At the end of last week, ISS announced its benchmark policy updates for 2023. The policy changes will apply to shareholder meetings held on or after February 1, 2023, except for those with one-year transition periods. The changes for U.S. companies relate to policies regarding, among other things, unequal voting rights, problematic governance structures, board gender diversity, exculpation of officers, poison pills, quorum requirements, racial equity audits, shareholder proposals on alignment between public commitments and political spending and board accountability for climate among the Climate Action 100+. The results are based in part on the results of ISS’s global benchmark surveys (see this PubCo post) as well as a series of roundtables.
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.
I have to admit I was surprised to read that, in the new $1.5 trillion budget bill, Congress has once again prohibited the SEC from using any funds for political spending disclosure regulation. But there it is—Section 633—in black and white: “None of the funds made available by this Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.” That means that, for now anyway, private ordering—through shareholder proposals at individual companies and other forms of stakeholder pressure, including humiliation—will continue to be the pressure point for disclosure of corporate political contributions. Those proposals have grown increasingly successful in the last couple of years. And, notably, it appears that the focus of many proposals has shifted recently, with more emphasis on apparent conflicts between stated company policies and values and the beneficiaries of those political contributions.