Dell and Oracle are two of the latest companies to adopt political disclosure and accountability policies as a way of giving shareholders a better picture of how much they donate to campaigns. Thirty-three corporations have adopted political-disclosure policies since 2005, according to the Center for Public Accountability (CPA), a nonprofit group that has led a campaign to push corporate disclosure of political spending.
The center’s director, Bruce Freed, tells CFO.com that the number of companies agreeing to adopt transparency and accountability policies is growing rapidly. So far this year, 22 companies have signed on, compared with 7 in 2006 and 3 in 2005. “The reason why we’re pressing for this is because political spending poses a great risk for shareholder value,” says Freed. “From a standpoint of risk, it not only can damage a company’s reputation, it also can create legal problems.”
While current campaign finance laws prohibit corporations from making donations directly to national candidates, companies can still contribute to tax-exempt organizations known as 527s and trade associations that use donations to support political campaigns. Such groups are not regulated by the Federal Elections Commission and therefore are not required to disclose their contributors’ list. But the amount of money funneled into these organizations is significant: indeed, in a report released last year, the CPA revealed that more than $100 million in publicly undisclosed corporate funds was donated to trade associations and used to support political campaigns.
Nevertheless, 13 of 33 companies with transparency policies, including Dell and Oracle, voluntarily disclose their trade-association memberships. Dell’s policy goes even further, mandating disclosure of payments (besides regular membership dues) made to trade associations involved in supporting political campaigns.
With the 2008 Presidential election already in gear, Freed expects more companies to adopt disclosure policies and more shareholders to request such disclosures. “It follows the growing trend for transparency in corporate activities and greater board oversight and involvement,” he says.