Tag Archives | Citizens United

SEC Commissioner Wants to Muzzle Shareowners

DanielGallagherIn a speech to the 26th Annual Corporate Law Institute held at Tulane University Law School on Federal Preemption of State Corporate Governance, SEC commissioner Daniel Gallagher delivered a scathing attack on small investors and proposed radical steps to severely limit democracy in corporate governance.

Gallagher opened his attack by stating,

 Activist investors and corporate gadflies have used these loose rules to hijack the shareholder proposal system. Continue Reading →

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Review – The Nature of Corporate Governance: The Significance of National Cultural Identity

TheNatureofCorporateGovernanceThe Preface to this book is so powerful that I have to begin my review with the words of the authors, Janet Dine and Marios Koutsias.

The thesis of this book argues that national corporate governance is extremely important for societies. Recently many scholars have said that a convergence of corporate governance is inevitable. We believe that it is true but like Mark Twain said “the reports of my death are greatly exaggerated.” We show that although there is some convergence, national law of corporate governance is thriving. We also believe that it is necessary for the identity of each country. The reason that national diversity in corporate governance is still widespread is because of the history, philosophy and economy of each county as shown in its cultural heritage, and which it gives its identity. The cultural heritage in each state is identifiable in the company law and corporate governance codes. We consider that this is crucial for the well being of democratic nations. Convergence in corporate governance is a threat to ordered commercial regulations because of the power of the preeminent economic paradigm in the West which is the neo-liberal model. The neo-liberal agenda that predicates deregulation, privatisation and the liberalisation of markets is moulding many jurisdictions into an Anglo- American model of corporate governance which is dangerous for a number of reasons: Continue Reading →

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Political Disclosure and Corporate America

Stephen Davis

Stephen Davis

Guest Post from Stephen M. Davis, Ph.D. is associate director of the Harvard Law School Programs on Corporate Governance and Institutional Investors, and a senior fellow at the Program on Corporate Governance. He is also a nonresident senior fellow in governance at the Brookings Institution. From 2007-2012 he was executive director of the Yale School of Management’s Millstein Center for Corporate Governance and Performance and Lecturer on the SOM faculty. Continue Reading →

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Video Friday – Corporate Speech: The Role of Corporations in Lobbying and Influencing Policy

Moderator: Jesse Eisinger, reporter at ProPublica, covering Wall Street and finance. Panelists: Martin Redish, NU Law; Robert A. Weinberger, Senior Fellow, Aspen Institute Initiative on Financial Security; former VP Government Relations, H&R Block; Chairman, Center for Responsive Politics; Lynn Stout, Cornell Law; Nell Minow, founder of GMI Ratings and co-founder and editor of the Corporate Library, a research firm for oversight on corporations and executive compensation. Continue Reading →

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Op-Ed: Citizens United and the 2012 Election: Bad News and Good News

Guest post from Jeffrey Clements.

Make no mistake, the impact of the Supreme Court’s fiasco in Citizens United v. FEC on the elections and our government was even worse than predicted. That’s the bad news. The good news is that the forces of reform, led by the growing movement for a 28th Amendment to the US Constitution, also made a forceful showing in November. Continue Reading →

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Investors Press for Disclosure of Political Spending: Please Vote for Resolutions

Last week, investors announced  filing shareholder resolutions at more than 50 corporations as part of a 2013 proxy season initiative asking companies to annually report their federal and state lobbying, including any payments to trade associations used for lobbying as well as support for tax-exempt organizations that write and endorse model legislation.

