Transparency on Corporate Political Spend Is Trending, but Risks Loom Large
An increasing number of public companies in the past several years have voluntarily opted to disclose corporate donations above and beyond what is required by law, but doing so often exposes the businesses to backlash from shareholders.
October 01, 2018 at 02:28 PM
3 minute read
It's a risky time for politically and socially conscious companies. Just ask Nike Inc.
The Beaverton, Oregon-based athletic-wear giant recently faced a shareholder call for greater transparency into political spending after the company launched an advertising campaign featuring former NFL quarterback and original knee-taker Colin Kaepernick.
Although Nike resisted its investors' push for greater political-spending transparency, an increasing number of public companies in the past several years have voluntarily opted to disclose corporate donations above and beyond what is required by law.
Political action committee donations and in-house lobbying financial activities must be reported. But companies are going beyond that, choosing to disclose contributions to trade groups' lobbying efforts and nonprofit organizations that spend money on political advertising.
Corporate contributions have “become a much greater threat to companies because the electorate is highly polarized today,” said Bruce Freed, a former longtime journalist on Capitol Hill and now president of the nonprofit Center for Political Accountability in Washington, D.C. “Companies make a big deal about their values, and if there's a conflict [between those values and political spending], they face the threat of consumer boycott.”
Freed continued: “Despite the opposition to disclosure that you get from the Trump administration, companies continue to move forward, and the trend among companies is for much greater disclosure and placing restrictions on the types of spending they'll engage in.”
To do this, he said, companies can set rules of the road and allow board oversight into the process.
Nike is a good example of some of the business and market considerations companies should take into account when deciding whether to increase their disclosure of corporate political spending, said Joshua Rosenstein, a partner at Sandler Reiff Lamb Rosenstein & Birkenstock in D.C.
“If you disclose that you have given to a [social welfare organization] or other independent expenditure group, and that intermediary in turn supports a candidate on the far right on the far left, there has to be and there is a concern that your business will take a hit, either by a boycott or otherwise, simply because the country is so polarized,” he said.
In addition, Rosenstein said, when a company plays in the political-contribution space and opts to make public disclosures about that involvement, it should have a robust compliance program that ensures it follows its own obligations regarding political spending and involves political law experts, whether in-house or outside.
Finally, for companies concerned about the type of reaction Nike faced, Avi Kelin, an associate in the Newark, New Jersey office of Genova Burns, suggested that they focus their political spending on lower-profile political and social causes.
“Corporations have faced a real backlash for their political spending and activities; you're going to make 50 percent of the country upset no matter what you do,” he said. “Therefore, I certainly understand the appeal for corporations not to put themselves in the spotlight as much.”
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