Merck – Report on Political Contributions (2005)

Outcome: 8.8%

SHAREHOLDER RESOURCES USED FOR POLITICAL PURPOSES
Resolved, that the shareholders of Merck (“Company”) hereby request that the Company provide a report updated semi-annually, disclosing the Company’s:
Policies and procedures for political contributions (both direct and indirect) made with corporate funds.
Monetary and non-monetary contributions to political candidates, political parties, political committees and other political entities organized and operating under 26 USC Sec. 527 of the Internal Revenue Code including the following:
An accounting of the Company’s funds contributed to any of the persons described above;
The business rationale for each of the Company’s political contributions; and Identification of the person or persons in the Company who participated in making the decisions to contribute.
This report shall be posted on the company’s website to reduce costs to shareholders.
Statement of Support:
As long-term shareholders of Merck, we support policies that apply transparency and accountability to corporate political giving. In our view, such disclosure is consistent with public policy in regard to public company disclosure.
There are various disclosure requirements for political contributions, but they are difficult for shareholders to access and are not complete. Although the Bi-Partisan Campaign Reform Act enacted in 2002 prohibits corporate contributions to political parties at the federal level, corporate soft money state-level contributions are legal in 49 states, and disclosure standards vary widely.
Corporations can also make unlimited contributions to “Section 527” organizations, political committees formed for the purpose of influencing elections, but not supporting or opposing specific candidates. These do not have to be reported.
Between January 1, 1991 and December 31, 2002 the Pharmaceutical Research and Manufacturers Association (PhRMA) – of which the company is a dues-paying member – gave $35.5 million in soft money political contributions. (Follow the Dollar Report, July 1, 2003, Common Cause).
Company executives exercise wide discretion over the use of corporate resources for political purposes. They make decisions without a stated business rationale for such donations. In 2001-02, the last fully reported election cycle, Merck contributed at least $85,900. (The Center for Responsive Politics, Soft Money Donors, http://www.opensecrets.org/softmoney).
Relying only on the limited data available from Federal Election Commission and the Internal Revenue Service, the Center for Responsive Politics, a leading campaign finance watchdog organization, provides an incomplete picture of the Company’s political donations.
Proponents believe our company should be using its resources to win in the marketplace through superior products and services to its customers, not because it has superior access to political leaders.   Political power can change, leaving companies relying on this strategy vulnerable.
Finally, the requested report represents a minimal cost to the company, as presumably management already monitors corporate resources used for such purposes. Although lacking a business rationale for such contributions, our peer company Pfizer discloses these contributions on an annual basis.
There is currently no single source of information that provides the information sought by this resolution.  That is why we urge your support for this critical governance reform.