Survey Shows More Companies Adopting and Strengthening Political Spending Policies
By William J. Farah
An annual survey prepared by the Center for Political Accountability (CPA) and released last week indicates that an increasing number of large companies are adopting policies and procedures designed to improve transparency and oversight of their political activities. This trend appears to be a reaction to a number of factors, including increasingly aggressive legal tactics by shareholders (including pension funds such as the New York Common Retirement Fund), who are demanding more information about how companies spend corporate funds in the political arena. Last year, there was a marked increase in the number of shareholder proposals to require greater corporate disclosure of political spending, and several lawsuits to compel the production of corporate books and records by companies that were not responsive to these demands.
The CPA uses an index comprised of 24 elements that are weighted to rank corporate political spending policies and procedures. According to CPA’s 2013 report, 78 percent of the 195 S&P companies it tracks made improvements to their disclosure practices last year, and the number of companies receiving the top five overall scores grew from five last year to 16 this year. They are: Merck, Qualcomm, United Parcel Service, AFLAC, CSX, Microsoft, Gilead Sciences, Noble Energy, ConocoPhillips, Exelon, JPMorgan Chase, Time Warner, Wells Fargo, Intel, PG&E and Yum! Brands.
At the same time many companies are moving to strengthen their political spending practices, the Securities and Exchange Commission (SEC) continues to consider a 2011 petition submitted by 10 law professors from several leading law schools to make disclosure of political spending mandatory. Although there were indications the SEC might consider the petition earlier this year, SEC Chair Mary Jo White deferred any action pending further agency review. There has since been no indication when the SEC might take action on the petition.
The CPA rating has taken on significance in recent years by providing a target list to shareholder activists. Those companies receiving a low score are at greater risk of attracting shareholder proposals and lawsuits aimed at corporate political activities. We have worked with a number of clients to help them design and strengthen political compliance programs. This includes assisting clients in identifying and implementing changes to their policies and practices that will improve the company’s CPA score and, in some cases, working with the CPA to be certain the company’s efforts are understood and receive appropriate credit.