Ever since the Supreme Court established the rights of corporations to exercise “political” speech (Citizens United), debates have raged concerning ground rules for corporate political action.
Sometimes the general public “votes with its purse” with respect to popular or unpopular political positions taken by companies, or by their executives (note particularly but not only the case of Chick‑fil‑A).
How do public corporations, with high profiles in terms of exposure to the securities market and to the consuming public, approach spending by the corporation? Are political contribution decisions the bailiwick of management, or does the board have a strategic role?
As noted in NACD Directorship magazine’s current issue, a poll of 399 public companies disclosed remarkable governance involvement: 276 such companies had a dedicated political spending webpage; 189 had board committee review of political spending policy; 201 had direct committee review of specific contributions. Well over half also reported “general board oversight.”
Further, over 84% of S&P 500 companies make some disclosure concerning election-related corporate expenditures, and almost 60% post a detailed policy statement. Conversely, only about 40% describe which political entities to which they may or may not contribute.
Proxy advisory firm ISS reported a large number of shareholder proxy proposals relating to corporate political contributions (and lobbying), and is pushing for formal SEC regulation of disclosure. Notably, almost all proposals regarding political contributions have to date failed of shareholder passage.
Whether you are publicly held or privately held, if you have a public profile (perhaps through the offering of products and services), how should a board of directors approach political contributions?
Best thinking: boards should be actively involved; boards should adopt a corporate strategy for political contributions, based upon a business case (what is the economic benefit sought to be gained); boards must consider risks attendant to political expression. Do political contributions line up with company statements of mission or values; is there preclearance of content and expense; what is your control for compliance with law, including the Federal Lobbying Disclosure Act.
In this highly politicized time, political expenditures can be volatile. Interesting that of the S&P 500, only 141 companies categorically prohibit contributions to State candidates, political parties and committees. This statistic alone suggests an open playing field for companies to support political action; and, an open invitation to foot‑fault by proceeding without due care.