The founding of the Center for Political Accountability in 2003 was propitious. The goal of bringing transparency to corporate political spending has been timely for this nonprofit, nonpartisan advocacy group. It might seem surprising, but the organization spearheaded directly engaging with companies on this subject. Along with more than thirty shareholder advocates, the NGO has improved transparency and supervision of this type of business disbursement. The subject of their work also includes funds given to various types of tax exempt organizations, including trade associations, as well as soft money donations.
Following its establishment, CPA has grown into a leading practitioner in improving disclosure of donations to political causes. From the beginning, the group has engaged shareholders and companies in the process. The nonprofit supports an open and responsible engagement in politics by corporations. It is guided by the belief that company boards, shareholders, investors and the general public would benefit from bringing such activities out into the open.
The advocacy group has effectively used current laws and regulations that support ethical decisionmaking. It has developed a model code for corporate political activity derived from the published practices of leading corporations. Major corporations have modeled their codes on this model code. A 100 companies have committed to its framework and during the 2012 proxy season, 12 additional companies adopted its proposed standard for disclosure.
At the moment, the SEC is considering whether to issue a rule mandating public companies to disclose their political grants. Should it go ahead, this would make uniform practice what discourse advocates have been achieving through a piecemeal approach. Critics have opposed this prospect by taking the position the role of the agency does not extend to protect voters. However, its role in protecting the interests of investors will be served by such a rule. These investors as owners are entitled to have access to such information. Conversely, as members of the public, they should know what other enterprises are communicating in this context. As the agency has compelled public reporting since its establishment, it can exercise its power on this subject.
In the new era which has emerged with the Supreme Court approval of the Citizens United case, the focus of CPA advocacy has a new urgency. A number of companies have begun a practice of secret donations using front groups and trade associations. They have strived to escape increased scrutiny through this activity. But, transparency in this environment has become of greater relevance.
The risks of bad publicity have been highlighted by the public embarrassment of Target and other enterprises. Target publicly regretted its decision to contribute to a group that supported a candidate who was against gay marriage. This was not before it was subject to store protests, boycott activity and negative social media publicity. A shareholder resolution was introduced to prevent a repeat of this activity. Prudential Financial, PepsiCo, Dow Chemical, UPS and Pfizer have also been subject to shareholder action for contributions disappointing their shareholders.
Such backlashes have demonstrated that a proactive stance is more constructive. There has been an environmental change since the Supreme Court decision that needs to be taken into account more seriously. With greater spending freedom has come great responsibility for exercising prudence. Companies must expect closer inspections their actions.
Yet, there is much room for improvement. So far around 50 percent of Fortune 100 companies have adopted a disclosure policy of some type. Many others need to follow suit. The Center for Political Accountability is a key player in the struggle for change.
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