Fact Checker

Proponents of corporate political spending disclosure have a history of saying one thing but meaning another when it comes to their goals of limiting, not promoting, free speech. They are adept at creating the illusion of an independent mainstream movement when the reality is that public opinion is not in their favor.

Claim: “The objective is not to prevent political expenditures; it’s to make sure those expenditures are reasonable and for the benefit of the company itself.” – Craig Holman, Public Citizen (Bloomberg, 9/25/2012)

Facts: The ultimate goal is to remove corporations from the policy playing field altogether.

  • “to launch shareholder resolution campaigns to prevent corporations from making these types of expenditures… to make the case that political spending is not within the fiduciary interest of publicly traded corporations and therefore should be limited.” (Memo from Media Matters for America to Ben Smith, 2011)
  • “create a multitude of public relations challenges for corporations that make the decision to meddle in political campaigns. Working with allied organizations, we will… provoke backlashes among companies’ shareholders, employees, and customers, and the public-at-large.” (Memo from Media Matters for America to Ben Smith, 2011)
  • “There is no substitute for a clear policy of not giving money to third-party groups for purposes of political spending.” – Bruce Freed and Karl Sandstrom, Center for Political Accountability (The Conference Board Review, Winter 2012)

Claim: “The five largest U.S. mutual fund families supported [political disclosure proposals] more than 80 percent of the time during the 2012 proxy season.” – Adam Kanzer, Domini Social Investments LLC; Lisa Gilbert, Public Citizen Congress Watch; and Leslie Samuelrich, Green Century Capital Management (Politico, 2/5/2013)

Facts: The claim that the five largest mutual fund families backed such proposals more than 80 percent of the time in 2012 is wildly inaccurate.

  • “In 2012, the seven largest mutual fund families–Vanguard, BlackRock, State Street, Fidelity, Capital World Investors, Capital Research Global Investors, and T. Rowe Price–supported only 3.6 percent of proposals calling for increased disclosure of corporate political spending, as is evident from a review of Form N-PX proxy filings publicly available from the Securities and Exchange Commission.” (The Manhattan Institute, 2/7/2013)

Claim: “Over the past decade, support for political disclosure has grown steadily among shareholders and proxy advisory services. Indeed, the average vote for these resolutions has topped 30 percent in the past three proxy seasons…Shareholders recognize that while the amounts spent may seem immaterial, the unintended consequences are not.” – Bruce Freed, Center for Political Accountability (Center for Political Accountability Letter, 9/27/2012)

Facts: Average shareholder support for corporate political spending proposals declined from 2011 to 2012, this year averaging only 18.3 percent at Fortune 250 public companies.

  • “…such proposals failed to attract widespread support, winning on average the support of 18.3 percent of shareholders [in 2012], down from 24.3 percent in 2011.” (Proxy Monitor, Winter 2013)

Claim: “Corporations should operate on the premise that their political donations will be disclosed. Secrecy breeds abuse and undermines accountability.” – Bruce Freed, Center for Political Accountability (Washington Post, 10/18/2012)

Fact: Corporations should operate on the premise that disclosed political donations will be used by activists to browbeat corporate opponents and discourage companies from participating in the political debate.

  • “[Center for Political Accountability] and our partners are putting pressure on companies to adopt political disclosure, to curb the independence of trade associations, and to change the behavior of companies and trade associations in their political spending.” – Bruce Freed, Center for Political Accountability (Proxy Preview 2011 Webinar, 2/23/2011)

Claim: “Disclosure leads a company to think three or four times.  You do have some investors who will raise questions.” – Bruce Freed, Center for Political Accountability (Bloomberg, 9/25/2012)

Facts: Groups will do more than raise questions, they will seek to intimidate companies with name and shame tactics to force their hand out of the political process altogether.

  • “What happened to Target was child’s play compared to the strength that all of these organizations can bring to bear against companies that decide they’re going against the people’s will and involve themselves unduly in the political process.” – Bill de Blasio, New York City Public Advocate (The Hill, 3/12/2012)

Claim: “The CPA-Zicklin Index of Corporate Political Disclosure and Accountability provides a comprehensive portrait of how leading publicly held U.S. companies are addressing political spending… The Index gives investors a tool to evaluate whether their companies’ policies and practices invoke disclosure or meaningful accountability.” (The 2012 CPA-Zicklin Index, 9/25/2012)

Facts: The Index, which purports to “score” companies on the strength of their political disclosure, comes from the Zicklin Center at the Wharton School of Business, where Bruce Freed helped create the rankings. The 2012 Index changed its baseline scoring averages from 2011, resulting in many companies receiving lower scores. By changing the underlying methodology year to year, the Index seeks to accomplish the CPA’s goals by creating the illusion that companies have not yet established satisfactory disclosure practices.

