Since the Supreme Court handed down Citizens United, which expanded the ways corporations can spend money to influence elections, there has been an accelerating drumbeat of calls for heightened disclosure requirements. After all, Justice Anthony Kennedy’s majority opinion in the 2010 ruling relied in part on the presumed ease with which political contributions may be disclosed in the modern era.
Yet seven years later our political system remains awash in cash with unclear origins. We are no closer to a robust regime of campaign finance transparency. Corporations spend especially heavily in state and local races, where even small amounts of money can have a significant impact, and they channel torrents of secret political money through third-party organizations such as trade associations. What’s more, given the current state of affairs in Washington, legislative and regulatory efforts to require disclosure are dead in the water for the foreseeable future.
{mosads}Meanwhile, voluntary disclosure by companies has provided important insight into previously hidden political spending. Spurred by socially responsible investors who file shareholder proposals asking their companies to disclose election-related spending, corporations have begun generating their own political spending reports and posting them on their websites. Since 2004, investors and the Center for Political Accountability (CPA) have reached over 150 agreements with companies to obtain this information, and they are gradually turning voluntary disclosure into a common practice among the country’s top public corporations.
In addition, the annual CPA-Zicklin Index of Corporate Political Disclosure and Accountability, which ranks companies in the S&P 500 based on their political spending transparency and accountability policies, is helping transform voluntary disclosure into the norm. The 2016 index reported that 305 public corporations had adopted some level of voluntary political spending disclosure. Of those corporations, 153 had struck agreements with shareholders while the rest adopted transparency and accountability policies of their own volition.
Until recently, these voluntary disclosures were scattered across various company websites, making it difficult for the public to get a broad picture of corporate involvement in election-related spending. But now there is a new tool bringing clarity to corporate political spending, benefitting investors, directors, executives, journalists, and the public.
TrackYourCompany.org, a database developed by the Center for Political Accountability, aggregates companies’ voluntary disclosure reports, allowing users to search and sort political spending data based on company, recipient, state, type of contribution, and various other factors. It includes direct contributions to political entities, but more importantly it has data on so-called “dark money” payments to third parties — including trade associations and 501(c)(4) organizations — that can be used to influence elections. In 2015 alone, companies reported more than $6 million in contributions to 501(c)(4) groups and $146 million in payments to trade associations — spending that would otherwise go undetected because such groups are not required to disclose their donors.
Going forward, this “dark money” realm is where more companies must demonstrate their commitment to responsible political spending. Shareholders, consumers, and the public can’t begin to comprehend how corporate contributions are affecting our politics — and the corporation’s bottom line — without voluntary disclosure. Currently, only 45 percent of the S&P 500 disclose their payments to trade associations, and 31 percent disclose their payments to 501(c)(4) organizations.
In the age of President Trump, the question of how companies use shareholders’ money for political purposes is particularly salient. As companies continue to be named and in some cases shamed by the president, many observers expect to see an uptick in company political spending. While involvement in the political process has long been an accepted part of doing business in America, secret spending can lend itself to exploitation of, or by, corporations. Such exploitation not only undermines the democratic process but also leads to policy outcomes that distort the competitive nature of markets. And in today’s hyper-partisan environment, every political contribution or expenditure comes with the risk of alienating half of a company’s customer base.
Today, the burden falls on companies to safeguard their reputations by being forthcoming with shareholders and consumers, and by adopting protective transparency and accountability policies. Even where the law does not require disclosure, anonymity can’t be guaranteed. Inadvertent disclosure will always pose a risk to companies — one that can be mitigated by establishing robust decision-making, disclosure, and oversight policies and procedures.
It is for these reasons that now more than ever, companies must have their political spending houses in order.
Bruce F. Freed is president of the Center for Political Accountability, an organization dedicated to bring accountability to corporate political spending.
Nanya Springer is vice president of programs at the Center for Political Accountability.
The views expressed by contributors are their own and are not the views of The Hill.