By Steve Arthur, Vice President
What public policy spending should our company disclose? Recent news events have rekindled this debate, and it is an issue on which I have provided guidance to clients. This has involved reviewing the policies of other companies and what the public benefits and drawbacks have been. As we move into another election season, the legal and policy debates over campaign financing and disclosure are likely to intensify once again. Clearly, any contributions required by law to be disclosed must be, and companies should not attempt to hide contributions required to be disclosed. The question really is, “what additional information should our company release?”
For companies, disclosure used to be a simple matter of complying with existing laws such as PACs filing FEC reports and some states requiring certain filings for corporate campaign donations. In other cases, only the candidate or political committee needed to report those contributions and a company had no filing requirement. But again, the focus was on the candidate and from where contributions were coming. In those circumstances, disclosure could help shareholders decide whether political contribution decisions were being made to enhance the value of the company.
However, in recent years an increasing number of companies have been pressured in shareholder meetings and other forums to publicly disclose more information about their public policy activities. This ranges from any contribution to political organizations like the Democratic and Republican Governors Associations to non-profit think tanks and trade associations. And rather than looking at a candidate or committee’s broad political views, advocates have increasingly used campaign style tactics to claim a company shares every position a candidate espouses.
For companies, this makes political giving even more complicated. They have to decide whether the benefits of giving to a candidate or committee is the right decision on the merits, and then they have to consider every public policy position that candidate has ever taken and determine how to defend that contribution. And this is likely the goal of those pushing for broad disclosure.
A Washington Post article reported last year on the sentiments of disclosure supporters: “Proponents of disclosure say shareholders need to know precisely how a company is spending money on politics in order to assess if the spending exposes them to reputational, business or legal risks.” In light of some of the recent boycotts and threats of boycotts, companies are now assessing if the reporting of the spending exposes them to reputational, business or legal risks.
Even columnist George Will, formerly a big proponent of full disclosure, recently stated on the Fox News Channel show Special Report, that the goals of campaign finance disclosure advocates have changed:
“The people who want to reform our finances and increase government control over political speech and spending say ‘well, everyone surely can be in favor of full disclosure of campaign contributions.’ This (Eich resignation) is an example of why some of us who used to be for full disclosure no longer are. The people advocating full disclosure of campaign contributions say, ‘we just want voters to make an informed choice.’ That not what they’re doing at all. They really want to enable themselves to mount punitive campaigns and deter people and to chill political speech.”
While many companies have disclosed a wide variety of contributions in the past, will they continue to do so in the future? If companies have to start defending every dollar that every trade association to which they belong spends, will some of them simply decide it is easier to take the hit for not providing any information about their memberships?
Finally, in addition to the reputational reasons to decide whether it is better to disclose or not to disclose, there are competitive business reasons as well. If a company would like to significantly expand a facility in a county, but one or two members of the county board oppose any growth, the company might want to support candidates that would be more open to properly managed growth. The contributions would be disclosed locally, but might not be rolled up into one neat package with other contributions made around the country.
Having easy access to all political spending of a company in one nice report could yield some very helpful clues for competitors trying to guess what that company may be planning in the future. If a company puts all of its political spending in one place, it could be like giving away corporate secrets to those competitors who can look for any trends in giving. It might not be cost effective for that competitor to look for all those contributions from around the country, but it would be very easy to look at one report. Most of the time, there probably wouldn’t be any discernible trends, but why would a company want to package everything in one neat report for its competitors?
So the question of what to disclose is not as simple as it might at first appear. There are both competitive and reputational reasons for and against disclosure. When I discuss some of these issues surrounding contributions with clients, it can lead to a broader discussion internally about corporate values, and at other times it prompts a discussion about how else the company’s public policy objectives can be achieved. Each company needs to make the assessment about whether it is more of a risk to disclose or not to disclose, and that answer will vary from company to company.
However, the one certainty is that this debate is likely to continue for years as the courts continue to rule on campaign finance laws and companies respond by deciding what is right for their company reputation and its bottom line.