Should businesses engage in political activity to protect jobs, fight unnecessary regulations or reduce costs? Most Americans think so.
Ninety-eight percent of Americans say if they ran a company facing burdensome laws and regulations, they would take some sort of political action.
Even corporate lobbying is supported by large majorities when it is in a business’s best interest. Eighty percent of Americans support lobbying to protect jobs, 72 percent support it to open new markets and 58 percent support it to reduce business costs.
Despite this, the political left has been working to discourage business engagement in politics. One tool they’ve used is the annual Zicklin Index, distributed by the Center for Political Accountability. The Index rates corporations on their disclosure of political and community activities. The more information a business discloses, the better its ranking.
This sounds harmless. Proponents of this Index paint it as nothing more than “best practices” that every corporation should undertake to inform shareholders and potential investors.
These disclosures, however, are not demanded by shareholders and investors. Proxy resolutions related to disclosure typically get about 20 percent support. A study by Stanford Business School found that 95 percent of investors are uninterested in a company’s disclosure policy. And the five largest mutual funds supported disclosure of political spending less than 1 percent of the time.
Investors generally don’t care because this is not useful information. Disclosure of overt political activity — donations to candidates, to Super PACs, or lobbying efforts — is already required by law. What the Zicklin Index seeks is disclosure of donations to social welfare groups, trade associations and charities, information that muddies the waters instead of providing actual transparency.
When Apple lobbies for a bill to lower the regulatory cost of selling iPhones, everyone knows what is going on. But when Apple donates to the Red Cross, the U.S. Chamber of Commerce, and the Sierra Club and those groups support a new healthcare policy, and run ads in favor of free trade deals, and lobby for higher taxes on oil exports, what have we learned about Apple, or the recipient organization, that we didn’t know before? Essentially nothing.
In addition to providing no useful information, these policies are bad for business. A study by Professors David Primo and Saumya Prabhat looked at such mandated disclosure policies in Great Britain and found that they caused greater volatility and lower stock prices. “In reality,” Primo concluded “disclosure and approval requirements tend to hurt shareholders.”
The answer is that some activists, including the union-backed CPA, are not interested in disclosure as a tool for education, or as a “best practice” to promote good business. Their goal is to make sure that corporations do not express views on government policies, do not defend themselves and their employees from unwise regulations and do not lobby to protect jobs.
CPA’s president, former Democratic Hill staffer Bruce Freed, warns corporate executives that political and community involvement “poses a range of risks,” including, ironically, “a real threat of extortion and shakedown.” But Freed and his kind are the lead shakedown artists.
This Index is intended to pressure businesses to disclose their giving to charities and nonprofits. The information is then used as a tool to harass corporate political and community participation that these unions and left-wing activists don’t like.
You’ve seen how it works in gangster movies: “Fine business you have here. It’d be a shame if there were protesters in front of your stores this Christmas …” Meanwhile, they casually display the picket signs that are already printed. Of course, nothing is said explicitly. CPA emphasizes that this is just “good corporate citizenship” and that CEOs should go along with the crowd. But in the movies, the gangster doesn’t need to explicitly tell the store owner what will happen if he doesn’t cough up the protection money.
What we have here are left-wing shareholder activists and unions attempting to force businesses to provide them with information that they will use to drive pro-business ideas out of public discourse. But businesses should argue for policies that protect jobs, open new markets, and reduce business costs. That’s a true “best practice,” and one that Americans understand and support.
Brad Smith is a former chairman of the FEC and chairman of the Center for Competitive Politics. Scott Blackburn is is a research fellow at the Center.