The New York Times had a great front-page story on Sunday about
corporations contributing to politically active non-profits in
order to shield their campaign contributions from public view.
That's not a revelatory thesis -- I've written about a suit by campaign-spending reformers to force such non-profits as Karl
Rove's Crossroads GPS to disclose corporate donors -- but the
Times dug deep for examples of specific corporate contributions,
such as the $3 million that Aetna gave to the U.S. Chamber of
Commerce, which was initially described in a regulatory filing
as a "lobbying expense."
Bruce Freed of the Center for Political Accountability read
about Aetna's donation to the Chamber with great interest.
Aetna, you see, is one of more than 100 large public companies
that have agreed in the last several years to disclose their
political spending. Most of those disclosure agreements have
come under pressure from shareholders, who (often with CPA's
help) have demanded proxy votes on resolutions calling for
corporations not only to disclose their policies and procedures
for political spending but also to itemize all contributions,
direct or indirect, that are intended to influence an election
These shareholder demands for disclosure have become increasingly common, thanks to the U.S. Supreme Court's 2010
holding in Citizens United v. Federal Election Commission, which
said indirect corporate political spending is protected by the
First Amendment. (Direct spending, as we've reported, may be
another story.) Forcing companies to own up to their political
involvement "has become even more critical," the CPA website
says, because Citizens United means "companies face greater
pressure to spend corporate dollars either directly or
indirectly through conduits such as trade associations and
Exceedingly few shareholder resolutions calling for
disclosure have received majority shareholder votes in favor --
Wellcare was the only company whose shareholders approved a
resolution this year -- but according to CPA, the disclosure
campaign is gaining traction. Freed's group said in June that
reso l utions gained more than 30 percent approval from
shareholders at 13 of the 25 corporations where political
spending disclosure was up for a vote this proxy season.
Even more important, Freed told me, is the dialogue that has
opened up between shareholders and corporations, which has
produced the 101 disclosure agreements his group touts. But the
Aetna example prompts a question that I put to Freed on Monday:
What happens if a corporation flouts its promise to disclose all
political spending to shareholders?
"We've been looking at that," Freed said. "These are
promises stated in writing ... A breach is something we consider
to be very serious. We're talking to companies, talking to
directors." (In response to my request for comment on whether it
breached its agreement with shareholders, Aetna directed me to a
letter it sent to Citizens for Responsibility and Ethics in
Washington about the Chamber donation; Aetna said the $3 million
contribution was publicly disclosed in an amended regulatory
Nevertheless, I'm afraid that if the best hope to reform
campaign spending lies with shareholder-sponsored resolutions to
enforce corporate disclosure, we'd better gird for the
continuation of shadowy corporate influence on campaigns. Aside
from raising a public stink, shareholders don't have much
recourse if a company decides not to disclose a political
donation. They could file a derivative suit claiming the
directors and officers breached their fiduciary duty, but unless
shareholders could establish that the board was acting against
the corporation's interest, the suit would almost certainly be
The problem for shareholders, according to Allen Dickerson,
legal director of the Center for Competitive Politics, is
materiality. A caveat: CCP is dedicated to assuring the
free-speech rights of corporations that want to engage in
politics, so Dickerson is not exactly objective on this
question. But he makes a smart point. That $3 million Aetna
reportedly donated to the Chamber of Commerce this year could
make a big difference to some candidate or in influencing some
political issue. But in the scheme of Aetna's $34 billion or so
in revenue and $2 billion in profits, it's just not material.
"Materiality has to be about the corporation's budget,"
Dickerson told me. "Management has a fiduciary duty to
shareholders, but they make much larger decisions all the time."
He said, not surprisingly, that he's opposed to the disclosure
agreements so many companies have signed with CPA and other
shareholder groups because he doesn't think corporate political
spending is significant enough to deserve an exception to the
rule of immateriality.
Disclosure may not impact corporate donations. A spokesman
for the Chamber of Commerce, for instance, told me on Monday
that corporate disclosure agreements with shareholders haven't
affected donations to the Chamber. But there's a lot of debate
right now about whether political spending benefits corporations
and their shareholders. Harvard Law professor John Coates
published a study last December with the counterintuitive
finding that campaign donations don't serve shareholder
interest; the Manhattan Institute questioned his methodology in
June and he fired back last week at the HLS Forum on Corporate
Governance. Disclosure of corporate political involvement seems
to me the only way to assess the costs and benefits to
shareholders of campaign spending.
That's why I hope shareholder activism -- as well as suits
like the disclosure case now at the D.C. Circuit Court of
Appeals, which demands disclosure from recipients of corporate
donations -- brings corporate campaign contributions to light.
But without enforceability, I have my doubts.
(Reporting by Alison Frankel)
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