The advocates are celebrating decisions by several major food and beverage companies to sever financial ties with the organization, the American Legislative Exchange Council (ALEC). Coca-Cola, PepsiCo, McDonald’s, Kraft Foods and Wendy’s have cut their support for the group, although all played down any connection to the Florida shooting.
The tension in corporate boardrooms over the case is the latest example of the pitfalls companies can sometimes face when they donate to political and lobbying groups, even those that seem safely below the radar of public consciousness.
The ALEC controversy is now sparking a broader debate about corporate participation in politics and the polarized state of political discourse. At a minimum, it has strengthened calls for companies to develop clear policies explaining their spending.
“I would caution companies to be very aware of where their money is going,” says Nell Minow, director of GMI Ratings, which provides corporate governance information to investors, corporate auditors and regulatory agencies. “Companies are going to realize they can take a real reputational hit with this kind of affiliation.”
She and others recall the tempest that erupted in 2010 around Target after the company donated to a nonprofit group supporting a Minnesota gubernatorial candidate who was known for opposing gay rights initiatives.
The Supreme Court decision that year in Citizens United v. Federal Election Commission gave corporations the right to contribute directly to groups active in election campaigns.
But most major corporations have not jumped at the chance. Rather, publicly traded companies have largely continued to donate through nonprofit lobbying and political groups — many recently formed — that are not compelled to reveal their donors.
Ron Scheberle, executive director of ALEC, said Thursday that the attacks are part of an “intimidation campaign . . . to silence our organization” led by left-wing activists opposed to the group’s free-market agenda.
In recent weeks, companies that have supported the state legislative group — many of them listed on the ALEC Web site — found themselves in the glare of a national protest organized by the government watchdog Common Cause, the civil rights organization Color of Change and other groups.
The list of companies now targeted includes AT&T, Johnson & Johnson, Pfizer, Diageo, Wal-Mart and the industry trade group Pharmaceutical Research and Manufacturers of America (PhRMA).
ALEC has had a significant impact in statehouses since it was founded in the 1970s by conservative activist Paul Weyrich. ALEC funders include the National Rifle Association, which led the way to passage of the Stand Your Ground law in Florida and other states. ALEC officials have said they were not directly involved in the Florida effort, but their organization’s Web site touts similar ALEC-backed legislation passed in other states.
ALEC also receives support from organizations linked to billionaires David and Charles Koch, libertarians who have fought environmental and other government regulations. ALEC’s “private enterprise board” includes executives representing companies such as Wal-Mart, Pfizer and AT&T.
Before the Martin case in Florida, ALEC had become controversial for its effort to encourage state laws requiring voters to show identification.
Industry lobbyists said in interviews that ALEC provides access to legislators at the state level, where many regulatory battles are fought. Major beverage companies sought ALEC’s help in fighting proposed state taxes on soda.
Coke announced last week that it was pulling out of ALEC but suggested the action was not related to the Martin shooting. Company spokeswoman Diana Garza Ciarlante said the decision was part of “a standard practice we have to look at every group we support and go through it on an annual basis.”
Officials from the other targeted companies used similar language to explain their decisions, and several said they had chosen to not to renew their membership before the controversy over the Florida law.
ALEC has long championed tort reform, drawing support from medical companies and the U.S. Chamber of Commerce Institute for Legal Reform.
Other groups that participate in politics and lobbying — PhRMA and the U.S. Chamber of Commerce, for example — have found themselves drawn in to the debate over corporate political giving as it expanded and became more confrontational in recent weeks.
The Chamber of Commerce and other nonprofit groups have become increasingly active political players over the past decade and have insisted on the right to keep donor names confidential. That policy is being challenged by shareholder groups and activists, mostly on the left, who see the current controversy as an aid to their cause.
“The ALEC case is a lightning rod, and it is inspiring a broader debate about corporate spending,” said Timothy Smith, senior vice president at Walden Asset Management, a Boston-based investment firm that promotes corporate consideration of environmental and social concerns.
Smith is coordinating an effort to present shareholder resolutions to 40 corporations asking them to reveal more about their expenditures on politics and lobbying. He is also part of an ongoing effort to press companies to reevaluate their relationship with the U.S. Chamber of Commerce and other trade associations.
He and others are criticizing PhRMA not only for the ALEC donations but also for providing support to politically oriented groups such as American Action Network (AAN), a Washington nonprofit group credited with helping elect a Republican majority in the U.S. House in 2010.
A recently released PhRMA tax filing, first reported by the Center for Public Integrity, shows that the trade association contributed $4.5 million to AAN in addition to donations to Democratic-oriented groups. AAN did not respond to requests for comment.
A PhRMA vice president, Matthew Bennett, rejected the criticism of his organization. “Our work with ALEC, as with all organizations that we work with, is confined to the health and health-industry issues that are of concern to our companies,” he said. In terms of PhRMA’s ongoing support of ALEC, Bennett said that “we regularly and constantly evaluate our relationships with all the organizations we support to be sure they continue to align with our mission.”
The protests against companies, with the accompanying threat of boycott, are exactly why corporate donations should remain anonymous, said Bradley Smith, a Republican who formerly chaired the Federal Election Commission and founded the Center for Competitive Politics. He said that the protests launched against ALEC donors may be an act of free speech but that they chill debate.
“This is aimed at cutting off support for ideas rather than combating the ideas themselves,” Smith said.
That argument was echoed in a statement from the Chamber of Commerce, saying activists’ pressure to disclose was a thinly veiled effort to “harass and intimidate the business community. That’s exactly what’s going on in the ALEC protests.”