Spotlight on CPA - September 2019
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SEC Commissioner Rob Jackson (middle) shares a word with SEC Chair Jay Clayton (left) at the HFSC SEC Oversight hearing; SEC Commissioner Allison Lee at right.

Breaching Congress-Imposed Gag Rule, SEC Commissioner Jackson Urges Adoption of Corporate Political Disclosure Mandate

In testimony before the House Financial Services Committee, Securities and Exchange Commissioner Robert J. Jackson Jr. told Congress that the “case for requiring disclosure of corporate political spending is strong,” yet “too many investors remain in the dark about how public companies spend their money on politics.”

Long an advocate for mandated disclosure of corporate political spending, Jackson noted that Congress has moved multiple times in its appropriations process to block the SEC from developing rules in this area. At the same time he outlined reasons why such disclosure is needed.

“A significant amount of corporate political spending is not disclosed under current law, since public companies can and do give investor money to intermediaries that do not disclose their donors,” he testified on Sept. 24. “Indeed, a study I published in 2013 showed that just eight intermediaries spent more than $1.5 billion of shareholder money on politics over just a few years. Under the law we have right now, ordinary American investors have no way to know whether the companies they own were a source of that money.

“That would not trouble me if executives’ interests in political spending were aligned with those of investors,” he continued. “But when it comes to politics, insiders’ interests can diverge from those of investors. Political spending has consequences beyond the company’s performance – like advancing insiders’ private political views – and executives’ decisions may be influenced by those preferences.

“The standard securities-law solution to conflicts like this is disclosure. That’s why SEC rules mandate clear disclosure of executive compensation. That’s why our rules also require companies to give investors detailed information about transactions between corporate insiders and the company. And that’s why the case for requiring disclosure of corporate political spending is strong.”

Jackson joined the commission in January 2018. Before that, his scholarly work included leading a bipartisan group of academics who asked the SEC to develop rules for the disclosure of corporate political spending. More than 1.2 million Americans have written to the SEC urging adoption of those rules. 


CPA Urges BRT to Include Political Transparency in New Statement on Corporate Purpose 

Almost 200 CEOs signed a Business Roundtable statement in August redefining the purpose of a corporation, to go beyond advancing the interests of shareholders. The Center for Political Accountability, in turn, wrote a letter asking the Roundtable to make corporate political disclosure and accountability part of its new statement. 

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the Business Roundtable statement said. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” The group added, “We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.”

In a letter to the Roundtable dated Sept. 11, CPA said it was “pleased to see the commitment of the signatory companies to ‘transparency and effective engagement with shareholders.’ However, we note the absence of any mention of corporate political disclosure and accountability, practices that are integral to transparency and in turn to a successful economy and democracy.”
CPA mentioned an increase in the number of public companies adopting accountability and disclosure practices and concluded, “We hope that the BRT’s support for transparency would advance beyond rhetoric and that it could ‘walk the walk.’” CPA said it would like to speak and work with the Roundtable to that end.


Wharton-CPA to Hold Conference on Updated Model Code of Conduct
To respond to both a changing marketplace and political environment, a conference about developing an updated model code of conduct, to guide companies on their political spending with corporate funds, will be held Oct. 18 in Philadelphia.

CPA and the Zicklin Center for Business Ethics at the University of Pennsylvania’s Wharton School will cosponsor the conference. It is intended to bring together the corporate community, corporate governance experts, investment managers (both private and public), the socially responsible investment community, academia and other interested parties.
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.
Today, the political environment that 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 compelling. An updated code needs to incorporate a wider range of factors in decision-making, adherence and the assessment of the impact of contributions and the risks they pose. According to conference planners, these include:
  • Looking more closely at the consequences of a company’s political spending and the risks they may pose not only to the company but also to the environment the company needs to grow and thrive.
  • Examining how a company retains accountability when contributing to third party groups.
  • Setting approval of the company’s political spending at a level commensurate with the risks the company faces. This may mean requiring approval by the highest level of senior management and/or the board.
  • Establishing a compliance regime and internal controls to ensure adherence by management and the board with the company’s political spending policies and the code of conduct.
Last year, CPA published “Collision Course: The Risks Companies Face When Their Political Spending and Core Values Conflict, and How To Address Them.”  It documented multiple instances when political spending led to a backlash, boycott threats or accusations of hypocrisy, all occurring in today’s hyper-partisan political environment and accelerated and amplified by social media.

Other examples affecting companies have followed since the Center’s report was published. The 2020 elections and also a presidential impeachment inquiry are stoking divisions further. It is in this incendiary political environment that an update to the Model Code of Conduct will be developed next month.

CPA Warns Public Funds Trustees of Heightened Risks to Companies from Political Spending
From left to right, Nell Minow, Bruce Freed, Wil Schroder and Tim Smith.

The Public Funds Forum featured CPA’s Bruce Freed; a leading socially responsible investor; and a Kentucky state senator on a panel convened in early September on “The Politics of Investing: Dark Money, Fake News and Front Groups.”
Held in Park City, Utah, the meeting, which brought together 225 public fund trustees and leading thinkers, focused on the impact on the fund fiduciary of the risks to companies from controversial or conflicted political spending that could harm their reputation and their relationships with consumers, employees and the general public.
Freed was joined by Timothy Smith, Director of Environmental, Social and Governance Shareowner Engagement at Walden Asset Management; and Wil Schroder, a Kentucky state senator who faced heavy “dark money” expenditures in a recent unsuccessful campaign for Kentucky attorney general.
“The risks from political spending can have a significant impact on company performance,” Freed said. “Corporate executives have told us that in conversations we had with them in the just concluded proxy season.
“Funds have a stake in corporate political disclosure and accountability to ensure that companies manage the risk from election-related spending and protect their business and share value,” he added. “CPA has found this in groundbreaking research that we have conducted into the sources of political money and the risk this poses to companies.”


CPA in the News

Financial Times’ Moral Money newsletter discussed August 7 the idea of conflicted corporate political spending bringing greater scrutiny of PAC spending. “(W)ith the rift between parties widening on issues from immigration to gun control, more corporate PACs are being accused of funding politicians whose policies clash with the company’s values,” the newsletter said. It went on to quote CPA’s Bruce Freed:

“Companies are making great efforts to present themselves as socially conscious and environmentally sustainable, and then you have this political spending which results in the exact opposite,” he said. “Their money’s being used for purposes that conflict with company policies and positions and they’re being called out on that.” 
Separately, regarding the personal political spending of CEOs in the Democratic presidential primary field, MarketWatch turned to CPA for insight.
“Some of Corporate America’s leaders could be aiming to give money to politicians who will end up having significant influence in the future, even if they’re not actually elected president next year,” CPA told MarketWatch. “If you get a Democratic president, then some of these folks who are running could end up in Cabinet positions.”
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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