Public Companies Under Increasing Pressure to Reveal Political Spending

In the wake of the U.S. Supreme Court’s decision in Citizens United, corporate political spending has skyrocketed.

In response, companies are facing increasing pressure from public interest groups, shareholders, and regulators to disclose their donations.

Shareholders concerned about corporate campaign donations are turning to resolutions that ask the company to disclose information about lobbying activities and election spending. According to Corporate Reform Coalition, more than 100 U.S. companies faced shareholder resolutions this year.

Current SEC rules

The Securities and Exchange Commission (SEC) does not currently require public companies to disclose political spending. However, last April, the state treasurers of five states called on the SEC to implement a formal disclosure system. To date, the SEC has not proposed a formal rule-making that could compel more transparency.

In the absence of legal requirements, many companies voluntarily make disclosures. A recent survey of the top 300 companies in the S&P 500 found that 61 percent of companies disclose direct political spending and 43 percent disclose payments made to trade associations that engage in political spending.

For companies that don’t provide information about political and lobbying activities, the public pressure is mounting. In the absence of formal requirements, several public interest groups regularly publish reports on corporate political spending.

Corporate political disclosure practices

Most recently, the Center for Political Accountability, in collaboration with the Zicklin Center at the University of Pennsylvania, scored the corporate political disclosure practices of the entire S&P 500. Three companies tied for a first-place rating of 97.1 points: Becton, Dickinson and Co., CSX Corp. and Noble Energy Inc.

Below are several of the study’s key findings:

• Companies engaged in this by shareholders, and reaching an agreement, had significantly better disclosure and accountability policies. The average overall score in 2015 was 72.6 for companies with an agreement in place.
• Companies are becoming more transparent. For 83 companies studied by the Index since 2011, the overall average score improved to 71.3 in 2015 from 45.2 in 2011.
• Many companies have placed restrictions on their political spending. The study found 124 companies, or 25 percent, placed some type of restriction on their political spending, such as restrictions on direct independent expenditures; contributions to candidates, parties and committees, 527 groups, ballot measures, or 501(c)(4) groups; and, payments to trade associations for political purposes.
• Most companies have policies addressing political spending. In total, 87 percent of the S&P 500 companies, or 435, had a detailed policy or some policy governing political spending on their websites.

While companies may not face legal consequences for failing to fully disclose political spending, they are at risk for shareholder litigation and negative publicity, both of which can still impact their bottom line. To determine the best corporate governance decision for your company, it is best to speak with experienced legal counsel.