A company that effectively discloses its political spending builds trust among shareholders and financial analysts. A company that fails to disclose risks making political spending decisions that can lead to financial losses and a compromised corporate reputation. The Green Canary explores the risks posed to shareholders in the absence of disclosure, and presents two methods of evaluating corporate political activity. These methods can reveal possible management weaknesses before they damage shareholder value.
Members of boards of directors view political spending as a potentially risky pursuit and an overwhelmingly majority supports disclosure of corporate political activity, according to this survey of 225 directors commissioned by the CPA and conducted by Mason-Dixon Polling & Research. Ironically, an overwhelming majority of directors possesses little knowledge of the rules and regulations governing corporate political activity.
This CPA Report provides a guide on how to manage corporate political spending in a risky new environment. Business leaders are educated on how to avoid the business and reputational risks that come with undisclosed political spending. The risks, as seen with the recent Target controversy, are not always obvious.
The “Roundtable on Corporate Political Accountability: The Importance of Educating Future Business Leaders Post-Citizens United” was convened by four leading American business and law schools and the Center for Political Accountability. Deans and faculty at these schools identified an urgent need to educate future business leaders about issues of corporate political engagement that did not exist a generation ago. The Supreme Court’s Citizens United decision in 2010 rewrote the rules for corporate participation in American politics; in its wake, educators believe it is important to teach current and future corporate leaders how to navigate the new political process responsibly.
The role of corporations in politics has changed dramatically. From the passage of the Tillman Act in 1907 to the Supreme Court's decision in 2010 in Citizens United, corporations played a limited role in the financing of federal elections. Corporations were prohibited from using corporate treasuries to make any contributions or expenditures in connection with a federal election. They had to use funds voluntarily contributed by employees and stockholders to a political action committee to make a contribution or expenditure in a federal election. All activity by the political action committee had to be fully disclosed to the Federal Election Commission, but Citizens United changed all that.
The elections are over, but the aftereffects of all those negative ads linger, both for shell-shocked TV viewers and for corporate donors that gave millions to put the thirty-second spots on the air. In boardrooms across the country, executives and directors are taking on uncomfortable questions about the money given to super PACs, trade associations and 501(c)(4) “social welfare” groups rather than toward opening new markets or restoring employees’ 401(k) matching funds. Are executives pleased with the increased prominence of business in electoral politics?
The Center for Competitive Politics issued a "fact-checker" on May 1, 2013 that purported to tell "the truth about corporate political spending issues." Unfortunately, it was filled with misstatements and inaccuracies. The following one-page information sheet corrects them.
Corporations and unions are subject to widely different disclosure requirements of their political spending with treasury funds. Citizens United freed up both unions and corporations to spend unlimited amounts of treasury funds on political expenditures, but none of the disclosure requirements for either group were updated along with the loosened spending restrictions. The result is that corporations have no formal political spending disclosure regime, while unions have many stringent disclosure requirements.