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November 22, 2011

Wall Street Journal Op-ed Attacks Corporate Disclosure of Political Spending
    by Robert Kropp

Bruce Freed of the Center for Political Accountability talks with about the mischaracterizations in the Journal's op-ed piece, and describes the widespread support for greater disclosure. -- When a leading advocate for corporate transparency and accountability comes under attack in the opinion pages of the Wall Street Journal, one can only conclude the message of that advocate has been influential. In the case of the Center for Political Accountability (CPA) and its president, Bruce Freed, that influence extends beyond the concerns of shareholders to include the very corporations whose right to secrecy the Journal's opinion piece purports to protect.

Since 2003, CPA has engaged with corporations, not to prevent them from spending on political elections, but to have them disclose their policies on the issue and provide board oversight of corporate political spending. Even the Supreme Court, in its Citizens United decision that opened the floodgates for political spending by corporations and trade associations alike, was emphatic in its support of disclosure to shareholders of corporate spending practices.

CPA has thus far engaged successfully with 90 major US corporations, convincing them to voluntarily adopt policies addressing political spending and board oversight of the issue. More than half the companies are listed in the S&P 100. The leading companies also report their payments to trade associations such as the US Chamber of Commerce, and in some cases directly request that their membership payments not be used for political purposes.

Last month, CPA sent letters to 423 corporations that do not disclose their political contributions, pointedly asking them to "adopt political spending disclosure and accountability ahead of the 2012 proxy season."

But the growing trend toward disclosure and board oversight did not keep Bradley Smith, the chairman of the
Center for Competitive Politics (CCP), from writing in the Journal that CPA is leading an "effort to convince American businesses to voluntarily disarm and leave the playing field to unions and foundation-funded lobbying groups."

"A new code of 'best practices' for companies to follow would serve labor's agenda, not the interests of shareholders," Smith continued. "Joining CPA's efforts to persuade corporations to voluntarily surrender their First Amendment rights are various 'social investor' funds, most notably
NorthStar Asset Management and Walden Asset Management."

Smith's charge of a labor union agenda overseeing CPA's work amounts to a red herring, Freed told

"We work with a broad range of investors," Freed said. "It's recognized and accepted that political spending poses a risk to companies and shareholder value."

"If there's any lesson that one has to take from the past, it's that companies have to protect themselves from the vulnerability associated with secrecy," he continued. "They have to take risk very seriously and adopt what is becoming the mainstream corporate practice of disclosure and accountability. They're in a company's self-interest. They're important for shareholders, but they're also very important for companies themselves. They give the company greater freedom and protect it from both positive and negative standpoints."

Freed cited a number of examples indicating growing support for corporate disclosure.

2006 survey commissioned by CPA and conducted by Mason-Dixon Polling & Research found that 85% of retail shareowners agreed that "lack of transparency and oversight in corporate political activity encourages behavior that puts corporations at legal risk and endangers corporate reputations."

2010 Mutual Funds Proxy Voting Report found that votes against CPA's resolution by mainstream mutual funds have decreased by nearly half since 2004.

Also in 2010, CPA collaborated with
The Conference Board, a business membership and research organization, on the Handbook on Corporate Political Activity.

"A major part of the Handbook addresses risk and outlines steps companies should take to address the risks," Freed said. The Conference Board subsequently formed a Committee on Corporate Political Spending, which seeks to educate member businesses on the issue in advance of the 2012 elections.

In this year's proxy season, resolutions addressing political spending and disclosure were included on the ballots of 32 companies. Vote totals for eight of the resolutions exceeded 40%, and an additional 14 resolutions gained more than 30% of shareowner support. At Sprint Nextel, a majority of shareowners approved the resolution.

Last month, CPA collaborated with the the Zicklin Center for Business Ethics Research at Wharton Business School on the
Index of Corporate Political Disclosure and Accountability, which ranks companies in the S&P 100 according to their disclosure and board oversight of political spending activities.

And last week,
Institutional Shareholder Services (ISS), the influential proxy advisory service, updated its policy on shareowner proposals relating to corporate disclosure of political spending. In the 2012 proxy season, ISS announced, its policy will be "to Generally Vote FOR these proposals."

"Recent incidents where companies have received negative media attention as a result of their political activities�demonstrate the risks and consequences of corporate missteps regarding this issue," ISS stated.

"The fact is that ISS has changed its policy on proxy voting across the board, not just for its labor clients," Freed pointed out.

As for Smith's opinion piece in the Journal, Freed responded with a letter sent on November 15th. It has not been published by the Journal yet.

"It is a disservice to label this as anti-business or aimed at deterring businesses from participating in politics," Freed's letter observed. "Disclosure and board oversight of company political spending is broadly accepted."

"Mr. Smith engaged in an ad hominen attack to avoid a thoughtful discussion of the value of transparency," the letter stated.

About his newfound notoriety, Freed was philosophical.

"It's a sign of our success," he said.

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