Take Action: In his Citizens United dissent, Justice Stevens argued  the law should protect shareholders from funding speech they oppose. The majority, however, argued that Continue Reading →

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How Mutual Funds Voted on Political Disclosures

As we look back on the 2012 elections one thing is clear, money flowed like water with any barrier that might have contained it removed by Citizens United. Writing for the court in the 5-4 decision, Judge Kennedy opined:

With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests. Continue Reading →

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SEC to Propose Rules on Corporate Political Spending by April 2013

The SEC recently updated its entry in the Office of Management and Budget’s Unified Agenda to indicate that, by April, it plans to issue a Notice of Proposed Rulemaking to require public companies to disclose their spending on politics. This is huge! Perhaps petitions, accompanied by thousands of e-mails from supporters, actually can have an impact. Congratulations to Bebchuk and Jackson, co-chairs of the Committee on Disclosure of Corporate Political Spending. See their post at HLS corpgov site. Continue Reading →

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A New Strategy to Fight Citizens United

Guest post from . Author, ‘The Myth of Choice’; law professor at Boston College. This article is adapted from a more substantial essay in the Fall 2012 issue of Democracy: A Journal of Ideas and appeared previously on Huffington Post, 9/15/2012.

We progressives have been in quite a tizzy about Citizens United, especially now that 2012 election cycle is swamped with Super PAC money. Citizens United, you’ll remember, is the 2010 Supreme Court case saying that corporations have the same rights to engage in political speech as you and I do. In response, a number of progressives have proposed constitutional amendmentsto do away with corporate “personhood.” Continue Reading →
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Trillium & Green Century Mark Citizens United Anniversary With Resolutions Urging Halt to Political Donations

On the 2nd anniversary of the Citizens United Supreme Court decision, two investment firms announce that they have filed shareholder resolutions at three companies, Bank of America, 3M & Target Corporation, urging them to refrain from making political donations in the future. This is the first time institutional shareholders have Continue Reading →

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Complexity Theory & Corporate Governance Failures

Catching up on a couple of noteworthy reviews from recent issues of Corporate Governance: an International Review.

Corporate Governance and Complexity Theory by Marc Goergen, Christine Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamde and Iris Hse-Yu Chiu.  Reviewer Diane Denis was hoping the application of complexity theory would lead to insights concerning how and where problems arise, allowing corporations to manage more effectively. Instead, according to Denis, the authors use complexity theory to advocate stakeholder governance. Like other such efforts, they fail to Continue Reading →

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Bill Moyers on the Patriot’s Dream

Bill Moyers has been a long-time hero for me, right up there with Bob Monks and Bob Tricker. In an address on the 40th anniversary celebration of Public Citizen, Moyers had some choice words. Below are a few snippets:

Our politicians are little more than money launderers in the trafficking of power and policy – fewer than six degrees of Continue Reading →

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Two Opportunities to Shape the Future

First, the IRRC Deadline of November 18 for Research Entries approaches. This is your chance to change the predominant paradigm of Modern Portfolio Theory.

Second, Institutional Shareholder Services Inc. (ISS) extended the comment period on their 2012 proxy voting policies until November 7th.  Institutional investors, individual investors, corporate issuers, and governance market participants are invited to provide feedback on ISS’ policy updates.  ISS did a specific outreach to CorpGov.net readers, so I Continue Reading →

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Support Grows for Transparency in Corporate Political Spending

A group of 43 House Democrats is urged the SEC to require public companies to disclose their political contributions. The Council of Institutional Investors also sent a comment letter on a petition (File Number 4-637) filed by prominent law professors.

Rep. Gary Ackerman (D., N.Y.) and 42 other House colleague argue the high court’s ruling in the case, Citizens United v. Federal Election Commission, was “misguided” and left shareholders “completely in the dark, unaware that their money could be funding political attack ads.”

Shareholders cannot hold corporate management accountable for decisions the shareholders never knew were made. The present system is undemocratic and untenable.

Shortly after the decision, Rep. Gary Ackerman (D-NY) introduced the Corporate Politics Transparency Act, which would require corporations Continue Reading →

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Support Rulemaking Petition on Corporate Political Spending

A group of ten very prominent corporate and securities law experts submitted a formal rulemaking petition to the SEC last week urging the Commission to develop rules requiring public companies to disclose the use of corporate resources for political activities to shareowners. Please take a few minutes to join with me writing an e-mail to the SEC in support of their petition and the important issue seeks to address.

