Ending corporate secrecy on soft money

Corporate secrecy on political contributions harms shareholders by denying them information critical for evaluating management performance and company behavior, a report from the Center for Political Accountability, Washington, D.C., insists. However, more than 30 major companies soon are expected to face shareholder resolutions calling on them to disclose and explain the business rationale of their political contributions made with corporate funds, as well as identify the officers involved in the donation decisions. Filed by more than 12 institutional investors, the resolutions are modeled on one drafted by the Center.

The "Green Canary" study suggests that company disclosure of corporate political contributions could alert shareholders to signs of possible management, reputational, and financial problems that could depress a company's stock price.

"Corporate secrecy surrounding political donations carries a high price tag for shareholders," contends CPA Co-Director Bruce R Freed. "As we saw from the collapses of Enron, Global Crossing, WorldCom, and Westar Energy, misbehavior aided and abetted by undisclosed corporate contributions can cost shareholders billions of dollars in lost value and can exacerbate shareholder risk."

Under current rules, companies are not required to reveal or account for their political contributions. Only the recipients of the gifts have to report them, making it difficult for the media, public, and shareholders to track business political giving. "The result is that shareholders know little, if anything, about corporate political donations and how the money is used," declares CPA Co-Director John C. Richardson. "The Center has found that a significant amount of that money has been used to underwrite organizations and candidates that promote policies contrary to stated positions and practices of the corporate donors."

Although companies are prohibited from contributing to political parties, they are allowed to give at the state level and to independent political committees, popularly referred to as 527s for the section of the Internal Revenue Code under which they are organized and operate.

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