Shareholders press companies to disclose more about political spending


Corporations are banned from donating directly to candidates at the federal level. But the political spending at issue involves corporate money that goes to political entities, as well as to trade associations and nonprofit 501(c)(4) groups that do not need to disclose their donors. (Pete Marovich/BLOOMBERG)

As regulators wrestle with whether to force companies to disclose more about their political spending, an increasing number of shareholders are taking matters into their own hands, thrusting the issue before boards of directors at companies across the country.

The number of shareholder proposals demanding more transparency in political spending has more than doubled since 2010, jumping from 61 to 128 this proxy season, according to the Sustainable Investments Institute, a research group that tracks the issue.

This week, shareholders of an Illinois fertilizer company overwhelmingly approved a resolution initiated by the New York State Common Retirement Fund that would require the company to report all political spending and detail how it makes its spending decisions.

The 65.9 percent vote for the plan, which the company reported in regulatory filings Thursday, was one of the largest ever in favor of disclosure, according to the Center for Political Accountability. It is the largest among cases that involve formal opposition from a board.

The development comes as the debate about political spending heats up in Washington. House Republicans this week called upon the Securities and Exchange Commission to ignore a petition that would require publicly traded companies to report their political spending. SEC Chairman Mary Jo White, who joined the agency last month, declined to take a position on the issue, citing the need for more analysis by her staff.

As the political wrangling rages, 217 companies have been urged by investors to make the disclosures since 2004 and 118 have adopted such policies, said Bruce Freed, president of the Center for Political Accountability, which pioneered the push for disclosures.

The 2010 Supreme Court decision in Citizens United v. Federal Election Commission, which rolled back restrictions on political spending by corporations, associations and labor unions, further emboldened investor activists to confront corporate boards.

Proponents of disclosure say shareholders need to know precisely how a company is spending money on politics in order to assess if the spending exposes them to reputational, business or legal risks.

“The SEC is playing catch-up when it comes to this issue,” Freed said. “Companies are forging ahead. Each year, there are new companies that are adopting disclosure or strengthening existing policies.”

These resolutions are not binding. But if 30 percent or more of shareholders vote for one, the support often brings corporate boards to the negotiating table and results in change, said Heidi Welsh, executive director of the Sustainable Investments Institute, which includes shareholder demands for more lobbying disclosures in its count of political spending resolutions. “It doesn’t fly if they ignore what a large percentage of their owners want,” she said.

Corporations are banned from donating directly to candidates at the federal level. But the political spending at issue involves corporate money — or shareholder money — that goes to political entities, as well as to trade associations and nonprofit 501(c)(4) groups that do not need to disclose their donors.

The New York State Common Retirement Fund, worth $160.4 billion, has waged a campaign to force more disclosure at its portfolio companies. It has reached agreements with nearly 20 companies since 2011 — including Qualcomm, Southwest Airlines, Dr Pepper Snapple Group, Plum Creek Timber,
Harley-Davidson and Noble Energy this year.

“We want to see not only transparency, but also accountability,” said New York State Comptroller Thomas P. DiNapoli, the sole trustee of the pension fund.

It’s unclear what will become of its latest effort at CF Industries, the fertilizer company.

The company did not return a call requesting comment.

But in a regulatory filing, the company said its corporate board unanimously recommended voting against the resolution, which it described as “neither necessary nor an efficient use of company resources.”

“Our corporate political contributions and grassroots lobbying expenditures are undertaken subject to strict policies and robust internal approval processes to ensure that contributions and political activities are always both in the business interests of the company and its stockholders,” the company said in its filing.

The U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers have opposed the call for more disclosure.

Dina ElBoghdady covers housing policy for The Washington Post.

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