Partnerships At Work, from the Center for Political Accountability

by Bruce Freed, Executive Director and Founder of the Center for Political Accountability

This column highlights selected groups and organizations working to promote social and economic justice, environmental leadership, or corporate accountability. Walden often partners with featured groups in research and advocacy initiatives.

The 2008 election is on its way to being the most expensive in U.S. history. Indeed, the presidential race alone is expected to cost well over $1 billion, and billions more will be spent on congressional, gubernatorial, state legislative, attorney general, and state supreme court contests.

Business historically has been a major political funder. According to the Center for Responsive Politics, corporate money, from political action committees and individuals, accounted for 73 percent of regulated or “hard money” contributions at the federal level in the last election cycle. 

Yet large parts of corporate political spending remain hidden. Current law does not require companies to report or account for their “soft money” political donations or their payments to trade associations and other tax-exempt organizations that are used for political purposes. Moreover, trade associations and groups organized under Section 501(c)(4) of the Internal Revenue Code, known as “social welfare” organizations, are not required to report funds they receive or spend on political activity, and many do not disclose the names of their members or donors. These groups are favored conduits for corporate political money.

This is changing as Walden Asset Management and others in the social investment community work with the Center for Political Accountability (CPA) to encourage companies to disclose and require board oversight of their hitherto secret use of political money. The CPA is a nonprofit, non-partisan advocacy group whose mission is to bring transparency and accountability to corporate political spending.

In the five years since the Center launched its effort, its

work has included the following:

• Thirty-four leading public companies have adopted political disclosure. Nineteen were added last year, and the number could hit 50 this year.

• A coalition of 26 social investors, foundations, and religious and pension fund partners works with the CPA to engage companies on political disclosure.

• A growing number of leading companies have adopted or are moving to adopt a code of conduct on political spending based on a model code developed by the CPA and the socially responsible investment (SRI) community.

• The Zicklin Center for Business Ethics Research at the Wharton School, one of the nation’s premier business schools, is working with the CPA on corporate political transparency and accountability issues. This included co-sponsoring a conference on Money, Politics, and Corporate Risk in late February 2008 and undertaking research on company political spending policies and practices.

The next step is to put in place policies and structures that will change corporate political behavior. As the 2008 proxy season unfolds, CPA and the investor coalition are:

• Making political transparency and accountability a governance standard to which all companies will be expected to adhere. The Center is working to persuade proxy voting advisory services to recommend, as a matter of policy, that institutional investor clients cast their proxies for the CPA resolution.

• Creating internal pressures to get companies to change their political behavior. Through its new Directors Project, the CPA is pressing directors to conduct serious and ongoing oversight of company political spending and encouraging companies to adopt the CPA-SRI model code on political spending.

• Creating external pressures on companies to adopt political transparency and accountability. A broader range of issues, including health care, diversity, and global warming are used as examples to highlight conflicts between a company’s positions and the positions on those issues promoted by trade associations and other recipients of the company’s political money.

The CPA is also monitoring companies’ disclosure of their political spending, political transparency and accountability policies and procedures, and trade association memberships.

Last year’s successes and this year’s program are moving the CPA and the SRI community closer to their goal of bringing accountability and balance to company participation in the political process.

For more information on the Center for Political Accountability, visit www.political accountability.net.