As a result of Citizens United and other cases decided in its wake, corporations and unions are now permitted to spend their own funds on ads advocating or opposing candidates, and other types of electoral communications. These court decisions, however, have not deterred critics from seeking ways of discouraging corporate political spending, primarily by compelling more disclosure. The battle is being waged not only through efforts to enact new legislation, but also through the shareholder proxy process.
In the 2011 proxy season we saw a significant uptick in the number of political spending proposals introduced by shareholders. The Manhattan Institute’s Center for Legal Policy’s Proxy Monitor project identified 36 political spending proposals in 2011 (up from just 14 in 2008). Proxy Monitor found that the majority of these proposals—none of which were adopted—were supported by labor-affiliated and social-investing funds.
Unsurprisingly, a record number of political spending proposals were filed during the 2012 proxy season. According to Walden Asset Management, a leading social-investing fund, 127 shareholder proposals targeted corporate political activity. Like the 2011 proxy season, the majority of these proposals focused on requiring the disclosure of political contributions made using corporate funds. However, a new trend has emerged: a significant number of the disclosures called for the disclosure of lobbying expenditures.
While Citizens United had nothing to do with a corporation’s right to engage in lobbying— corporations are permitted to lobby federal officials subject to the Lobbying Disclosure Act’s registration and reporting requirements—the rise in these shareholder proposals shows how opposition to Citizens United is being used to fuel a range of efforts to clamp down on corporate political activity.
Indeed, lobbying disclosure resolutions appear to be gaining traction. According to Walden Asset Management, the proposals that went to a shareholder vote received an average of 24 percent support. Publicly traded corporations that want to avoid the scrutiny that these resolutions often bring should consider taking the following steps:
- Adopt and disclose internal political spending policies that govern the company’s criteria and procedures for engaging in political activity.
- Post the company’s lobbying reports on the corporate website.
- Disclose information about the company’s participation in trade associations that engage in lobbying.