Mutual Fund Support for CPA Model Resolution Hits New High in 2013
mutual funds’ support for corporate political
disclosure resolutions climbed to a new high of
39 percent in 2013, an increase of five
percentage points over 2012, according to
a report by
the Center for Political
Accountability. The average topped the previous high
of 35 percent in 2011 by four percentage
“Support from mutual funds for corporate political disclosure gained momentum this year and reached an unprecedented level,” said Bruce Freed, CPA president.
CPA reviewed the 10-year voting record of 40 of the largest mutual fund families. They have voting power over $3.3 trillion in U.S. securities, and they hold great sway over companies’ approaches to corporate governance.
The mutual fund families were tracked for their votes on shareholder resolutions that asked for disclosure of political spending, based on a model resolution drafted by CPA.
In one of the most striking findings, CPA reported that eight fund families supported corporate political disclosure more than 80 percent of the time in 2013. They were AllianceBernstein, MFS, DWS Investment, Oppenheimer, Wells Fargo, Morgan Stanley, Schroder and Virtus. AllianceBernstein, DWS, MFS and Oppenheimer backed all of the resolutions that they voted on.
In another significant finding, CPA reported that abstentions continued to decline as an average portion of votes cast, from 12 percent in 2012 to nine percent in 2013. Most of these undecided votes appear to have been cast ‘for’ instead of ‘against’ political disclosure requests in 2013. Overall, the mutual fund families opposed these resolutions 52 percent of the time in 2013.
This week, Bloomberg News was among first media outlets to cover the mutual funds report, in an article headlined, "Mutual Funds Increasingly Support Corporate Disclosure of Donations." The article quoted Freed as saying, "Shareholders see corporate political spending as risky, and they want political disclosure and accountability to protect companies and their investments."
Other highlights of CPA’s report on mutual fund voting in the 2013 proxy season included:
· Thirteen of the mutual fund families cast a majority of votes in favor of corporate political disclosure resolutions. All except one of these increased its support in the 2013 proxy season relative to 2012.
· Fidelity and Federated, which had in previous years failed to support all but one of the 250 resolutions voted on prior to 2013, this year supported 20 percent and 38 percent of resolutions in 2013, respectively.
The CPA report was based on data provided by Fund Votes, an independent project begun in 2004. It tracks mutual fund proxy voting in the United States and Canada.
Latest Report Shows Trade Associations Hip Deep in 'Dark Money'
By Bruce Freed
The extensive use of industry trade associations as conduits for corporate money flowing to politically active non-profit groups got a lot of attention from news media and campaign finance watchdogs, and that’s actually good news.
If the public and shareholders are troubled to learn how widely this cash from undisclosed donors, or “dark money,” is channeled into political spending, then more companies will hopefully understand the need to routinely disclose their trade association payments used for political purposes.
The Nation , for example, sought to expose “The Invisible Hand of Business in the 2012 Election.” Criticizing “dark money princes,” its reported $1.5 million supporting the American Action Network from the Pharmaceutical Research and Manufacturers of America (PhRMA), and better than half a million each to Republican and Democratic-aligned groups by the Alliance for Quality Nursing Home Care, among numerous payments by trade groups.
The Center for Public Integrity, a nonprofit investigative journalism outfit, had acomprehensive article entitled “’Dark money’ groups give big to similar nonprofits.” Among the big-spending trade associations it examined were PhRMA ($18.1 million in grants), American Petroleum Institute ($7.1 million in grants), and the U.S. Chamber Institute for Legal Reform. Some of the recipients included the American Action Network, Heritage Action for America, Americans for Prosperity, Republican State Leadership Committee, American Legislative Exchange Council and Republican Governors Association.
A separate CPI article documented $5.8 million in grants given by the National Cable & Telecommunications Association to an array of groups including nonprofits that are not required to disclose their donors. Among the latter were Americans for Prosperity, Americans for Tax Reform, American Commitment and the Center for Individual Freedom.
These were just a few of the reports about trade associations giving money to key 501(c)(4) groups, also known as “social welfare” organizations, that are highly engaged in political activity and also to political 527 groups. Taken together, the reports indicate this funneling of ‘dark money’ for political activity is growing and becoming more extensive.
In two lengthy articles for The Conference Board Review and for Directors & Boards, we have spelled out the risks for companies and for their boards of “outsourcing” political spending to other entities such as trade associations. We discussed how disclosure and oversight can overcome this serious threat.
CPA will take steps to track this kind of political giving closely in the future. We strongly urge companies to pay closer attention to, and make full disclosure of, their trade association payments that are used for political purposes. This is essential for them knowing how their money is used and protecting them from the range of risks posed by “dark money.”