Business interests gave over $1 billion in campaign contributions in the 2002 election cycle. And despite the new McCain-Feingold campaign finance reform law, experts predict the 2004 Presidential election will be the most expensive ever, with companies contributing record-breaking amounts. But a diverse group of shareholder advocates is working to shine a spotlight on the issue through resolutions asking companies to report on their political contributions, including some that may take advantage of loopholes in the new ban on soft money donations.
Two union pension funds—the Service Employees International Union and the Central Laborers’ Pension Fund—have led the way by filing resolutions asking nearly 30 large companies to disclose their political contributions to federal, state, and local candidates, including contributions from Political Action Committees (PACs) and so-called “Section 527 organizations.” (Some campaign finance experts assert that 527 organizations are an important loophole in the new ban on soft money contributions. These organizations are political committees formed for the purpose of influencing elections, but not supporting or opposing specific candidates, and they are exempt from any limits on corporate contributions and some reporting requirements.)
The resolution asks companies to issue comprehensive reports on their campaign contributions. Despite disclosure requirements for some political contributions, this information can be difficult to access and is not complete. For example, corporate soft money contributions are currently legal in 49 states, but the disclosure standards vary. Also, while corporations are not allowed to make direct contributions to candidates, they are allowed to fund the administrative support for PACs to which employees make contributions.
In support of this disclosure campaign, Trillium Asset Management joined with SEIU, the Nathan Cummings Foundation, and religious investors that are part of the Interfaith Center on Corporate Responsibility, to file the political disclosure resolution at two major pharmaceutical companies: Pfizer and Merck. We chose these companies because the pharmaceutical industry has emerged as a major force in political contributions, particularly over the last decade. According to the Center for Responsive Politics, from 1991 to the present, total contributions from companies, PACs, and individuals associated with the pharmaceutical industry totaled over $107 million, with roughly two-thirds of that supporting Republican candidates and one-third supporting Democrats. And Pfizer led the way, according to a report by Common Cause. The company increased its donations from 1992 to 2002 by over 600 percent and it gave the most of any pharmaceutical company over that period, with total donations of $6.7 million.
Given this political largesse, it’s not surprising that the pharmaceutical industry has won a string of victories in Washington, D.C., including a provision in the newly-passed Medicare prescription drug benefit that explicitly prohibits the government from negotiating with drug companies for lower drug prices. Yet these very successes may pose a threat not only to our nation’s fiscal health and to patients who cannot afford life-saving drugs, but to the companies’ own long-term viability. The Wall Street Journal’s Washington, D.C. correspondent Allan Murray called the pharmaceutical industry’s lobbying strategy “bankrupt,” in explaining a surprising recent loss by the industry to stop re-importation of cheaper drugs from Canada to the U.S. He wrote, “The industry needs to change its ways…. It needs to rethink its business model. That’s hard to contemplate at a time when it enjoys huge profits, but it’s essential for long-term survival.” He argued that if the pharmaceutical industry continues to rely on the willingness of U.S. consumers (and voters) to tolerate ever-increasing price hikes, “it is likely to face ruinous price controls.”
We hope the resolutions gain strong support at Pfizer and Merck’s annual meetings this spring and lead to enhanced disclosure to help shareholders and citizens to better understand how companies are investing money to influence elections. After all, we have some of the best public policies money can buy in this country. And while campaign contributors may be footing the bill, we’re all paying the price.