  • “Then there’s the Center for Political Accountability, which developed the Index of Corporate Political Accountability and Disclosure, which purports to rank companies on a scale of 0 to 100 on its subjective preferences regarding political transparency and accountability. Some of the most successful companies, such as Amazon and Wal-Mart, had a score of 0 in 2011. Other companies, such as Pfizer and Johnson & Johnson, last year were ranked at the top because they met the special-interest criteria. However, in 2012, Johnson & Johnson and Pfizer woke up to find that they had received a much lower score because the scale had changed; the rankers had changed the standards and found fault where these companies did not disclose 501(c)(4) contributions. This is another sign of how these activists move the goalposts to create the illusion that companies should disclose more. They work under the guise of ‘shareholders just want to know,’ when, in fact, it’s not about shareholders at all; it’s purely about politics and removing the company and its interests from the debate.” – Paul Atkins, Patomak Global Partners (NACD Directorship, 1/24/2013)
  • “Mr. Freed also likes to reference the ‘Zicklin Index,’ which scores companies on their political disclosure. This index ostensibly comes from the Zicklin Center at the Wharton School of Business. Less known is that Messrs. Freed and Sandstrom both sit on Zicklin’s advisory board and helped create the ranking.” – Kimberley Strassel, Wall Street Journal Editorial Board (Wall Street Journal, 6/1/2012)
  • “CPA and the Zicklin Center for Business Ethics at the Wharton School at the University of Pennsylvania released a so-called ‘CPA-Zicklin Index’ of companies’ compliance with ‘best practices’ for corporate political spending. These ‘best practices,’ in turn, come from the Conference Board’s 2010 Handbook on Corporate Political Activity, a report co-authored by—surprise!—CPA’s Mr. Freed… Mr. Freed’s co-authors on the CPA-Zicklin Index—all now affiliated with CPA—are a former analyst for the Service Employees International Union (SEIU), a writer who also works for the George Soros-funded Justice at Stake (a group critical of business efforts to promote state-level tort reform), and a former general counsel to the Democratic National Committee.” – Brad Smith, Center for Competitive Politics (Wall Street Journal, 11/10/2011)

Claim: “The CPA-Zicklin Index released last year found that political disclosure and accountability was becoming a mainstream corporate practice…the index confirmed that a growing number of companies restrict how their money can be used politically and take seriously the consequences that uninformed political spending may have on the company and on the larger society. ” – Bruce Freed, Center for Political Accountability (Center for Political Accountability Letter, 9/27/2012)

Facts: The vast majority of public companies have not found that CPA-style political spending disclosure is a mainstream corporate practice that should be adopted.

  • “CPA’s own 2012 analysis . . . shows that fewer than 15 of [the] 196 companies [listed in the CPA-Zicklin Index] are disclosing political expenditures that are not already required to be disclosed by the applicable political contribution laws.” (Letter from 60 Plus Associations to Elizabeth M. Murphy, 1/4/2013)

Claim: “The Conference Board, the nation’s leading business research organization, recognizes the risk posed by political spending and published a Handbook on Corporate Political Activity in November 2010 to assist companies in managing and overseeing their political spending.” – Bruce Freed, Center for Political Accountability (Center for Political Accountability Letter, 9/27/2012)

Facts: Bruce Freed directly influences the views of the Conference Board, serving on the three-member Advisory Panel to the Conference Board’s Committee on Political Spending. Bruce Freed has also co-authored several of the Conference Board’s publications, including its Handbook on Corporate Political Activity. These publications are frequently cited by activists as evidencing the business community’s views, creating the illusion of an echo chamber in support of corporate disclosure.

Claim: “Our partners, many of whom signed this letter, represent concerned and engaged investors from diverse organizations including pension funds, foundations, religious institutions and socially responsible investment firms.” – Bruce Freed, Center for Political Accountability (Center for Political Accountability Letter, 9/27/2012)

Facts: The interests involved in this movement for more disclosure are not concerned investors with respect to the health of the company. They are a coordinated effort of narrow interest groups seeking to sideline corporate america in the public discussion of their narrow liberal policy goals.

  • NorthStar: “urges its clients to divest themselves from targeted companies, retaining just enough shares to engage in corporate activism. In other words, they advise their own clients to limit their financial exposure to companies that might actually follow their recommendations. Presumably, if they thought their recommendations would increase profitability, they would buy shares to gain the windfall that would come with adoption of their proposals.” – Brad Smith, Center for Competitive Politics (Wall Street Journal, 11/10/2011)
  • Walden Asset Management: “has long worked with the American Federation of State, County and Municipal Employees (AFSCME) and the SEIU to file shareholder resolutions. It has demanded that executive compensation be tied to “social criteria” and that companies adopt International Labor Organization standards. In 2010, it sent a letter to corporate executives—co-signed by CPA’s Mr. Freed—urging them to cease support for the U.S. Chamber of Commerce and the National Association of Manufacturers because it disagreed with those organizations on environmental issues.” – Brad Smith, Center for Competitive Politics (Wall Street Journal, 11/10/2011)
  • Trillium Asset Management: In 2012, they proposed a shareholder resolution to Bank of America, 3M, and Target asking the company’s respective directors to “adopt a policy prohibiting the use of corporate funds for any political election or campaign.” (3M Company, 2012 Proxy Statement, 5/8/2012)
  • New York City Pension Fund: On January 21, 2011, NYC Pension Funds called on six companies to publicly disclose their political contributions. Bill de Blasio, the founder of Coalition Against Political Spending and a trustee of the NYC Employees’ Retirement System said, “…we can continue to get corporations to reject the political activities afforded them by Citizens United.” – Bill de Blasio, New York City Public Advocate (New York City Comptroller Press Release, 1/21/2011)

THE BOTTOM LINE: The CPA and their allies are a coordinated group of economically disinterested shareholders who are working together to create the illusion of a mainstream mandate for companies to cease public affairs activities altogether. An idea a wide majority of economically interested shareholders reject year after year.