The petition was submitted by the Committee on Disclosure of Corporate Political Spending, co-chaired by Lucian A. Bebchuk, Professor of Law, Economics, and Finance at Harvard Law School and Robert J. Jackson, Jr., Associate Professor of Law at Columbia Law School. Bebchuk and Jackson are co-authors of Corporate Political Spending: Who Decides?, and prior posts about the subject of Continue Reading →

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Shareholder Protection Act

The Story of Stuff people did a great job of creating a video about Citizens United, asking for a Constitutional Amendment limiting corporate influence…very ambitious but unlikely to provide a solution anytime soon.

The SEC ruled that shareowner proposals calling for approval of political spending must be included on the company’s proxy card and put to a shareholder vote. However, there are thousands of corporations and tackling them one at a time will also take many years.

Bills introduced last week in both the House and Senate attempt to address Citizens United more globally than one corporation at a time. The Shareholder Protection Act would mandate extensive disclosure, a role for independent directors, and shareowner approval.

  • First, the Shareholder Protection Act would require companies to disclose to shareholders each year both the amounts and recipients of the company’s spending on politics. According to Lucian A. Bebchuk and Robert J. Jackson, Jr., the SEC currently has the authority to require disclosures of this type. They urge the SEC to develop rules that would require that shareholders be given information on corporate political spending.
  • Second, the Act would require oversight of political spending by the board of directors of amounts over $50,000. Individual board member votes and the details of approved expenditures will be disclosed online within 48 hours and to shareowners and the SEC on quarterly basis. Bebchuk and Jackson also favor requiring directors to provide shareholders, in each year’s proxy statement, with a report explaining their choices and policies concerning the company’s spending on politics.
  • Third, an affirmative vote by shareowners would be required to approve the amount of any corporate spending on politics. Bebchuk and Jackson would give shareowners both a say on the overall level of spending and the power to adopt bylaws governing how this spending will be distributed. Giving shareowners veto over the budget for political spending, without any say over the targets of that spending, may unnecessarily limit choices between no spending at all or endorsing management preferences that don’t align with those of shareowners.

More information at Colbert’s Knock Knock Joke is Funny Because It’s True….Unless (The Corporate Library, 7/15/2011), The Re-Introduction of the Shareholder Protection Act, (HLSFCG&FR, 7/14/2011), 11 Reasons Why We Need the Shareholder Protection Act, Business Ethics, 7/13/2011, and Contact Congress via Public Citizens.

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Conference Board to Examine Corporate Political Spending

The Conference Board formed a committee of representatives from Fortune 500 companies and “corporate citizenship executives” to research issues related to disclosure and accountability of corporate political spending and develop a  report by fall that will provide corporations with a toolkit of resources to strengthen their governance practices in this area.

The current member companies of the Committee on Corporate Political Spending include Campbell Soup Company, Exelon Corporation, Merck & Co., Inc., Microsoft Corporation, and Pfizer Inc. The Committee is co-chaired by Dan Bross, Senior Director, Corporate Citizenship, Microsoft Continue Reading →

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Target & Citizens United

I’m on vacation, visiting friends in Boaton before Yale Governance forum but this looks noteworthy:

More than 100 protesters bearing signs with messages such as “Hands Off our Elections,” “Corporations are not people,” and “No Mouth, No Soul, No $peech” rallied outside of the not-yet-opened Target store in the East Liberty neighborhood of Pittsburgh, Pa.

Several of the demonstrators – acting as proxies on behalf of Target shareholders – entered the shareholder meeting to interrogate CEO Gregg Steinhafel about the corporation’s expenditure of $150,000 to support an extreme right-wing candidate during the 2010 elections.

Questions about corporate money in politics in the wake of the Supreme Court’s ruling in Citizens United v. Federal Election Commission dominated the shareholder question and answer session.

via Target CEO “embattled and annoyed” by critics « CitizenVox.

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How I Voted: Home Depot

Home Depot (HD) is one of the stocks in my portfolio. Their annual meeting is coming up June 2. ProxyDemocracy.org had five funds voting.

Checking the Summary Compensation Table, it appears CEO/Chair Francis S. Blake was paid about $10.5 million. Using the United States Proxy Exchange (USPX) released draft guidelines, I am voting against most pay packages over the median for large-caps of $9 million, including this one. I also voted against all members of the compensation committee: Brenneman, Codina and Hill.

