Tag: corporate political spending disclosure
Political spending transparency from Russell 1000 companies? Not so much
In the wake of the events of January 6, a number of companies, highly sensitized to any misalignment between their political contributions and their public statements or announced core values, determined to suspend or discontinue some or all of their political donations (although many have since resumed business as usual). As social and political unrest and political polarization have continued, demand for disclosure about corporate political spending has increased. In the midst of an unusually fraught mid-term election season, the Center for Political Accountability and the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania released their annual CPA-Zicklin Index of Corporate Political Disclosure and Accountability for 2022. The Index annually benchmarks public companies’ disclosure, management and oversight of corporate political spending, and includes specific rankings for companies based on their Index scores, as well as best practice examples of disclosure and other helpful information. (See this PubCo post.) This year, accompanying the Index is a new CPA-Zicklin Model Code of Conduct for Corporate Political Spending, designed to provide a “thorough and ethical framework” for corporate political spending. CPA launched the Index in 2011 following the decision by SCOTUS in Citizens United, benchmarking only the S&P 100. In 2015, it began to benchmark the S&P 500. This year, the Index has expanded its coverage to the Russell 1000. The difference in the levels of transparency between the S&P 500 and the Russell 1000 (excluding companies in the S&P 500) is dramatic.
CPA-Zicklin Index to cover Russell 1000 companies
The CPA-Zicklin Index of Corporate Political Disclosure and Accountability (from the Center for Political Accountability and the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania) annually benchmarks public companies’ disclosure, management and oversight of corporate political spending. The Index also includes specific rankings for companies based on their Index scores, as well as best practice examples of disclosure and other helpful information. (See this PubCo post.) CPA launched the Index in 2011 following the decision by SCOTUS in Citizens United, benchmarking only the S&P 100. In 2015, it began to benchmark the S&P 500. The Index has just announced that, beginning this fall, it will expand its coverage to the Russell 1000. As reported in MarketWatch, the President of CPA observed that, “[w]ith companies under much greater scrutiny on their election-related spending, it really is incumbent on them that they have strong [governance] policies that they adhere to. They face the threat of boycotts. They face the threat of employee morale problems….They face the threat of very harmful publicity. Bottom lines can be adversely affected by the way companies engage in political spending.”
2021 CPA-Zicklin Index shows steady rise in board oversight and disclosure of political spending
In the aftermath of January 6, a number of companies, highly sensitized to any dissonance or conflict between their public statements or announced core values and their political contributions, determined to pause or discontinue some or all of their political donations. Notwithstanding those actions—or perhaps to some extent because of them—the clamor for disclosure regarding corporate political spending has continued. To that end, in March, Senators Chris Van Hollen and Robert Menendez reintroduced the Shareholder Protection Act of 2021, a bill to mandate not only political spending disclosure, but also shareholder votes to authorize corporate political spending. (See this PubCo post.) The chances that this bill will pass in this Senate? Not great. Nevertheless, even in the absence of legislation, investor pressure and public sentiment may well be having some effect. As shown in the new 2021 CPA-Zicklin Index of Corporate Political Disclosure and Accountability (from the Center for Political Accountability and the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania), the number of companies increasing transparency and enhancing board oversight of corporate political spending, whether on their own initiative or prodded by shareholder proposals, is on a gradual but determined rise.
House budget package would scrap proxy advisor rules
It’s worth noting that the minibus budget package passed by the House last week includes a provision intended to put the kibosh on the proxy advisory firm rules that were adopted by the SEC in July 2020. Specifically, the bill provides that “[n]one of the funds made available by this Act may be used to implement the amendments to sections 240.14a-1(l), 240.14a–2, or 240.14a-9 of title 17, Code of Federal Regulations, that were adopted by the Securities and Exchange Commission on July 22, 2020.” Of course, Corp Fin had already put a temporary halt on enforcement of those rules. And unlike prior years, there is no provision in the House bill—yet—that would prohibit the SEC from using any of the funds to finalize rules requiring disclosure of corporate political spending. The bill next goes to the Senate, where, of course, there could be substantial changes.
Senators introduce bill to mandate political spending disclosure and shareholder authorization
The events of January 6 heightened sensitivity to any dissonance or conflict between a company’s public statements or announced core values and its political contributions. In the aftermath, a number of companies determined to pause or discontinue some or all political donations, but the clamor for disclosure regarding corporate political spending has continued. To that end, Senators Chris Van Hollen and Robert Menendez have reintroduced the Shareholder Protection Act of 2021 to mandate not only political spending disclosure, but also shareholder votes to authorize corporate political spending. According to the press release, “[s]ome public companies’ decision to suspend or reevaluate further political donations is an acknowledgment that political donations can significantly affect a company’s reputation and financial health. Without public disclosure of political contributions, shareholders are left in the dark about decisions that may affect a company’s bottom-line, and in the case of the January 6th insurrection, decisions to support organizations and campaigns that may have advocated stopping the certification of a free and fair election.”
Deregulation? What deregulation? Two (persistent) campaigns for enhanced disclosure requirements
Notwithstanding the deregulatory emphasis of the current administration, two campaigns are currently being waged to convince the SEC to adopt new regulations mandating more disclosure—one related to human capital management and the other related to a frequent target, corporate political spending. Are these just pipe dreams? Is it time for a reality check? Or might there be some basis for believing that this SEC might act on these requests?
Court dismisses case to compel SEC to act on rulemaking petition for corporate political spending disclosure
by Cydney Posner As noted in Law360, a DC District Court has granted the SEC’s motion to dismiss a complaint filed to compel the SEC to act on a rulemaking petition regarding corporate political spending disclosure. Of course, as discussed in this PubCo post, a provision prohibiting the SEC from […]
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