Shareholder groups seek to limit corporate contributions
Shareholder groups aim to keep a lid on companies’ political spending in the wake of Citizens United v. the Federal Election Commission, a case in which the Supreme Court eased restrictions on corporate campaign spending.
In late February, an obscure real estate company in Jacksonville, Texas, placed ads in two newspapers calling on local Republicans not to support the incumbent state representative in the GOP primary.Skip to next paragraph
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The ads didn't work. The incumbent won handily. But they played on the worst fears of some liberal groups. In the wake of a Supreme Court ruling easing limits on political spending, will corporate money flood into political campaigns?
Shareholder groups and others are rushing to make sure it doesn't. Handed down in January, the court's decision came too late for most shareholder activists to file resolutions for corporate annual meetings this spring. So some of them are turning to uncommon methods to keep a lid on corporate political donations.
"We're thinking beyond our usual tool of shareholder resolution filing, [exploring] what else might be effective," says Laura Berry, executive director of the Interfaith Center on Corporate Responsibility (ICCR) in New York. "The filing tool is a good one. But it's insufficient to the magnitude of the problem [of corporate political spending] this year. And the timing doesn't help."
In its January ruling in Citizens United v. the Federal Election Commission, the Supreme Court allowed corporations, and, by extension, unions and advocacy groups, to tap their treasuries to support or attack candidates for federal office – although they still can't directly contribute to these candidates. "We're horrified. It was a dreadful ruling that has all kinds of pernicious implications," says Ms. Berry.
So shareholders are fighting back. For example:
•In late February, the Center for Political Accountability (CPA) and the Council of Institutional Investors jointly sent letters to 427 of the companies in the S&P 500 stock index, asking them to disclose all their political contributions. The letters, signed by 44 other groups, also asked corporate boards to approve and review all company political outlays. As of now, 73 companies in the S&P 500, including almost half of those in the S&P 100 index, disclose their political spending, says Bruce Freed, the CPA's president.
•The Investor as Owner subcommittee of the Securities and Exchange Commission is taking up the issue of political contributions. "We will be [exploring] whether investors have a consensus view [on] what, if any, steps the SEC should take," especially as concerns disclosure, says Stephen Davis, chairman of the subcommittee and executive director of Yale University's Millstein Center for Corporate Governance and Performance in New Haven, Conn.