I voted in favor of the proposal by Evelyn Y. Davis for cumulative voting. This right could become increasingly important is shareowners are ever given proxy access. I voted in favor of William Steiner’s proposal to allow special meetings to be called by 15% of the shares. I’ve introduced similar proposals and see this as simple good governance.

Similarly, I favor the proposal by Trillium Asset Management for a diversity report. Home Depot should take a leadership position on this important issue. I also favor the proposal from NorthStar Asset Management Funded Pension Plan to allow a shareowner vote on specified political expenses. After Citizens United, I think such votes at every company are warranted.


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Kodak Agrees to Green Century Request for Political Transparency

Green Century Capital Management, Inc., a Boston-based investment adviser to the environmentally responsible Green Century Funds, announced that Eastman Kodak Company (Kodak) joins 79 other companies that have agreed to greater political transparency and accountability, according to the Center for Political Accountability (CPA).

Kodak will provide increased transparency on its payments to trade associations and other tax exempt groups and will provide more information on its accountability structures governing its political giving.

The agreement resulted from a dialogue Green Century had with the company in conjunction with the CPA, a nonprofit, non-partisan advocacy organization leading the political disclosure and oversight effort. Green Century stressed the importance of ensuring shareowners are aware of the full spectrum of political spending made by their firms, especially those made through trade associations like the U.S. Chamber of Commerce.

Companies are not required by law to disclose political contributions or payments to trade associations for political purposes. Moreover, trade associations are not required to disclose the specifics of their political spending or their membership. This secrecy leaves institutional investors, individual shareholders and even member companies in the dark.

In light of the Supreme Court ruling in Citizens United v. Federal Election Commission, which permits corporations to spend freely on independent advertising for and against political candidates, many investors believe this type of disclosure is more Continue Reading →

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Video Friday: Citizens United via StoryofStuff.org

In 2011, investors including many of our managers are filing 83 different corporate political spending shareholder resolutions. The motivation for these resolutions comes directly from the landmark decision by the Supreme Court in Citizen’s United vs. Federal Election Commission case that permits corporations to spend freely to influence American elections.

By now, most people are familiar with the Story of Stuff Project directed by Annie Leonard and produced by Free Range Studios. This year, they’ve put together a great video focusing on Citizen’s United vs. FEC.

Watch the video which explains the issues in a fun, easy to digest way. At the same time they propose solutions such as a constitutional amendment to overturn the Supreme Court’s ruling and implement public financing of elections. (Thanks to Goodfunds Wealth Management).

Watch the video at Story of Stuff. And a great follow-up is Naomi Kline talking about Disaster Capitalism on the Rachel Maddow Show. See also, The Shock Doctrine: The Rise of Disaster Capitalism

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Shareholders Can End Political Ad Secrecy

This month marks the first anniversary of the landmark Supreme Court Citizens United decision striking down restrictions on independent political spending by corporations and unions. But heated national debate continues. Major controversy has erupted over independent or third party organizations channeling secret donations into the elections. President Obama strongly criticized the decision, stating that it would “open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.”

Polls showed that 80 percent of Americans opposed the decision.

In reaction, the House passed disclosure legislation but it failed in the Senate. As a result, millions of dollars in undisclosed donations poured into the 2010 elections. The Chamber of Commerce alone spent a reported $75 million to unseat primarily Democratic members of Congress who opposed Chamber policies.

With government stalled, it will be up to private citizens to take action. Some groups have called for companies to disclose their donations. But since the largest share of these secret donations goes to buy expensive TV ads, the focus should be on the major broadcast and cable TV companies. There is another way to end donor secrecy:

Shareholders should file resolutions requesting television companies to refuse ads from groups which don’t provide full disclosure of donors.

Ironically, the concentration of TV ownership makes this approach practical. A handful of publicly traded companies dominate the US media landscape. These include GE/Comcast (NBC), Disney (ABC), CBS, News Corp (Fox),and Time Warner

People assume that stations must run these ads since the Communications Act of 1934 requires that broadcasters grant “reasonable access” to airwaves for political speech. However, that rule has typically been applied to candidates for political office, not independent groups. Regulations governing direct candidate advertising don’t apply. The FCC has no rule prohibiting stations from refusing such ads.

