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02 Nov. 2010 | Comments (0)

With the first national elections in the post Citizen’s United era all but over, The Conference Board Governance Center is looking ahead to the 2012 presidential election as it released the groundbreaking Handbook on Corporate Political Activity Monday. Three key messages from the 52-page report [Read press release]:
  • Corporations need to look at their political engagement programs through an ERM filter, which requires board oversight.
  • Corporations need to monitor the political engagement and policy positions of the trade associations to which they belong.
  • Citizen’s United v. Federal Elections Commission decision (January 2010) has opened additional avenues to spending, and increased reputational and compliance risks.
The last message has been getting most of the attention from the traditional media during the midterm elections as an unprecedented amount of political contributions have come in for both Republicans and Democrats through such conduits as the U.S. Chamber of Commerce, the Business Roundtable, and various labor unions.  “There is an issue of resurrecting the ghost of Watergate: secret spending,” Bruce Freed, president of The Center for Political Accountability and co-author of the handbook, told a panel at a Directors’ Institute Investor Summit last month. “There is less disclosure through the advent of organizations that serve as conduits.”  Co-author, Paul DeNicola, director of The Conference Board Governance Center, points to another important aspect of the Citizen’s United case. “The U.S. Supreme Court decision in Citizens United v. FEC has significantly increased the avenues for corporate political activity, and the next proxy season will almost certainly bring increased shareholder proposals on spending disclosure and board oversight.”  The handbook outlines policies, procedures and emerging best practices on political engagement, highlighting key elements of effective programs. Co-authored also by Stefan C. Passantino, a partner at McKenna, Long & Aldridge, and Karl J. Sandstrom of Perkins Coie LLP, the Handbook addresses: 
  • The legal framework for understanding political giving, including an overview of federal/state pay-to-play laws
  • Standards of director conduct that can potentially be applied to political activity
  • The rewards of a robust political engagement program, and the risks if such programs aren’t managed well
  • Examples of companies that have successfully managed political engagement programs
  • The importance of embedding political-spending decisions into a corporation’s ethical framework.
For all those directors and corporate secretaries who haven’t faced shareholder proposals asking for political contribution disclosure, you may want to look at the tally of such proposals from this past proxy season. A RiskMetrics blog post from July 15 spelled out the situation:
“Investors associated with a wide range of proponent groups--public pension funds, labor unions, social investment funds, religious groups, and foundations--filed 42 resolutions, of which 28 came to votes. The proposals averaged 30.7 percent support, up from 28.3 percent in 2009.”
 A survey commissioned by the Committee on Economic Development and reported this week by political accountability center found two-thirds of the 301 business leaders questioned believe secret political spending poses a threat to companies, and even higher percentages support disclosure by third-party groups that receive company money and limiting company contributions to non-political purposes unless the board or shareholders permit otherwise.  Heading into the 2010 proxy season, a total of 76 of the S&P 100 companies have adopted political contribution disclosure policies after a lobbying effort by the CPA, according to Freed.[See my blog post earlier this year.]
  • About the Author:Gary Larkin

    Gary Larkin

    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…

    Full Bio | More from Gary Larkin

     

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