If there was anything heartening about the fact that the amount money spent on the 2012 elections was jaw-droppingly huge, it was that this development was noted with widespread concern. With an estimated $6 billion spent, a great deal of media attention focused on the relatively small number of billionaires and multimillionaires who so generously share their fortunes with political recipients. Meanwhile, watchdog groups and other followers of the corporate world tried as best they could to track the flow of corporate money into politics, a tough task due to giant loopholes in disclosure requirements.
According to the new report Billion Dollar Democracy from U.S. PIRG and Demos, directly traceable political spending from corporations on federal elections in 2012 was, at the low end, $102 million, which is the amount of corporate funds disclosed by Super PACs. But it doesn’t stop there, explains Blair Bowie of U.S. PIRG, one of the report’s authors. When you add in spending by groups that do not disclose their donors but expressly receive their funds from corporations (trade associations like the U.S. Chamber of Commerce) the guesstimate rises to $138 million. It gets worse. “There was an additional $282 million reported also from undisclosed sources a large portion of which we have good reason to believe came from business corporations,” says Bowie. “That brings you up to between $140 million and $422 million in reported spending, not to mention all the hundreds of millions spent on issue advocacy which wasn’t reported to the FEC at all.”
You don’t have to be Donald Trump (who tweeted on November 7, “Congrats to @KarlRove on blowing $400 million this cycle….What a waste of money”) to feel that there were better ways corporations might have spent that chunk of change. But while the Donald and his Republican colleagues are ruing the lack of bang for their buck, most Americans were outraged at the mere fact of the private sector’s mega-sized presence in American politics. In a poll taken a month before the November elections, between 80 and 90 percent of respondents to a Bannon Communications poll agreed, across party lines no less, with the following statements: there is “too much money in politics,” corporate political spending “drowns out the voices of average Americans,” corporations and corporate CEOs have “too much political power and influence,” and corporate political spending “has made federal and state politics more negative and corrupt.” Indeed, revulsion for the role corporations currently play in our democracy seems to be the one thing that Americans can agree upon in these polarized times.
Investors should be appalled that business diverted this huge sum from R&D, shareholder dividends, employee wage and benefits packages, or any number of better options. Even those agnostic to the deleterious impact of such donations on our democracy should give heed to a growing body of academic studies that challenge the conventional wisdom that political donations are effective in buying policy outcomes. Additional studies suggest that above-the-norm political involvement correlates with bad governance and lower stock returns.
In the last decade, investors have registered their distrust of corporate political activity and its more secretive aspects with strong shows of support for shareholder proposals calling for greater transparency and oversight of both political spending and lobbying activities. There has also been record support from investors and the wider public for a proposal submitted to the Securities and Exchange Commission (SEC) calling for a rule to require better disclosure. Comments submitted to the SEC, including one from Clean Yield, are rapidly approaching half a million, making it the most popular rule proposal in history.
But is disclosure enough? The theory behind the push for greater disclosure is that greater sunlight on their activities will motivate companies to be more judicious about their political spending and tie it more closely to their business strategy. Presumably, this would ensure that the spending doesn’t function as an outlet for particular executives’ political preferences or ambitions. But such an approach avoids the hard question of why investors and the public should stand for companies having a vote at the ballot box at all, given that “corporate persons” aren’t like actual persons who must weigh a candidate’s potential impact on not just their pocketbooks, but their entire wellbeing and that of the country as a whole.
We think it’s time to take it up a notch. Clean Yield clients filed resolutions at three companies this year that call on them to study the feasibility of ceasing all political spending from the corporate treasury. This relatively modest proposal doesn’t address political action committee spending (pools of money at least ostensibly raised and controlled by employees) or corporate lobbying budgets (which tend to dwarf political spending from the general treasury). However, a feasibility study would put the onus on companies to justify exactly what shareholders are receiving in exchange for political donations. Is there a return on equity? If it’s low, nonexistent, or indeterminable, why is the company squandering funds and risking its reputation and goodwill on this activity? And if it’s high, well, that would be good to know, too. It could be a sign that a company’s business model or strategy is overly dependent on regulatory laxity.
Our proposals will appear this spring on the proxy ballots of EQT (a Pennsylvania natural gas driller engaged in hydrofracking), 3M, and at Exxon (where our client, the Singing Fields Foundation, has co-filed with our colleagues at Zevin Asset Management). Similar proposals have been filed this year at Target, Bank of America, Starbucks, and Chevron.
“One of the things I’ve learned is that becoming an active owner of the companies in which we invest is not at all difficult, and doing so in partnership with Clean Yield makes it even easier. Having done this for a while now, I have some words of advice for anyone looking to get more involved. First, the process may seem complicated at first, but it’s really not. Anyone can vote their proxies; it’s a critical venue for expressing our values as mission-related investors. Second and perhaps most important, there is a growing community of investors and advisors who can help you figure this out. You don’t have to go it alone, and some of the field’s leading practitioners are at Clean Yield.”
Jonathan A. Scott, Trustee, Singing Fields Foundation
Room for Optimism
While the current level of money in politics is sobering, there has never been more passionate or organized activity around campaign finance reform, inadvertently made sexy by the 2010 Citizens United decision that opened the doors to ever-higher spending. “Never before have [campaign finance reform movements] seen the level of specific and sustained engagement now on display,” writes John Nichols in a recent issue of The Nation. State and local efforts to advance a constitutional amendment to overturn Citizens United are meeting with easy success to date. Although many are writing the pursuit of an amendment off as a fool’s errand, the same was said about abolitionism and women’s suffrage. As Nichols points out, even unsuccessful constitutional amendment campaigns can create the political space for policymakers to enact meaningful if less-sweeping reforms. When the target is as loathed as Citizens United, the situation is far from hopeless.