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Perspectives: January 2016

Taking the Lead on Political Disclosure
By Ann M. Ravel, Chair of the Federal Election Commission

At a time when increasing amounts of undisclosed “dark” money flow into American politics, many of the largest corporations have moved toward greater transparency in their political spending. More than 125 companies in the S&P 200 have political spending disclosure and accountability policies in place. They come from across the spectrum of industries, including IT, pharmaceuticals, health care, chemicals, and aerospace/defense. These companies have taken the lead, implementing these policies voluntarily and without waiting on regulators to impose disclosure requirements.

Political disclosure is vital to a healthy democracy. As Justice Anthony Kennedy wrote in the US Supreme Court’s 2010 Citizens United decision, “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way.” Arming people with information allows them to vote in a way that is consistent with their views and interests. For this same reason, we benefit from transparency in commercial markets.

Indeed, as so many of America’s largest companies recognize, disclosure is good business. It is a prudent and cost-effective way to maintain control of corporate spending decisions. In addition, when a company is transparent about its political spending, investors can have confidence that the company’s policy work is aligned with business goals.

By contrast, without transparency, it is more difficult for companies to adequately monitor how their money is used, to identify problems, and ultimately to manage risk. The risks that accompany political spending can be legal, reputational, or business. And they have become more complex and costly with the increased flow of undisclosed money into the political system. For example, an outsourced payment could be used to support activities at odds with the corporation’s interests. An unaccountable employee may use political spending for improper or illegal purposes. Undisclosed political spending also risks undermining market competition, as politically favored competitors gain unseen access and influence.

Disclosure is in the company’s interest not only because it is good governance and helps manage risk, but it is also an important way for corporations to build and maintain the trust of customers, investors, policy makers, and the public. As the 2013 Edelman Trust Barometer noted, stakeholders have increasingly emphasized the importance of corporate integrity attributes, including transparency and open business practices. This was reinforced by Edelman’s 2014 survey results, and it showed—as many companies already know—that there is a significant opportunity to enhance public trust and investor confidence when companies adopt disclosure policies.

The altered legal landscape surrounding political spending and the resulting rise of secret spending have made political disclosure and accountability one of the major corporate governance issues today. At the same time, the information age has raised expectations among investors, customers, and the broader public that companies will increase transparency across business operations. America’s largest companies have stepped forward to make political disclosure policies a mainstream best practice. This trend surely will continue because transparency and accountability promote greater trust and confidence—which is in everyone’s interest.

About the Author:

Commissioner Ann M. Ravel is Chair of the Federal Election Commission for 2015. The Federal Election Commission (FEC) administers and enforces the Federal Election Campaign Act (FECA) - the statute that governs the financing of federal elections. The duties of the FEC, which is an independent regulatory agency, are to disclose campaign finance information, to enforce the provisions of the law such as the limits and prohibitions on contributions, and to oversee the public funding of Presidential elections.


The ESG Center facilitates small groups of prominent senior executives from companies, investors, and advisors for confidential discussions of key issues.

Handbook on Corporate Political Activity
This handbook offers an overview of the legal rules and standard practices related to political activity, as well as a discussion of internal oversight of political spending.

Complimentary registration required.

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