With the corporate governance community still trying to ascertain the fallout from the Citizens United v. Federal Elections Commission Supreme Court decision and the revelation [See Reuters blog here.] this week that the embattled Goldman Sachs doubled what it spent on Washington lobbyists this year, corporate political spending continues to be a worry for boards.
It is the concern over risks involved in corporate political spending that has the Center for Political Accountability becoming more aggressive in its disclosure marketing campaign.
Using the best practices on political spending policies and procedures in an upcoming handbook it is collaborating on with The Conference Board Governance Center, the Center for Political Accountability is teaming up with Baruch College’s Robert Zicklin Center for Corporate Integrity to launch an accountability index in October.
That was what Bruce Freed, CPA president and co-founder, announced during Tuesday’s RiskMetrics Governance Exchange Webcast on Corporate Political Spending and Accountability. “This is in the early phase,” he said. Although, he does expect to roll out the index in the fall a couple of months after the political spending handbook is published. He envisions a rollout where the index would cover the S&P 100 the first year, the S&P 300 the second year and the full S&P 500 the third year.
“It will be a numerical score or rating,” Freed said. “We have the [several] points that we look at and have a dialogue with a company.” He hopes that the analysis provided by the index would be used by proxy advisors as well as investors.
The idea behind the index is twofold: to get more public companies to voluntarily disclose their corporate political spending and to make boards more aware of the risks involved in such spending, especially when it involves a trade association. (At last count, Freed claims that about 75 of the S&P 100 voluntarily disclose.)
The points Freed alludes to are part of the CPA’s Political Transparency and Accountability Profile on public companies. Each profile is a narrative analysis of a public company’s political spending policies, procedures and voluntary disclosure of contributions. It also includes a checklist of 15 policies the CPA expects to be included in political spending procedures and disclosure and whether or not those items are in a company’s policies. Some of those items include:
• The use of corporate funds for political purposes is prohibited.
• Political contributions permitted only through voluntary employee funded PAC contributions.
• No contribution will be given in anticipation of, in recognition of, or in return for an official act.
• Company will not reimburse employees directly or indirectly for political donations or expenses.
• No employees will be pressured to make any personal political expenditures.
(For a complete list of the policies and the CPA Model Code of Conduct for Corporate Political spending, click here. For an example of an actual profile, click here.)
One company that the CPA has worked with on corporate political spending policy and disclosure is the pharmaceutical maker Merck.
“We decided three or four years ago after talking to Bruce [Freed] that we would disclose,” Charles Grezlak, vice president for state government affairs and policy at Merck, said during Tuesday’s Webcast. “Last year, we decided to disclose the portion of our dues to trade associations that are used for political purposes. We are still working on how we can improve disclosure there.”
In Merck’s disclosures, it includes the state, level of office, party affiliation, committee name receiving the donation and the amount. (For Merck’s corporate political contribution policies, information about its political action committee and contribution disclosures, click here.)
As for the political handbook, The Conference Board Governance Center plans on publishing it this summer. The book has three chapters on assessing political accountability, establishing an effective program to manage and oversee corporate political spending and creating an ethical corporate culture. It also includes examples of codes of conduct on political spending and proxy voting guidelines.
If you want to get a copy of the handbook when it is published, contact me at email@example.com.
Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…