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September 26, 2012

Index of Corporate Political Spending Updated
    by Robert Kropp

The Center for Political Accountability and the Zicklin Center update their Index of Corporate Political Accountability and Disclosure, finding that voluntary disclosure of corporate political spending is becoming a mainstream practice.

SocialFunds.com -- In October, 2011, the Center for Political Accountability (CPA) and the Zicklin Center for Business Ethics Research at the Wharton School published the first-ever ranking of companies on the issue of political spending.

By ranking companies in the S&P 100 according to their disclosure and board oversight of political spending activities, the CPA-Zicklin Index of Corporate Political Disclosure and Accountability provided shareowners and other stakeholders with insight into how the nation's largest companies are addressing the risks associated with political spending.

With yesterday's publication of the
20 12 CPA-Zicklin Index of Corporate Political Accountability and Disclosure, CPA and Zicklin have expanded their research to include the top 200 companies in the S&P 500 by market capitalization. Eighty-eight companies are included in the Index for the second year in a row; of these companies, 85% "improved their overall scores for political disclosure and accountability," the updated Index reveals.

Ninety-three of the companies studied now provide some measure of disclosure about their direct political spending, and another 22 report that they do not engage in direct political spending at all.

The corporate leaders receiving scores of over 90 are Merck, Microsoft, Aflac, and Gilead. Costco, Walt Disney, and Capital One received the most improved scores.

Even as the Supreme Court's Citizens United decision in 2010 opened the floodgates for secret political spending through trade associations and politically active nonprofit groups, the Index further demonstrates that many companies are improving their disclosure of payments to trade associations. Seventy companies make some disclosure abut such payments, and nine have directed trade associations not to use their payments for political purposes.

Nevertheless, as the report points out, "the first full election cycle since Citizens United has witnessed a flood of secret spending, often called 'dark money.'" Although disclosure of payments to so-called social welfare organizations, or (501)(c)(4) groups, is not yet as robust as is disclosure of direct spending and payments to trade associations, 32 companies now disclose such payments, and 17 do not give money to such groups.

"When trade associations and social welfare groups make a concerted effort to hide their donors, transparency becomes more critical than ever for shareholders and for our democracy," Bruce Freed, CPA President, said.

Board oversight of corporate political spending "is becoming a corporate governance standard," the report states. "Board oversight of corporate political spending assures internal accountability to shareholders and to other stakeholders." Fifty-sex percent of companies report that their boards have such oversight.

CPA regularly collaborates with investors in engaging with companies on political spending, and the Index reports that institutional investor networks were among those asked to review the key indicators from the 2011 report.

Last month, a coalition of investors with approximately $155 billion in assets under management wrote to four pharmaceutical companies, asking them to clarify their policies on payments to the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry trade association that contributed $4.8 million to two non-profits that helped elect 23 legislators in the 2010 elections.

CPA has also collaborated extensively with
Walden Asset Management, whose Director of Environmental, Social and Governance (ESG) Shareowner Engagement, Tim Smith, has focused the firm's engagement this proxy season on lobbying expenditures by companies.

"We're encouraged that even when the stakes are highest, leading companies are refusing to engage in hidden spending," Freed said. "These companies are further establishing political disclosure as a corporate mainstream practice."

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