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22 Oct. 2011 | Comments (0)

Of all the messages coming out of The Conference Board Committee on Corporate Political Spending Symposium Thursday, there was one that resonated the most with public boards.

To put it succinctly, that message is that no matter how politically active a company may be, it is imperative that boards should make sure management has in place a process to track such expenditures, compile them and, when appropriate, disclose them. The new report from the committee, Corporate Political Spending: Policies and Practices, Accountability and Disclosure, [click here for a copy of the report] states: “…disclosure of corporate political spending in the context of the business strategies, principles and policies that guided those decisions may make a company less vulnerable to the risk of unwarranted allegations.”

Timothy Smith, senior vice president and director of ESG (Environmental, Social and Governance) Shareowner Engagement for Walden Asset Management, specified three reasons a board should be concerned about corporate political spending.

“There is risk, such as the risk of having a company executive donating to a campaign that the corporate office did not know about,” Smith told attendees at the symposium in New York City. “[There is] seeking transparency – knowing if checks and balances are in place and how monies are spent directly or indirectly. And [there is] accountability – knowing what a company does and how they do it.”

Process is a buzzword that was repeated often at the symposium and is found numerous times in the committee’s report. That is understandable when you consider political environment corporations find themselves in following the 2010 Citizens United v. Federal Election Commission decision that made it easier for companies to support candidates and issues.

The report addresses the need for strong internal processes for those companies that choose to give to political campaigns. “One way for corporations to mitigate the potential risks of political spending and other political activities is to employ strong internal processes and structures at the management level and to consider some degree of oversight at the board level. These may include the use of internal or external audits to verify the effectiveness of controls and procedures related to approval and oversight of political expenditures.”

The report also points out that while is no established fiduciary duty that requires boards to oversee political spending separate from the financial statement, each company deals with the issue in different ways. But the report does offer the following statement regarding responsibility around this issue: “How to structure its involvement, including how often to review political spending policies, procedures and decisions, are questions each board must answer for itself.”

Four companies that have shared their stories about their policies and procedures are Pfizer, Merck, Exelon and Microsoft. Executives from those firms as well as Coca-Cola, Campbell Soup, Prudential Financial and Procter & Gamble served on The Conference Board Committee on Corporate Political Spending.

“It has been a journey over the last few years around our process,” Matthew Lepore, vice president and corporate secretary, and chief counsel of corporate governance of Pfizer, said at the symposium. “Our board’s view has been about process, specifically where our piece on disclosure is:

  • How we decide to give
  • To whom we give
  • How we give it.”

Charles Grezlak, vice president of state government affairs & policy for Merck and co-chair of the committee with Dan Bross, senior director of corporate citizenship for Microsoft, described his company’s process.

“We have committees that decide on corporate political spending,” he said. “So we always had these procedures in place. And when we began meeting with shareholders who had shareholder proposals [calling for corporate political spending disclosure], we decided to be more transparent.”

As for The Conference Board Committee on Corporate Political Spending, Grezlak mentioned that the committee plans on holding a second symposium in the spring to discuss further developments as the 2012 presidential election will be in full swing. For more information on the committee, contact marcel.bucsescu@conference-board.org.

  • 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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