Spotlight on CPA - October 2019
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ALERT: SEC Proxy Rules Changes Threaten Shareholder Engagement
The U.S. Securities and Exchange Commission is expected on Nov. 5 to propose for comment controversial new rules to rein in proxy adviser firms and to weaken shareholders’ ability to campaign for change at companies, according to a Financial Times article. 

2019 CPA-Zicklin Index in Brief
The 2019 CPA-Zicklin Index of Corporate Political Disclosure and Accountability, evaluating the entire S&P 500 for the fifth year, spotlighted continued momentum for the campaign led by CPA since 2003. Here are top findings:
  • 2019 saw the greatest year-to-year increase in Trendsetter, or top-scoring, companies. They stand at 73, up from 57 last year.
  • The number of companies with improved scores of 50 points or more doubled from eight last year to 16 this year; and
  • Representatives of 60 companies had substantive conversations with CPA about adopting or strengthening political disclosure and accountability policies.

Strong Coverage Greets 2019 CPA-Zicklin Index
CPA’s ninth annual scorecard of how U.S. companies are adopting political disclosure received strong news media coverage reaching select audiences. This came despite a simultaneous blizzard of competing news on Ukraine and influence-seeking, a presidential impeachment inquiry and related topics.
Much of the coverage featured CPA’s own analysis of the Index results -- showing more companies adopting greater sunlight in response to an incendiary political climate today.

From MarketWatch, a website subsidiary of Dow Jones and Company: “American companies appear to have found a solution to the white-hot political atmosphere in Washington – more disclosure.”

From the Guardian: “Fearful of facing public wrath in a heated political environment, a record number of US companies have adopted stronger transparency and accountability practices over their political spending, according to a new report.”

From the Philadelphia Inquirer: “…[In] an age of backlash against corporate money in politics – think AT&T’s donation via disgraced White House lawyer Michael Cohen – companies are treading more carefully than in past years.” 

The news media examined both national trends and the scores of hometown corporations in their coverage of the 2019 CPA-Zicklin Index of Corporate Political Disclosure and Accountability.

Additional coverage included front page stories in NJ.Com newspapers, “Trump era has made corporations afraid to donate to political campaigns;” Bloomberg Law,  “More S&P 500 Companies Disclose Their Money in U.S. Politics;” Corporate Counsel, “'Incendiary Political Climate' Spurs More Companies to Disclose Campaign Contributions;” and the Center for Public Integrity,CORPORATE POLITICAL TRANSPARENCY: IT’S OPTIONAL.”
The most thorough article appeared in the Guardian. It quoted CPA at length to analyze the 2019 Index data.
“This year, because the stakes are so high going into 2020, US public companies are acknowledging and taking solid steps to manage the heightened risks from political spending,” CPA’s Bruce Freed told the Guardian.

“Increased scrutiny has forced companies toward greater disclosure and to take stands on contentious policy issues,” he said. “Social media and millennials have really raised the stakes for companies, and we’re seeing that in the type of policies companies are adopting.”


Wharton-CPA Conference Brings Together Broad Group to Update Company Conduct Code for Political Spending
CPA is moving to draft a revised Model Code of Conduct to help companies manage today’s heightened risks of spending on politics, following an all-day conference on the topic held at the Wharton School’s Zicklin Center for Business Ethics Research.

Delaware Supreme Court Chief Justice Leo E. Strine Jr. and U.S. Securities and Exchange Commissioner Robert Jackson delivered opening remarks at the Oct. 18 conference, co-sponsored by the Zicklin Center. Strine is a prominent expert on corporate tax law (see separate article in this newsletter) and wrote the foreword to this year’s CPA-Zicklin Index.

Participating in the conference were representatives of diverse interests including corporate governance experts, corporate America, investment managers, academia and the socially responsible investment community. 

While the conference was held under an agreement not to disclose the remarks of individual participants, CPA President Bruce Freed waived the restriction for his opening remarks, which are excerpted here:

“Twelve years ago, [CPA] developed a model code of conduct for political spending. It focused on the process for companies to follow for disclosing, managing and overseeing their political expenditures with corporate funds. The code was adopted by several leading companies and included in The Conference Board Handbook on Corporate Political Activity issued in late 2010. …"

“Today, the political environment companies need to navigate for their political spending has changed dramatically and the risk has increased exponentially. This new environment and risk level make the need for an updated code of conduct even more compelling. The updated code needs to incorporate a wider range of factors in decision-making, adherence and the assessment of the impact of contributions and the risk they pose. …”

“Beyond a company’s internal policy needs, a revised code is essential for including the new expectations of various stakeholders and shareholders and accompanying risks in company spending decisions and policies, oversight and related policies. What companies have to deal with today is vastly different from the situation when the original code was released.”

Session topics included “The New Terrain Companies Need to Navigate;” “Creating the Model Code;” and “The Role of the Institutional Investor and Proxy Voting.”

Delaware Chief Justice Leo Strine: Strong Voice for Corporate Political Disclosure and Institutional Investor Accountability
Chief Justice Leo E. Strine Jr. of the Delaware Supreme Court, one of the nation’s foremost and forthright judges, made this month a passionate public call for institutional investors to push for change.

