The report also found a positive correlation between shareholder engagement and increased disclosure, which is consistent with a broader trend of shareholder activism and corporate resolutions relating to political spending. The report is an important reminder for boards, management and in-house lawyers that, especially in the current contentious climate, corporate political activity continues to be a significant public focus and that they should proactively manage their oversight and disclosures lest investors or the media do it for them. 

The CPA-Zicklin Report and 2019 Index1

The Center for Political Accountability (CPA) is a nonprofit, nonpartisan organization with the stated mission of bringing transparency and accountability to corporate political spending. For the past eight years, the CPA has partnered with the Carol and Lawrence Zicklin Center for Business Ethics Research at The Wharton School of the University of Pennsylvania to publish the CPA-Zicklin Index along with a report on the results (the "Index"). 

The Index rates S&P 500 companies based on a number of criteria relating to political spending, including (i) whether the companies disclose (or prohibit) corporate political contributions, (ii) whether and to what extent they have adopted policies on political spending (and whether those policies are publicly available), and (iii) whether there is board oversight of political activity. Based on these criteria, the Index ranks companies and notes year-over-year trends, including identifying those that are "most improved" and calling out "basement dwellers" and "backsliders" that score lower than they did the previous year. This year's Index also includes a strident forward by Chief Justice Leo E. Strine, Jr. of the Delaware Supreme Court that criticizes the "Wild West" of corporate political spending and, consistent with the mission of the CPA, calls for fundamental reform and increased transparency. 

Across the board, the data show a trend toward increased attention and transparency regarding corporate political spending. Among the key metrics in this year's Index:

  • "Core" S&P 500 companies (those on the list since 2015) increased their ratings by 25%, while the overall increase by S&P 500 companies generally was 7%;
  • 73 companies scored 90 percent or higher (up 28% from last year);
  • 251 companies disclose some or all of their election-related spending (up 8% from last year);
  • 186 companies prohibit at least one category of such spending (up 6% from last year), 12 of which fully prohibit the use of corporate assets to influence elections (up 20% from last year); and
  • Seven companies had scores decline by 10% or more, and 59 companies received a score of zero. 

Shareholder Engagement and the Drive Toward Political Transparency

A key trend observed by the Index authors was the positive impact of shareholder engagement on a company's Index score. Of the 16 companies receiving the highest year-over-year score increases, 12 had experienced some degree of shareholder engagement on the issue of political spending.  

This is consistent with a broader movement of shareholder activism relating to corporate responsibility in general, and political disclosures in particular. While the SEC had considered implementing rules that would require public companies to disclose political spending, Congress has effectively killed the proposal with spending bills that prohibit funds from being used by the SEC to implement such rules. Shareholder activists have filled the void by proposing resolutions that require corporations to disclose contributions to political candidates, parties, lobbyists, trade groups and so-called dark money groups.  

A recent article from the Harvard Law School Forum on Corporate Governance and Financial Regulation noted that in 2019, a coalition of at least 70 investors had filed proposals at 33 companies seeking disclosure reports that include federal and state lobbying payments, payments to trade associations and social welfare groups used for lobbying, and payments to tax-exempt organizations that write or endorse model legislation.2 That article further noted that investors had specifically targeted companies affiliated with a nonpartisan group that had a record of opposing climate change regulation. Even without formal resolutions, shareholders may also pressure corporations on political issues through letter-writing and other influence campaigns.  

Key Takeaways

In our increasingly contentious and transparent environment, the public is more informed about and focused on the political activities of corporations. This fact is underscored by recent social media campaigns and boycotts targeting companies that support—or are perceived as supporting—certain politicians, groups or causes. Leading up to and following the 2020 election season, companies should expect continued focus on their political spending and related disclosures and oversight, and they should expect increased transparency from their peers.  

In light of this trend, companies should proactively assess and plan their political activities with an eye toward public perception. This could include education of senior management on the ways in which their individual political contributions can be scrutinized by the media and public, as well as tracking of traditional political spending by the corporation and indirect contributions to trade associations, 501(c)(4)s and other advocacy organizations.  

For companies that deem political spending to be appropriate and in their best interest, they should further consider at least some form of disclosure, and should also be prepared to explain the considerations behind the spending. In both cases, if companies fail to take control of the narrative regarding their own activities, shareholders, employees and the media may do it for them. 

Finally, companies should evaluate policies and procedures for control over political activities and contributions, and address any gaps. As reflected in the Index and recent shareholder proposals, board committee oversight is itself a significant focus of activists and pro-transparency groups. Such policies also mitigate risks from missteps and government enforcement of complex regulations relating to lobbying, campaign finance and "pay to play" restrictions. 

Footnotes

1. See https://politicalaccountability.net/hifi/files/2019-CPA-Zicklin-Index-Report.pdf.

2. Timothy Smith & John Keenan, 2019 Lobbying Disclosure Resolutions, Harvard Law School Form on Corporate Governance and Financial Regulation (Mar. 14, 2019) at https://corpgov.law.harvard.edu/2019/03/14/2019-lobbying-disclosure-resolutions/.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions