CPA-Zicklin Index: A Deceptive Dragnet

Companies Should Ignore the CPA-Zicklin Index — A Dragnet Attempting to Police Corporate Speech to the Detriment of Shareholder Best Interest

October 8, 2015, ALEXANDRIA, VA – The Center for Competitive Politics (CCP) today denounced this year’s fifth annual CPA-Zicklin Index released by the Center for Political Accountability (CPA). The CPA-Zicklin Index is a deceptive tool used to sell more and more companies on the idea of corporate ‘transparency’ with the partisan goal of removing these voices from the public policy debate altogether:

“The CPA Index is used to sell corporate boardrooms a bill of goods,” said CCP Chairman and former Federal Election Commission Chair Bradley A. Smith. “While board members think they will be enshrined as good corporate citizens, the reality is that companies quickly find themselves in the increasingly uncomfortable position of trying to comply with CPA’s changing demands for unnecessary disclosure year-after-year. This is an attempt by activists to capture more and more companies in their disclosure dragnet.”

Among Fortune 250 companies, roughly 80 percent of shareholders rejected proxy resolutions related to corporate public policy and lobbying disclosures in 2015.  According to 2014 data from the Securities and Exchange Commission, the five largest mutual fund families supported only 0.6 percent of proposals related to lobbying and corporate public policy expenditures.

Survey data confirms that investors are uninterested in these disclosure measures. A 2015 Stanford Business School study surveyed 64 investors with a combined $17 trillion in assets under management; Stanford found that 95 percent of the investors surveyed did not consider a company’s political contributions when making investment decisions.

Recent polling data by the Public Affairs Council confirms that citizens actually support political speech by corporations if they believe it is in the best interest of the business. The survey found that corporate efforts intended to “protect jobs” garners 80 percent support among those surveyed, and efforts to “open new markets” earned 72 percent support.

The data further suggests that enforced disclosure like that supported in the CPA Index harms shareholders. Last year, CCP Academic Advisor and University of Rochester Professor David Primo studied the effects of regulations enacted in the United Kingdom that mandated shareholder approval of political contributions. Professor Primo found that after these mandatory disclosure rules went into effect, stock-return volatility increased and stock returns declined for politically active firms. Primo surmised that activists, such as the CPA and its allies, are often more interested in their ideological goals than with stock returns, noting that union pension funds “may be willing to accept lower investment returns if limiting corporate involvement in politics leads to political advantages elsewhere.”

“Companies that bend to the CPA’s demands are making a foolish bet that the CPA has their shareholders’ best interests in mind.” added Smith. “The CPA is the real threat, as it demands more and more disclosure to be used for these ‘name and shame’ campaigns against companies that engage in political activity.”

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