Shareowner Activists Galvanized by Citizens United Decision Financial and reputational risks associated with corporate political spending lead to successful shareowner engagement and request that S&P 500 companies agree to disclose political donations.

Last month’s Supreme Court decision in the Citizens Untied case threatens to open floodgates of unfettered corporate spending to influence political elections. The implications for a democratic electoral process are stark; but what will be the impact on investors with ownership stakes in companies that may intend to take advantage of the ruling? A recent study of political spending by corporations associated the activity with lower shareholder returns. Even before the Citizens United decision, when corporate political spending was limited by the Bipartisan Campaign Reform Act (BCRA) of 2002, the Center for Political Accountability (CPA) concluded that “gaps in transparency and accountability create serious financial, legal, and reputational risks for companies.” The CPA, which seeks to encourage responsible corporate political activity by engaging with companies to improve disclosure and oversight of their political spending, has thus far convinced 73 companies, including nearly half of those listed on the S&P 100, to report on their political spending. The most recent addition to the companies on the CPA’s list is Pulte Homes, which agreed to disclose its political spending and implement board oversight of political spending following shareowner engagement with the company by Green Century Capital Management. Green Century collaborated with the CPA in its engagement with Pulte Homes. “Accountability and transparency measures are critically important to protect investors from risk,” said Larisa Ruoff, Director of Shareholder Advocacy for Green Century. “Comprehensive disclosure of political spending is necessary to ensure corporate funds are not directed toward policy objectives that harm the long-term interests of the company.” The CPA has also collaborated with the Council of Institutional Investors (CII), as well as nearly 50 institutional investors and shareowner advocacy groups, in a letter sent on February 24th to the chairs of 427 companies listed on the S&P 500, asking them to disclose all political contributions made with corporate funds and provide board oversight of corporate political donations. Citing a 2006 poll of shareowners in which more than 90% of respondents supported more disclosure of corporate political spending, and 84% called for board oversight, the letter states, “Shareowners in growing numbers support proxy resolutions calling for disclosure of company political contributions.”