Published October 28, 2011
By Kim DixonMore American companies are bending to shareholder pressure to reveal their spending to sway political campaigns despite court decisions allowing unfettered corporate cash in elections, according to a study released on Friday.
Colgate-Palmolive Co, IBM and Merck & Co are among the big names with the best grades from the Center for Political Accountability, a foundation-funded group that pushes companies to open up their books.
The landmark Citizens United ruling by the U.S. Supreme Court in 2010 ended most restrictions on campaign donations by corporations and unions, giving these groups the ability to write fat checks to back political causes.
But pressure has been building for years from shareholders of public firms to shed light on such spending. Proponents of disclosure argue that getting involved in politics poses big risks for a company's reputation and brand.
Target Corp learned that lesson the hard way, when it gave $150,000 in 2010 to a Minnesota business group that backed a Republican candidate for governor who was a staunch opponent of gay marriage.
Potential shareholder ire "has got the attention of companies because now there is greater recognition that political spending poses real risks," said Bruce Freed, president of the Center for Political Accountability. "Are they there yet? No. But the direction is important."
The candidate ultimately lost the race but Target was forced to defend itself from shareholders and some in the public, who threatened a boycott.
Shareholders have had increasing success in pushing companies to open up about their donations. Of the 33 resolutions at major companies that made it to a shareholder vote in 2011, the average support was about 34 percent, according to the Center. Several years back, support of such resolutions was about 10 percent.
Three-fifths of the Standard & Poor's 100 companies are now reporting direct corporate spending, while 43 companies report some information about political spending through third parties like trade groups, the survey found.
Before the Citizens United ruling, companies could spend $5,000 from their employee-funded political action committees on a candidate per election. Now, there are no limits.
Citizens United and other legal rulings will help make the 2012 presidential election the costliest ever, with a price tag of $6 billion or more, according to some independent estimates.
Some well-known corporations say they would not risk their brand by giving to a group with an overly political agenda.
"Most companies are worried about alienating consumers," said Wesley Bizzell, assistant general counsel of tobacco conglomerate Altria, which scored in the top tier in the survey.
Under Citizens United, pro-business trade groups like the U.S. Chamber of Commerce and other tax-exempt entities won new powers to spend unlimited pools of cash without disclosing donors.
Corporate America has a ways to go in detailing this funding, Freed and other activists said.
"All of the secret money is being laundered through tax- exempt groups, which means, if a corporation is going to agree to disclose its political activities, to be effective, it must include the money it gives to trade associations," said Fred Wertheimer, a veteran campaign finance lawyer and president of Democracy 21, which promotes campaign finance reform.
The use of funds from undisclosed sources rose to $135 million in the 2010 elections, up from about $76 million in 2008, according to the nonpartisan Center for Responsive Politics.
IBM, for example, requires that the money it gives to the Chamber not be for political activity such as advertising.
But most companies do not put such restrictions on the funds to these organizations.
"There is a lot of latitude for organizations to have it both ways." said Sheila Krumholz, executive director of the nonpartisan Center for Responsive Politics.
(Editing by Philip Barbara)