Just in time for another round of polarizing midterm elections, the Center for Political Accountability and the Zicklin Center for Governance and Business Ethics at the Wharton School have issued their annual Index of Corporate Political Disclosure and Accountability.
If there is one thing that has become clear over the past 11 years in which this Index has been published, it’s that companies that don’t carefully monitor “political spending” are playing with fire. And it’s important to note that — in addition to candidate donations — the term “political spending” includes contributions to trade associations, committees and lobbying organizations. In the wake of the Dobbs decision this summer, we wrote:
Carefully consider political and trade association contributions. Contributions to politicians, trade associations and other advocacy organizations are already receiving major scrutiny – and that’s only going to increase. Emily blogged recently that two lobbying-related shareholder proposals received majority support at recent meetings. Many trackers now exist that monitor the alignment of corporate political donations with stated values – with several companies already in the news for donations to anti-abortion politicians, and shareholder proponents also picking up the mantle with a new iteration of “values misalignment” shareholder proposals.
Gone are the days when a board could simply confirm that the company’s donations were striking a roughly even split between Republican and Democratic organizations. Now, management may need stricter directives to ensure that each donation aligns with overall values – and the board may need to dig deeper to ensure it’s informed of any potentially controversial activities.
When it comes to S&P 500 companies, this year’s Index finds:
– The number of S&P 500 companies with policies for general board oversight of political spending is 295, up 13.9 percent from 259 companies in 2020.
– Board committee review of direct political contributions and expenditures rose to 255 companies this year from 227 in 2020, an increase of 12.3 percent; board committee review of payments to trade associations and other tax-exempt groups rose to 228 this year from 199 in 2020, an increase of 14.6 percent.
– The number of companies that fully or partially disclosed their political spending in 2021 or that prohibited at least one type of spending is 370. This is over 75 percent of the S&P 500 companies evaluated. It is a record high since CPA and its shareholder partners launched their efforts.
– The number of companies that fully or partially disclosed their political payments to state or local candidates or committees, or that prohibited them, was 334, another record and well more than three-fifths of the S&P 500.
– The number of companies that disclosed some or all of their political spending was 293. The number of companies that prohibited direct donations to state and local candidates, political parties, and committees was 136.
For the first time this year, the Index also expanded to cover Russell 1000 companies (representing approximately 90% of the U.S. market). It’s not a stretch to think that this move will lead to more scrutiny of spending by mid-sized and smaller companies in the form of shareholder engagements and proposals, or questions from employees and customers. Right now, there’s a pretty big gap in transparency — and potentially, policies — between large and small companies. The Index finds:
– For all non-S&P 500 companies in the Russell 1000, the average score is 12.8 percent, on a scale of zero to 100. The overall Index score for all S&P 500 companies this year, for example, is 57.0 percent.
– There are 54 companies in the non-S&P 500 portion of the Russell 1000 with general board oversight of company political spending, compared with almost six times as many, 307 companies, in the full S&P 500 with the same oversight.
For “best practice” comparisons, take a look at the full Index as well as the policies and disclosures of the six companies that scored a winning 100: AT&T, Becton Dickinson, Consolidated Edison, Edison International, HP Inc. and Visa. Also see the resources in our “Political Contributions” Practice Area.
— Liz Dunshee, TheCorporateCounsel.net, October 17, 2022