Stations frequently do refuse political ads. In a case involving anti-war ads, the Supreme Court ruled that “the Communications Act…does not require broadcasters to accept editorial advertisements.” Indeed, during 2008, some TV network affiliates refused to run anti-Obama ads.

Further, since stations have the discretion to refuse the ad, they are no longer shielded from liability for the accuracy of the ads, just as with a commercial product.  In a Congressional race, a Denver TV station stopped running a third party ad stating that the sponsor failed to substantiate its claims.

Given this legal liability risk, shareholders must weigh the possible financial impact to their company of running such ads without full transparency. Currently, third party ads only have to disclose the sponsor’s name, contact information and key officers.

A second issue for shareholders is that the station’s association with ads funded by secret donations could harm the company’s reputation and potential profits. This happened to the Target Corporation, which became the object of a boycott after disclosure of a donation to an organization running ads supporting an anti-gay marriage candidate.

Finally, public distaste for secrecy, combined with the potential for foreign influence over US elections, is more reason for the media to adopt disclosure policies. Without full disclosure, shareholders can clearly claim that there is no way for companies to eliminate legal and financial risk. This shareholder claim is expressly affirmed in the proposed Congressional DISCLOSE ACT,

The American people have a compelling interest in knowing who is funding independent expenditures …to influence Federal elections… (D)isclosure of the funding sources… can provide shareholders, voters, and citizens with the information needed to evaluate the actions by special interests seeking influence over the democratic process. (emphasis added.)

It is time for shareholders to stake their claim AND FILE shareholder resolutions.

© Copyright Ron Freund  January 2011. Ron Freund is Director of Corporate Responsibility for the Social Equity Group, a California socially responsible investment firm.

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Vermont State Senator Seeks to Redefine Persons as Human Beings

Vermont, state senator Virginia Lyons introduced a bill to seek an amendment to the US Constitution providing that corporations are not persons. The movement is in reaction to the Supreme Court’s  Citizens United decision, which allows unlimited corporate spending in elections as a form of “free speech” for the corporate “person.” According to dissenting Justice John Paul Stevens:

Corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their ‘personhood’ often serves as a useful legal fiction. But they are not themselves members of ‘We the People’ by whom and for whom our Constitution was established.

According to a ABC News poll, 76% of Americans oppose the Citizens United decision. (Vermont Is Gearing Up to Strike a Major Blow to Corporate Personhood, Ban It Statewide | AlterNet.)

Corporate Sponsored Judges

Time to get on board by signing the MoveOn.org petition. Here’s the full text of the petition:

  • “Corporations aren’t people and shouldn’t be able to corrupt our democracy. We need as many state legislatures as possible to get behind the call for a constitutional amendment to reverse the Citizens United ruling.”

We’re asking every state legislator in the country to back adopting resolutions supporting the only remedy we have left to correct the Supreme Court’s Citizens United decision: a constitutional amendment clarifying that corporations are not people.

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Disclosure & Board Oversight of Political Spending Weak: Contributions Negatively Correlated with Firm Value

A new study finds that while nearly 80 percent of S&P 500 companies have disclosed direct political campaign spending policies, 86 percent have no disclosed policies regarding indirect political expenditures. Additionally, only 20 percent of corporations disclose how much is actually spent and which organizations or causes receive the funds.

Key research findings include:

