Shareholders Paying Closer Attention to Corporate Electoral Spending
With the disappearance of the traditional checks on corporate influence by a strong labor movement and active government, investors are stepping in to press companies to change their policies and behavior and take a broader view of their societal impact and obligations. A notable example is the recent letter to CEOs from BlackRock CEO Laurence Fink urging corporations to give more consideration to their social responsibilities. But the question remains: Will this make a difference, and how will this play out in practice?
The newly updated CPA model resolution provides a template that management, directors and shareholders can use to assess company policies for electoral spending. In today’s hyperpolarized climate, companies face heightened risks – reputational, legal and business – from that spending, just as they face dangers from what they’re associated with through their advertising. Adopting political transparency and accountability policies are central to managing and mitigating these risks.
The good news is that companies that have adopted transparency and accountability policies have not dialed back following the 2016 election. The 2017 CPA-Zicklin Index of Corporate Political Disclosure and Accountability shows that among the 429 companies included in the Index since 2015 (when it was expanded to cover the S&P 500), there has been a consistent upward trend in each category of disclosure. Companies have also consistently improved their policies and their oversight and accountability practices.
Notably, the study found a strong positive correlation between shareholder engagement and a high score on the Index. The average score for companies that had reached an agreement with shareholders was 70.6 percent; for companies that did not reach an agreement, it was 59.1 percent. The average score for companies that were never engaged was only 31.5 percent. The results of the 2017 Index make clear: Shareholder engagement matters.
For the 2018 proxy season, CPA expects to file 30 electoral disclosure and accountability resolutions. Some companies are challenging the resolution under the Securities and Exchange Commission’s new interpretations for filing shareholder proposals, but one of these challenges has already been defeated.
In another significant development, a new Iowa Law Review article highlights the success of the CPA effort in using “private ordering” – voluntary action by companies – to make political accountability the norm and establish best practices. The paper by University of Wisconsin law professor Robert Yablon lays out the strong case for private campaign finance reform efforts at a time when government regulation of big money in elections is stalled.
A New Tool to Hold Companies Accountable
TrackYourCompany.org, released by CPA in spring 2017, makes it easier to learn what your company discloses (or does not disclose) about its electoral spending. The database allows users to search voluntary disclosure reports posted by S&P 500 companies on a variety of metrics, including ticker, type of recipient, industry, state, year, and political party.
In addition to the search function, TrackYourCompany provides information about overall trends in corporate electoral spending, a comparison of how companies in different sectors rank on the CPA-Zicklin Index, and a full accounting of CPA’s shareholder engagement history.
President, Center for Political Accountability
Vice President of Programs, Center for Political Accountability