Here’s the bad news. Since January 2010 we’ve been living with the consequences of the U.S. Supreme Court ruling in Citizens United vs. Federal Election Commission (FEC) and of subsequent court cases that have brought us unlimited corporate spending, unlimited individual spending, Super PACs, and what will likely be the first ever billion dollar election. Dark money is pouring into the race from nonprofits while a feckless FEC and Internal Revenue Service (IRS) allow their existing loophole-ridden rules and regulations to be trampled and ignored, and refuse to promulgate new more effective ones. Corporations are funneling money into the U.S. Chamber of Commerce for campaign related expenditures, whoops, I mean “educational activities.” And in the meantime, voters have been left completely in the dark by a Congress too polarized to pass the DISCLOSE Act.
However, there is some good news to report. The Corporate Reform Coalition has released a report detailing the work of corporate responsibility advocates titled, “Sunlight for Shareholders.” Made up of institutional investors, good governance groups, academics, small businesses, elected officials and more, the Corporate Reform Coalition has developed an innovative approach to dealing with corporate spending in elections. Though our system of money in politics is in crisis, the report shows there are attainable solutions.
On the federal level much is being done to create a system where corporations are accountable to both their shareholders and to voters. Advocates continue to press for the DISCLOSE Act and its life beyond this session’s Republican filibuster, as well as for the Shareholder Protection Act (SPA). There is broad public support for these reforms. In a recent poll conducted by Clarus Research Group on behalf of Common Good, 88 percent of respondents said that all campaign contributions and expenditures should be disclosed. Another poll commissioned by Common Cause showed 80 percent of respondents agreed that corporations should be required to get approval from shareholders before spending money on politics. Even more ground has been gained at the Securities and Exchange Commission (SEC) where a group of law professors submitted a petition last August asking the agency to create a rule that would require publicly traded companies to disclose their political spending. The rule has the support of SEC Commissioner Luis Aguilar, as well as 43 members of Congress. The petition has also been met with astounding support from the public. More than 300,000 people have left supportive comments for the petition; beating the previous all-time comment record by more than 100,000.
Progress hasn’t just come on the federal level. Many business leaders have come to believe disclosure is in the best interest of their bottom line and, as such, the trend in the corporate world has been toward more disclosure. The Center for Political Accountability (CPA) has reached agreements with 100 companies regarding their political spending policies. As CPA’s list grows so does the support for board oversight disclosure to shareholders. These types of reforms aren’t just the practices of outliers any more; they are rapidly becoming part of standard best practices for all firms.
And if conforming to the norm isn’t enough motivation, there is mounting evidence that political spending does not increase firm value. Many studies have shown political spending to be negatively correlated with shareholder value. One study found that from 1991 to 2004 firms that donated money to political parties or 527 groups had worse stock performance than firms that did not contribute. A more recent 2010 study showed that firms active in politics, through PACs or lobbying, also had worse performance than those that were not active. In addition to the questionable advantage provided by political spending, the practice often invites reputational risk and national backlash. Just ask Chick-fil-A and Target.
Naturally some firms continue to resist transparency despite this evidence, and those companies have been waging increasingly public battles with shareholders over their political spending policies. Since the first shareholder resolution calling for political spending disclosure was filed average support for such resolutions has grown from just 9 percent in 2004 to 33 percent in 2011. In 2012, a record-breaking 125 resolutions relating to corporate political spending were filed. Shareholders understand the money their company spends on politics is their money, and they are taking up the fight with CEOs and in board rooms across the country with increasing success.
It’s easy to be cynical, but this report shows that the solutions are out there if we’re ready to roll up our sleeves. We continue to push back on the problem and make progress toward reforming the way corporate America plays in politics. The facts and the public are on our side.