Support is growing to give shareholders the right to vote on corporate political spending.
By Sanford Lewis, Attorney
In response to the Supreme Court’s decision in Citizens United v Federal Election Commission, which expanded the opportunity of corporate treasuries to be used in electoral fights, diverse responses by the shareholder community have emerged. With company managers beginning to spend even more of “Other People’s Money” in support of their favorite political candidates, shareholders must act to stem the bleeding of our electoral system. But how? Should shareholders converge around their consensus for a Right to Know, or should they also insist that disclosures be accompanied by a shareholder Right to Act, i.e. at least an advisory vote on whether shareholders support or oppose corporate election spending?
Some shareholder coalitions, like the Center for Political Accountability seem to be taking the position disclosure alone is most ripe for action and where we should converge. Corporate resistance to disclosure is apparent, with a campaign by the Chamber of Commerce to oppose the White House Executive Order to require federal contracting corporations to disclose corporate election spending. The Chamber asserts requiring such disclosure is a veiled effort to punish or intimidate companies that donate to conservative causes. But investor proponents of the Executive Order say the disclosure proposed is necessary to ensure that the government contracting process is free of “pay to play” relationships.
Disclosure nevertheless has plenty of support, even in conservative circles, with Fox Broadcasting having decided quietly it will begin disclosing its political spending.
This season, longtime disclosure advocates are being joined by others, such as NorthStar Asset Management’s founder Julie Goodridge and Vanguard Funds founder John Bogle, asserting that the Right to Know should also be accompanied by the Right to Act. In this viewpoint, shareholders should also press for the opportunity to vote up or down on corporate political spending.
The Home Depot proposal, sponsored by NorthStar and cleared by the SEC, gives shareholders the opportunity to vote on whether the company should disclose its past and future electioneering spending in the proxy, but also allow shareholders to vote annually on whether they support the company’s policies and future spending. The Home Depot proposal also asks the company to annually analyze whether its political spending is in line with its values. What troubled NorthStar and catalyzed the proposal was the company’s decision to support anti-gay candidates, despite company nondiscrimination policies.
There is room under prior SEC Staff precedents to expect that future proposals will ask companies to eliminate particularly heinous categories of corporate contributions – e.g., laundering corporate money by filtering it through “independents” such as trade associations, or directly funding TV or newspaper ads supporting or opposing a candidate.
Vanguard’s founder John Bogle’s opinion piece in the Sunday, May 15 New York Times, supported the Home Depot Proposal but also asserted that shareholders should vote to require 75% of investors voting in support before companies can engage in election spending.
In my experience in another field, toxic chemical releases, I have seen how advancing the Right to Know went a long way to discouraging and reducing another corporate evil—toxic emissions. Eventually, activists recognized the need for additional action – either by regulators or stakeholders, the “Right to Act.” It is true that winning the Right to Act or regulatory controls can be more difficult than winning disclosure, but eventually both are necessary.
About Sanford Lewis
Attorney Sanford Lewis represents shareholders and NGOs on issues of corporate disclosure and shareholder rights. He represented NorthStar in defense of the Home Depot proposal. You can see a 15 min. talk by him on the Home Depot proposal and related SEC rulings here.
Talkback Readers: Which way do you come down on this – should shareholders only work toward a Right to Know, or should they also start seeking the Right to Act as well? Tell us on Talkback!