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16 Sep. 2011 | Comments (0)

The issue of corporate political spending has gotten a lot of attention as American companies have become concerned about the direction of the country as another presidential political cycle is about to start. By now, nearly everyone has heard about Starbucks CEO Howard Schultz campaign (complete with full page ads in the New York Times and USA Today) to withhold campaign contributions to candidates until the President and Congress figure out a way to put people back to work and come up with a fair plan to reduce the national deficit. Schultz’ campaign, which is part of  a couple of social media-based efforts aimed at recruiting businesses to break through Washington, D.C., logjam, came at a time when his company has been bullish on the economy. But it also came a time when Congress and the President were at loggerheads about raising the federal debt ceiling and the country faced the prospect of not being to pay some of its basic bills. Schultz’ letter states:
“Three weeks ago, I asked fellow business leaders to join me in urging the President and the Congress to put an end to partisan gridlock and, in its place, to set in motion an upward spiral of confidence. More than 100 business leaders representing American companies – large and small – joined me in signing a two-part pledge: “First, to withhold political campaign contributions until a transparent, comprehensive, bipartisan debt-and-deficit package is reached that honestly, and fairly, sets America on a path to long-term financial health and security. Second, to do all we can to break the cycle of economic uncertainty that grips our country by committing to accelerate investment in jobs and hiring.”
No matter how you look at it, Schultz’ letter to “Fellow Concerned Americans” that appeared in the ad struck a chord on Twitter and in the blogosphere. The idea is simple enough: Ask the top executives of all U.S. companies to stop donating money to political candidates and campaigns until Congress and the President get their act together on fixing the economy once and for all. While the idea is quite simple, the reality of achieving the expected outcome of scaring our federally elected politicians into working together is not so simple. What’s not taken into account by Schultz or the organizations he is affiliated with (No Labels and Upward Spiral) are the actions of trade associations and not-for-profit 527 advocacy groups. You see, one of the big problems behind corporate political spending isn’t so much the disclosure by companies but rather the disclosure by such associations as the U.S. Chamber of Commerce, Business Roundtable and such unions as the Service Employees International Union. Many companies face the dilemma of receiving high grades for corporate political spending disclosure, but being railed by shareholders and critics for having contributed to a membership organization like the U.S. Chamber, which has become quite politically active. In fact, some public companies have asked such organizations for a breakdown of how their membership fee is being spent to no avail. So for some companies the issue is one where they have to balance the reputational risk of belonging to such organizations that are politically active vs. the benefits they receive. While the Starbucks CEO’s campaign has gotten a lot of press, there have been some other developments on the corporate political spending front you may be interested in. In the last two months alone a college and two not-for-profit organizations (including The Conference Board) announced efforts to better inform U.S. companies about corporate political spending best practices either through a task force or the creation of a corporate political disclosure index. The Conference Board Committee on Political Spending has been convening this year and is planning a symposium in New York City on Oct. 20 where it will release the results of a report that is meant to be a tool for all companies. The symposium keynote speaker will be former Federal Elections Commission Chair Trevor Potter. Some of the early research done by the committee shows that although the public, the media and watchdog groups have focused almost exclusively on political spending by corporations, a list of the largest all-time political donors between 1989 and 2010, based on information released by the Federal Election Commission (FEC) in April 2011, includes only one corporation among the top 10 donors. Six of the top 10 donors are labor unions, one is a trade association, one is a plaintiffs’ bar, and one is an independent 527 organization. The committee’s report will include information about key issues and shares examples to show how other leading corporations are handling them. Yesterday the Baruch College Robert Zicklin Center for Corporate Integrity released the results of its inaugural Index of Corporate Political Disclosure, which rates the S&P 100 companies on the disclosure of corporate political spending. The index, which was put together by Donald H. Schepers, Ph.D., director of the center, and Naomi A. Gardberg, Ph.D., Baruch College professor, measures a company’s corporate political activity at all levels and branches of government. The index takes into account 57 items when measuring a company’s willingness to disclose with regard to:
  • Ease with which someone can find the relevant materials on the corporate website;
  • What policies, procedures, and corporate governance structures are in place and disclosed; and
  • What the corporation says about who and what it gives to, and how those donations are made.
Meanwhile, the Center for Political Accountability (CPA) and the Wharton School’s Zicklin Center for Business Ethics Research plans on unveiling on Oct. 28 an index of their own named the C-Z Index after the name of the two sponsors. According to CPA President Bruce Freed, the index will measure whether companies in the S&P 100 have policies and practices that invoke transparency and accountability when it comes to political spending disclosure. In a release on the CPA website, Freed says the index will draw on emerging best practices identified in The Conference Board’s Handbook on Corporate Political Activity, which was co-authored by Freed and former Governance Center Director Paul DeNicola. While both indexes will include donations made to trade associations and 527 committees and The Conference Board Committee on Political Spending will also cover the issue, but the issue of transparency for such organizations could continue to be problematic for companies. That issue has already been the subject of some federal legislation and even some state bills, such as in California.
  • 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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