  • Nearly 80 percent of the S&P 500 companies have disclosed political campaign spending policies. However, only a distinct minority has stand-alone policies that are easily accessible and with clear descriptions of spending decision making and oversight. The publicly available language that companies use to describe their political spending is usually not precise, and rarely includes all types of political spending.
  • 86 percent of the S&P 500 does not have stated policies on indirect political spending via contributions to trade associations and non-profit interest groups that have become a key area of concern. Financials firms are notably less likely than other sectors to have any policies on indirect spending.
  • Less than one-quarter of S&P 500 companies require their boards to oversee political spending. Nearly all of those are the largest companies in America. Least likely to have oversight are smaller companies and companies in the Consumer Discretionary sector. Board oversight is more prevalent in the Health Care sector, which has been in the spotlight in recent elections and the subject of sweeping and controversial reform enacted in March 2010.
  • More than 80 percent of the S&P 500 companies do not provide information on actual contributions, as opposed to the policies that ostensibly control that spending. Almost all companies that do report are at the top end of the revenue scale. One-third of Health Care companies disclose spending but only about 10 percent do in three other sectors—Financials, Telecoms and Consumer Discretionary.
  • Only 52 companies indicated they do not use “independent expenditures” to advocate for or against the election of candidates.
  • About half of all S&P 500 companies provide some information on which company officers make spending decisions. This management transparency is most common among Consumer Staples companies. In contrast, Financial sector companies provide the least amount of information, even though Congress enacted significant and contentious reforms for the industry in July 2010.
  • Nearly 60 percent of S&P 500 companies spend shareholder money from the corporate treasury on political campaigns, while two-thirds have political action committees that spend money contributed by corporate executives. Utilities – amongst the most highly regulated industries – are more likely than any other sector to support candidates, parties and interest groups’ political committees. Information Technology companies are the least likely to spend in these categories.
  • Board oversight encourages disclosure of what companies do spend, but there is no evidence that such oversight affects spending.

The study was conducted through an examination of S&P 500 companies’ federal and state campaign contribution data and other publicly available information, combined with the results of a Si2 survey sent to each company. The report also includes two case studies and a short primer on the various types of political spending. The full study is available at www.irrcinstitute.org and www.siinstitute.org and is included in the IRRC sponsored Social Science Research Network Corporate Governance Network at http://www.ssrn.com/cgn/index.html. (full press release)

On a related note, John Coates has a draft study, Corporate Governance and Corporate Political Activity: What Effect Will Citizens United Have on Shareholder Wealth?, that found during the period 1998-2004 shareholder-friendly governance was consistently and strongly negatively related to observable political activity before and after controlling for established correlates of that activity, even in a firm fixed effects model. Political activity, in turn, is strongly negatively correlated with firm value. These findings – together with the likelihood that unobservable political activity is even more harmful to shareholder interests – imply that laws that replace the shareholder protections removed by Citizens United would be valuable to shareholders.

See prior post, Citizens United: Most Won’t Engage But Won’t Monitor Either, as well as Follow the (Corporate Campaign) Money @ the The Murninghan Post, 10/14/2010.

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Citizens United: Most Won't Engage But Won't Monitor Either

Back in July, I signed onto a letter from the Center for Political Accountability, Walden Asset Management and Domini Social Investment asking companies about their use of new corporate political spending routes opened up by the Citizens United decision.

As of October 7, 2010, 68 companies have formally responded, with several more responses expected.

35 of the responders stated they do not plan to engage directly in any independent expenditure activity. However, relatively few companies have committed to hold their trade associations’ political spending to scrutiny by imposing conditions on dues payments or other means. Other notable trends and highlights in the responses include:

  • Many smaller companies stated that because they generally do not engage in the political process, they do not see the need to implement a policy regarding independent expenditures or trade association monitoring.
  • Several companies stated that they currently or will begin to inform their trade associations that no portion of their dues may be used for political expenditures. Philip Morris International included a template of the communication it sends with its dues payments stating that none of the dues may be used for election activity.
  • Many larger companies declined to answer the questions posed or commit to any increased disclosure.
  • 30 companies stated that they would not engage in independent expenditures, but were reluctant to monitor or impose conditions on their trade association payments or did not address the issue at all.
  • All of the responders in the health insurance industry (Aetna, UnitedHealth, WellPoint) declined to outline their positions on independent expenditures.
  • Several responders appear to still be reviewing the implications of Citizens United and were not in a position to comment on the questions posed in the letter. Some of these responders say they will consider our ideas when formulating their policies.

Further information at Companies spend indirectly on politics (USA Today, 9/8/2010) and in this summary document (pdf)  with 2-3 prominent quotes from all of the responsive companies. Contact: Aaron W. Stanley, Staff Associate, Center for Political Accountability.

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