Following the killing of George Floyd, attention has increased on diversity and inclusion, among other matters. Earlier this summer, Liz blogged on our “Proxy Season” Blog that company “anti-racism” statements could lead to more scrutiny of corporate political spending.
Now, with increased focus on “E&S” as a backdrop, a “Conflicted Consequences“ report from the Center for Political Accountability finds that corporate political spending through non-profit, tax-exempt “527” organizations often doesn’t align with company statements in support of environmental and social issues. The report examines corporate political spending over the last decade and how those funds were used to fund political efforts that have turned out to be contradictory to company public statements. CPA made a bit of a splash with this report, as it received coverage in the NYT and Financial Times the same day of the report’s release. Here’s an excerpt from the foreword, explaining the concern with “527” political spending:
The intermediate organizations that these companies finance often direct that money in ways that belie companies’ stated commitments to environmental sustainability, racial justice, and the dignity and safety of workers. To take just one of the many instances this report recounts, large donations channeled through these organizations helped North Carolina Republicans take control of the state legislature in 2010. They used that control to institute extreme gerrymanders of both the state legislature and the state’s delegation to Congress, and to pursue a range of divisive and anti-democratic policies, including restrictions on LGBTQ rights and new rules designed to impede the access of black voters to the polls.
Both the NYT and FT cite specific examples of apparent disconnects between company support for issues and ultimate beneficiaries of company “527” donations. Cydney Posner’s blog discusses the report and cites a 2018 CPA report with guidance for companies to address heightened risk of potentially conflicting messages. Among other suggestions, it suggests companies conduct due diligence of risks associated with any donation, including how the funds will be used and with whom the company is being associated by virtue of the donation. If this heightened scrutiny continues as we move into election season and beyond, it could be a big deal for companies, especially in light of the increased focus lately on corporate purpose.
-Lynn Jokela, TheCorporateCounsel.net August 4, 2020