“In a sweeping manifesto published in conjunction with a corporate governance conference at New York University, Chief Justice Strine is urging investors to push a progressive agenda in which corporations focus on long-term sustainability, workers, consumers and the environment,” Reuters reported

Strine’s paper is entitled, “Toward Fair and Sustainable Capitalism: A Comprehensive Proposal to Help American Workers, Restore Fair Gainsharing between Employees and Shareholders, and Increase American Competitiveness by Reorienting Our Corporate Governance System Toward Sustainable Long-Term Growth and Encouraging Investments in America’s Future.” 

Strine has shown a keen interest in the work of CPA and its shareholder partners. He wrote a foreword for this year’s CPA-Zicklin Index and was one of two keynote speakers at a forum co-sponsored by CPA this month in Philadelphia, on a revised Model Code of Conduct for corporations engaging in political spending. These actions preceded his planned retirement at month’s end. 

In the foreword, Strine wrote that since the U.S. Supreme Court’s Citizens United decision in 2010, “American corporations have helped generate a huge increase in political spending, tilting the playing field much more heavily in favor of the wealthiest interests, and against those of the middle class.” 

He also noted, “Companies themselves face heightened risks from the Wild West environment that now surrounds political spending. Contributions that conflict with their core values and positions endanger their reputations, their relationship with consumers and employees and their bottom lines.” 

Strine called for “fundamental reform” and said, “But until then, the very least that should be expected is for Americans to know what powerful corporations are doing to influence our political system.” He cited advances measured by the 2019 Index and added, “By shining a light on corporate conduct, the Index encourages greater corporate integrity.” 
Attendees at the Conference on Model Code of Conduct at the Wharton School on October 18, 2019.
Political Spending Code of Conduct Essential for Protecting Companies in Today’s High Risk Environment
Founders Column
By Bruce Freed and Karl Sandstrom
Only days after the U.S. Supreme Court issued its landmark Citizens United decision in 2010, President Obama warned, “I don't think American elections should be bankrolled by America's most powerful interests, or worse, by foreign entities.”
Recent revelations about hundreds of thousands of dollars in foreign dollars allegedly funneled into U.S. politics through a corporate shell illustrate why the warning was on target. They also underscore the urgent need for corporations to adopt a strong Model Code of Conduct regarding their political spending.
A Justice Department indictment unsealed Oct. 10 alleged that Lev Parnas and Igor Fruman and other defendants “conspired to circumvent the federal laws against foreign influence by engaging in a scheme to funnel foreign money to candidates for federal and state office so that the defendants could buy potential influence with the candidates, campaigns, and the candidates’ governments.”
Parnas and Fruman were arrested “on charges they schemed to funnel foreign money to U.S. politicians while trying to influence U.S.-Ukraine relations,” The Washington Post said. They were accused of concealing the source of $325,000 given to a pro-Trump super PAC through naming a front company.
The indictment also outlined an alleged effort to funnel $1 million from a Russian businessman to win support for a marijuana business in Nevada and elsewhere
These developments spotlight what we have discovered since Citizens United: When it comes to corporate political spending, we can’t rely upon the law to be the standard to which companies adhere. If companies look in the mirror, they’ll see that when they participate in this dark-money system, it’s one that advances the interests of some players they’d prefer to shun.
What, then, should the standard be for a responsible company? We believe it’s looking in the mirror and accepting what you see as your company at its very core.
If you give political money secretly, and you look in the mirror, how do you then explain to shareholders your company’s dispensing of political cash under the table?
Is it that you want to hide your donations because daylight means that – according to a Parnas associate quoted in the indictment -- “the buzzards descend?”
The existing system can be filthy. Nor is the law enough. This is why we’re inviting suggestions for an updated Model Code of Conduct that lets companies do better, by stepping up and saying, “Here are the principled provisions we’re living by; and if we’re not living up to them, tell us why.”
The principles include transparency and accountability. They should include paying close attention to what companies become associated with as a result of their spending. Most importantly, they should create a code of integrity for companies navigating politics in our post-Citizens United world.

Adapted from remarks by Karl Sandstrom to Conference on Model Code of Conduct, Philadelphia, Oct. 18, co-sponsored the Center for Political Accountability and the Zicklin Center for Business Ethics Research at The Wharton School at the University of Pennsylvania.


GW Poll Shows Deep Public Concern about Corporate Political Spending and Influence
A new GW Politics Poll suggests that three out of four Americans believe corporations wield too much clout when it comes to elections and policymaking, and a similar majority believes that quarterly disclosure of corporations’ political spending should be mandated.
The poll was managed jointly by GW's School of Media and Public Affairs, Graduate School of Political Management and Department of Political Science. YouGov, a respected leader in online polling, conducted the academic, nonpartisan research poll for GW. The survey interviewed 1200 Americans and went into the field Sept. 26.
When respondents were asked whether they agreed or disagreed with the statement, “Corporations have too much power over elections and policymaking in the United States today,” 54.4 percent replied they strongly agreed and 23.3 percent said they somewhat agreed (for a total of 77.7 percent).
When asked about the statement, “Corporations should be required to publicly disclose all their political spending on a quarterly basis,” 50.2 percent said they strongly agreed and 21.6 percent said they somewhat agreed (for a total of 71.8 percent).
CPA welcomed the poll results. 
CPA is a non-profit, non-partisan organization created in November 2003 to bring transparency and accountability to political spending. To learn more about the Center for Political Accountability visit
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