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Corporate Political Spending Targeted In Shareholder Meetings

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CORPORATE POLITICAL SPENDING
Corporate trade associations and social welfare nonprofits spent tens of millions from unnamed sources to support Mitt Romney's 2012 presidential bid. (AP Photo/Evan Vucci, File) | AP

WASHINGTON -- It's spring again and with that comes another season of corporate shareholder meetings and the filing of resolutions looking to change the way those corporations engage in the political process.

In the 2013 shareholder proxy voting season, there have already been more than 120 proposals introduced dealing with corporate political spending -- an all-time high, according to the U.S. Chamber of Commerce.

While rarely winning a majority of shareholder votes, these resolutions, filed by activist investment firms and backed by a string of state-level elected officials in charge of large pension funds, help to increase public awareness and to push companies to adopt, or consider adopting, disclosure provisions and other rules on electoral activity.

This year alone, 16 companies, including JPMorgan Chase, WellCare Health Plans, Southwest Airlines and the Dr. Pepper Snapple Group, have adopted new rules on political spending after being contacted by activist investors and the Center for Political Accountability.

The center works directly with companies to write such rules. "We engage companies on many levels, and we find that more and more companies continue to be receptive to either adopting or strengthening their disclosure and accountability policies," said center director Bruce Freed.

There are now 117 companies that have adopted disclosure and accountability rules for political spending, according to Freed. Some have agreed to voluntarily disclose their contributions to 501(c)(4) nonprofits and trade associations.

While much corporate political spending is already disclosed under campaign finance laws, contributions to politically active nonprofits and trade associations are not required to be made public. In the 2012 election, so-called social welfare nonprofits organized under section 501(c)(4) of the tax code and trade associations spent a combined $310 million, according to the Center for Responsive Politics. Most of that money went into the presidential election between President Barack Obama and Republican nominee Mitt Romney and a series of hotly contested Senate races.

The effort to use shareholder resolutions and direct engagement with corporations to produce more transparency on and accountability for political spending has accelerated since the 2010 Supreme Court ruling in Citizens United v. Federal Election Commission. That ruling freed corporations and unions to spend their money directly on elections. It also endorsed the notion -- but did not require -- that all of that spending, along with the sources of the money, should be disclosed for the benefit of both the public and shareholders.

Business associations in Washington have begun to push back. Groups like the U.S. Chamber of Commerce, which spent at least $36 million on federal elections in 2012, argue that the calls for corporate political disclosure are tantamount to intimidation, threatening retaliation and public action if companies do not do what they want.

In an April letter to 200 corporate CEOs, the Chamber, along with the Business Roundtable and the National Association of Manufacturers, attacked the disclosure push and laid out what they deemed to be the myths propagated by activists.

"For nearly four years, one side of the political debate -- unions, public pension funds, some environmental groups and other activists -- have worked to undermine the business community, whom they view as the primary obstacle to enacting their legislative and regulatory priorities, e.g., greater regulation of health care, financial services or business activities that affect the environment," the letter states. "The activists' goal is to limit or remove altogether the business voice from the political and policymaking processes."

"That is baloney," Freed said. "Those folks have been saying the same thing year in and year out. They haven't changed their tune because there's nothing else for them to say."

And Sol Kwon, associate director at the Center for Political Accountability, noted the Chamber does not speak for the entire business community. "We speak with some corporate folks who commend us for what we're doing," she said.

While some corporations have been working with shareholder activists on the adoption of disclosure rules, other activists have been pushing a harder line on political spending that companies may not welcome.

Members of the Corporate Reform Coalition, a collection of 80 groups and activist investors, targeted four companies with resolutions earlier this spring asking them to renounce all political spending and, in one case, to end membership in the Chamber of Commerce.

The targets of these more far-reaching resolutions were Starbucks, Chevron, Google and the oil and gas drilling company EQT. Shareholders at Starbucks and EQT rejected, by large margins, resolutions asking the companies to cease or study the cessation of all political spending activity. Chevron shareholders will be able to vote on a similar resolution later in May, and a resolution asking Google to quit the Chamber will come up in its summer shareholder meeting.

"Disclosure is not a panacea at all, and I think the only way to do it is to get these corporations out of it, period, because they just so dominate the system," said John Harrington, head of Harrington Investments and the lead filer of the resolution asking Starbucks to stop all political spending.

Ritchie Tabachnick, the owner of an oil and gas services company and a member of the Pennsylvania liberal group Keystone Progress, said he was backing the resolution asking EQT to study the possibility of ending its political spending because, ultimately, such measures would lead to a safer and more responsible oil and gas industry in the state.

"I'm not opposed to gas and oil in the state of Pennsylvania," Tabachnick said. "I want it to be done cleanly and safely, and as long as the operators, the driller and operators, can buy themselves out of regulations, it's not going to be done."

Linda Robertson, a spokeswoman for EQT, said the company has studied the use of its funds for political purposes. "Our board believes it is in the best interest of EQT and our shareholders to continue actively participating in the legislative and regulatory approval process. An overwhelming majority -- more than 97% of the votes cast -- were against the proposal," she said.

But shareholder resolutions have not failed in their purpose simply because they did not pass. They can still succeed by bringing more attention to what the Corporate Reform Coalition sees as the negative impact that corporate spending has on democracy.

Leslie Samuelrich, senior vice president at Green Century Funds (which is not part of the Corporate Reform Coalition) and the lead filer of the Chevron resolution, said the main goal is to "raise awareness about this issue, let other shareholders know, get them thinking about it, have the broader public thinking about it."

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