Four Leading Companies Widen Political Disclosure(A)
Washington, D.C. – January 24, 2007. In a major expansion of company political disclosure, General Electric (NYSE:GE), Hewlett- Packard (NYSE: HPQ) and American Electric Power (NYSE: AEP) have agreed to report their trade association payments used for political purposes as part of their overall disclosure of political spending with corporate funds. In addition, Home Depot (NYSE: HD) has adopted disclosure of its soft money political contributions. All of the companies agreed to board oversight of their political spending.
Shareholder activists announced the companies’ actions today. The groups, Washington-based Center for Political Accountability (CPA), Trillium Asset Management and Green Century Capital Management, are part of a nationwide campaign to bring transparency and accountability to company political spending.
General Electric (GE), Hewlett-Packard (HP), American Electric Power (AEP) and Home Depot join 15 other major companies which adopted political transparency and accountability policies during the 2005, 2006 and 2007 shareholder resolution seasons. The companies are Bristol-Myers Squibb (NYSE: BMY), Staples (NASDAQ: SPLS), Amgen (NASDAQ: AMGN), McDonald’s (NYSE: MCD), Southern (NYSE: SO), General Mills (NYSE: GIS), Morgan Stanley (NYSE: MWD), Johnson & Johnson (NYSE: JNJ), Schering-Plough (NYSE: SGP), PepsiCo (NYSE: PEP), Coca Cola (NYSE: KO), Eli Lilly (NYSE: LLY), Verizon (NYSE:VZ), Monsanto (NYSE:MON), and General Dynamics (NYSE:GD).
The move by GE, HP and AEP to disclose their politically-related trade association payments is part of a growing trend by companies to provide a fuller picture of their political spending. Last month, General Dynamics became the first company to agree to report and have board oversight of its payments to trade associations that are used for political purposes. Previously, company disclosure and accountability was limited to political contributions made with corporate funds, popularly known as soft money.
“GE, HP and AEP are to be congratulated for recognizing the importance of much broader political disclosure. Through their agreements, they are establishing a new best practice. This will encourage companies to pay much closer attention to how trade associations use their money politically and will give shareholders a fuller understanding of how their money is being used,” said CPA Co-Director Bruce Freed. “The Center applauds Home Depot for recognizing its responsibility to make public and account for its political spending with shareholder money.”
Shelley Alpern, Director of Social Research and Advocacy at Trillium Asset Management, said, “These resolutions have clearly touched a sensitive nerve. Nearly every company we have approached has been interested in complying. Many are realizing that they have as much to learn from gathering the information as we will learn when it is disclosed. It is a very positive step forward for good governance and political risk management.”
Andrew Shalit, Director of Shareholder Advocacy at Green Century Capital Management, said, “Companies often push back on requests from shareholders, but in this case we’re seeing the majority of companies agree with our assessment. Full disclosure and oversight of political contributions is a basic good business practice. It costs very little to implement, it increases public confidence, and it reduces the risk of abuse.”
AEP pledged to ask its trade associations receiving more than $25,000 in annual AEP payments for the portion of the company’s payments used for political and lobbying purposes. (The $25,000 threshold may be reanalyzed in 2009.) The company said it will include the dollar amounts reported by the associations in its annual sustainability report.
HP said that it would include in its annual report the company’s soft money political contributions along with its political payments made to trade associations “and any other [corporate] payments used for political purposes.”
In its Statement on Political Contributions, GE committed to asking each association that reported that it has or will spend $25,000 or more of GE’s money on non-deductible lobbying or political expenditures to tell the company the amount used for political campaigns. “We will include in our political contributions report any responses we receive to such request,” GE said.
Current campaign finance law allows corporations to make donations in many states and to political committees commonly known as 527s, but not to federal candidates. However, companies aren’t required to disclose political contributions made with corporate funds or payments made to trade associations that are used for political purposes. Moreover, associations aren’t required to disclose the specifics of their political spending or their membership. This secrecy leaves institutional investors and individual shareholders in the dark about the use of company resources for political activities.
GE, the world’s second-largest company, and HP, a leader in information technology, adopted their new policies following discussions with Trillium Asset Management. AEP, one of the top public utilities, adopted its policy following discussions with Trillium and Green Century Capital Management. Green Century had filed a political disclosure resolution with Home Depot, the world’s largest home improvement retailer, in the current and most recent proxy seasons. The resolution at Home Depot was cofiled by the As You Sow Foundation and Progressive Investment Management.
In its Hidden Rivers report released in May 2006, the Center found that trade associations helped companies conceal and spend over $100 million in corporate funds in 2004. This spending, the report noted, poses serious risks to company economic interests and reputations and to shareholder value.
For the past three proxy seasons, the Center, a non- partisan, non-profit advocacy group, has been leading a shareholder campaign that includes 19 institutional investors and allied groups to get companies to agree to political disclosure and accountability. For the 2006 proxy season, shareholder votes on CPA-model resolutions averaged more than 21 percent. The resolution received more than 20 percent of the vote at 15 companies, and over 30 percent at five companies.