By Mark D. Anderson, Esq., Co-Chief Executive Officer & Principal
As Chair of the American Bar Association’s (ABA) Government Affairs Practice Committee, I participated recently in an instructive CLE session addressing shareholder petitions that require the disclosure of political activity. While these petitions are not new phenomena, recent events including the Supreme Court decision in the Citizens United case, have raised the profile of the issue. Because even the prospect of a shareholder petition on political transparency could have a damaging impact on a government affairs program, preparation is the best way to defend against—or even avoid altogether—a shareholder petition.
According to the Conference Board, while the number of shareholder petitions rose dramatically after Citizens United (from 40 in 2010 to over 100 so far in 2012), the success rate between 2011 and 2012 fell from 30 percent to just over 20 percent. The petitions ranged from requiring disclosure to shareholders of certain types of political activity, to more draconian measures such as a cease and desist of all political activities.
A reason for the diminishing return is likely the proactive and effective ways that many companies are now dealing with the petitions, or even acting in advance of a petition. Understanding that corporations have different policies and procedures governing political expenditures such as campaign contributions, there are some common methods by which corporations have effectively dealt with the transparency issue without crippling their government affairs programs. The following are a few tips to help you to be prepared to defend your government affairs program in light of this rise in shareholder petitions.
- Understand that there are activist groups that have been advancing this issue. The Center for Political Accountability has a model shareholder petition online and the Corporate Reform Coalition has an “activist toolkit” for use on political transparency issues. Some of these groups are promoting this transparency to stifle political contributions from corporations. First, they compel a company to disclose its contributions, then they can use an issue (often not business-related) supported by a candidate to threaten boycotts or pickets based on a single corporate contribution to that candidate. Therefore, the movement should not be considered an organic uprising of shareholders, but an organized activist effort aimed at your corporation.
- It is more difficult to defend a political contribution to a candidate, a stance on legislation, or a membership in one the groups of state and local officials in the absence of information about why it was done. So make guidelines available to your shareholders that outline qualities you support in candidates and policies your corporation supports. For example, you may support candidates that promote a certain tax stance or whose platform supports a more favorable climate for business. If you have outlined that beforehand, you will be better prepared to defend a political contribution and combat the notion that you support every tenet of that candidate’s platform including non-business issues.
- Given all of the rhetoric about corporate spending, your shareholders probably think that you are doing many things that you are not, so ask your shareholders what information they would like to have about corporate political spending.
- Use the discourse with shareholders as an opportunity to build understanding about the role that government affairs plays within the corporation. By actively engaging, much of the distrust that often builds in the absence of information may dissipate—or even be replaced with an understanding the value that government affairs may add to the corporation and shareholders.
The possibility of a shareholder petition can be a chilling event. However, being prepared to defend your government affairs program can certainly help to alleviate many of the concerns and raise confidence that your program will be able to withstand challenges by activist groups.