More Firms’ Political Ties Put Online
Under pressure from shareholder activists, a small but growing number of major U.S. companies have agreed to disclose their political donations on their corporate websites.
Campaign contributions are a matter of public record, but getting a complete picture of a company’s political giving is difficult because the donations can be scattered over scores of individual campaign finance reports at the local, state and federal levels.
Since late last year, companies including Amgen Inc., Staples Inc. and Bristol-Myers Squibb Co. have agreed to post their contributions on their websites. Some other companies, including PepsiCo Inc., Coca-Cola Co. and Eli Lilly & Co., enhanced their political disclosure policies last fall.
“This is an issue that shareholders have latched onto,” said Daniel Rosan, program director for public health at the Interfaith Center on Corporate Responsibility, a coalition of faith-based investors that has pressed politically active pharmaceutical firms to make the disclosures.
The relationship between money and politics has long held allure for some of the public. But recent events have fueled demands for greater clarity, advocates of disclosure maintain.
The legal travails of lobbyist Jack Abramoff, former House Majority Leader Tom DeLay (R-Texas) and former U.S. Rep. Randy “Duke” Cunningham (R-Rancho Santa Fe) are a reminder that the political arena can be tainted by scandal that potentially can reflect on donor corporations.
Even before the raft of political scandals, frauds at Enron Corp. and other politically active corporations had prompted calls for greater transparency in donations. Advocates contend that companies stake part of their reputations when they enter the political battlefield.
“Risk is important -- the risk to shareholders, the risk to companies, the risk to directors,” said Bruce Freed, co-director of the Center for Political Accountability, which has championed the cause.
The effort may be starting to affect how company watchers define proper transparency. Institutional Shareholder Services, a proxy advisory firm, recently said that for the first time it would consider supporting political disclosure resolutions at annual corporate meetings in the coming months.
The measures may be considered at more than 40 companies during their upcoming annual meetings, including Home Depot Inc., General Dynamics Corp., Boeing Co., Wyeth and Citigroup Inc.
Most of the measures call on companies to prepare a report documenting their contributions and their in-house guidelines for making them. This report would be submitted to the board audit committee and posted on the corporate website.
Some of the measures would have companies disclose their trade association dues as well.
In a survey last fall, 65% of investors told Institutional Shareholder Services that they viewed full public disclosure of a company’s political contributions as important or very important.
“At the very simplest level, shareholders are asking, ‘What are you doing with my money?’ ” said Jim Letsky, a senior analyst at Institutional Shareholder Services.
Not that all of corporate America has joined the cause.
The proposal “would create a duplicate system of public reporting that would not confer upon our shareholders a benefit equal to the resources expended,” said Diane Dayhoff, Home Depot’s vice president for investor relations, in a letter to shareholder activists.
“Additionally, we believe that requiring board oversight of each political contribution we make would unnecessarily distract the board from other matters and would not enhance shareholder value,” Dayhoff wrote.
What surprises some is the emerging group of companies that has embraced greater political transparency.
This month, the board of Staples agreed to post corporate political contributions on the company website.
“It was a nice easy negotiation,” said Margaret J. Covert, shareholder activism coordinator at NorthStar Asset Management Inc., a socially conscious investment firm in Boston. “They really wanted to do the right thing.”
In response, NorthStar dropped the resolution it had prepared for Staples’ annual meeting. When shareholders brought a similar measure to Amgen, the company came back with a surprise: Rather than trying to kill the resolution, it said it would recommend a yes vote on the measure at its annual meeting in May.
Executives of the Thousand Oaks-based biotech company declined to discuss the matter, noting that their 2006 proxy voting materials had not yet been released.
In some cases, companies that endorse transparency believe that there is a payoff in consumer trust and even shareholder value.
Elaine Palmer, director of external affairs at PepsiCo, said her company had embraced greater transparency in other areas -- such as its record on environmental and social matters -- long before Green Century Capital Management, an environmentally oriented investment firm in Boston, asked it to enhance its political disclosures. So going along with the request wasn’t a great leap.
“We discussed it with them, and we agreed,” Palmer recalled. “It was that simple.”
The PepsiCo decision last November gave Green Century ammunition in its continuing talks about disclosure with Pepsi’s arch-rival.
“When Pepsi took that step, I got back to Coke and let them know that their buddies at Pepsi had agreed,” recalled Andrew Shalit, director of shareholder advocacy at Green Century.
Within a couple weeks Coca-Cola was on board. “We’ve made the commitment,” said Charlie Sutlive, a Coca-Cola spokesman. “Now we’re just drafting the mechanics of how it will work.”
Corporate contributions can be hefty. Since 2000, Citigroup has contributed more than $3.8 million, BellSouth Corp. (which is being acquired by AT&T; Inc.), more than $3.3 million and Wyeth, more than $1.8 million, according to the Center for Political Accountability, which has spearheaded the push for Web-based disclosures.
Bristol-Myers sprinkles modest contributions among candidates in various states, according to its recent Web posting. But when prescription drug prices became an issue in California’s 2005 election, with two competing propositions on the matter, the company dug much deeper into its pockets, spending $4.5 million, according to its website.
The user-friendly disclosures are “consistent with our efforts to enhance transparency throughout the company,” Bristol-Myers spokesman Tony Plohoros said.
The continuing role of corporations in political finance has caught some by surprise. When Congress overhauled the campaign finance law in 2002, some observers predicted that corporations would become a more marginal political force. The new law, for example, no longer allowed corporations to give money from their own treasuries to the political action committee of a member of Congress.
But other opportunities to donate remain. Corporations can make unlimited contributions to Section 527 groups, which do not endorse candidates but try to influence elections in other ways, such as by ads that mobilize voter blocs without formally supporting a candidate. The campaign reform law did not address state contributions. Many states, including California, allow companies to contribute directly to state candidates.
Such realities seem likely to preserve a significant role for corporations in the political process -- and energize the push for disclosure. “You don’t get a ton of issues where faith-based investors, labor, socially responsible investors and public pension funds all agree,” said Rosan of the Interfaith Center on Corporate Responsibility. “I don’t think it’s going away.”