Overtime, we have seen our electoral process eroded by special interests groups and lobbyists, coupled with much money to influence elections and elected officials. The emergence of a new Republican party has launched a nation-wide effort to suppress the vote through bills that would disenfranchise millions in over 34 states, and have become law in 14.
Of equal concern, the Citizens United (see also SCOTUS blog) ruling “allows companies to spend unlimited sums in their own names or contribute to trade associations and other nonprofit groups that engage in political spending.” This further erodes the electoral process, leaving it open for more corruption and infusion of a culture of “don’t ask, don’t tell,” since disclosure of political spending is voluntary. Shareholders, however, may be the deciding factor on the issue of full disclosure for leading corporations.
Public disclosure of political spending creates a variety of risks for corporations, their boards and CEOs. Shareholders no doubt will want to know whether political donations being made are in the best interest of the company or the CEO or a board member. If you’re a pharmaceutical company that manufactures contraception pills, a political donation to a nonprofit pro-life group to support a pro-life candidate is not in line with company interests. An excellent read on how corporations and shareholders are dealing with disclosure in the wake of Citizens United is Gary Stern’s article, Dealing with political contribution disclosures.
In 2007, the Center for Political Accountability, which was formed in 2003 to “address the secrecy that cloaks much of the political activity engaged in by companies and the risks this poses to shareholder value,” united their efforts with the Zicklin Center for Business Ethics Research. After the Citizens United ruling, they used the CPA-Zicklin Index they created to assess corporate political spending under this ruling and released a report of their findings on October 28, 2011.
Of note, the report shows the unexpected is taking place: “voluntary disclosure of political spending is becoming a mainstream corporate practice, and a growing number of companies are putting restrictions on the political use of their money.” The report stresses the need for full versus partial, some or no disclosure of corporate political spending.
U.S. companies are at a crossroads. As a result of Citizens United, American corporations must now decide for themselves how, and to what extent, they will devote their treasury funds to influence elections. The decision has had immediate affect. In the 2010 election cycle, outside, or nonpolitical party, organizations reported spending $305 million, more than four times what they spent in the 2006 midterm elections. Tax-exempt groups that disclosed no information about their donors spent $135.6 million of the total.
The report also highlights the risks businesses face when engaging in political activity.
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