In the face of mounting pressure, many major U.S. companies are still listening to their shareholders and are disclosing their political spending, according to the eighth annual CPA-Zicklin Index of Corporate Political Disclosure and Accountability.

This year the number of Standard & Poor's 500 companies receiving scores of 90 percent or above for political disclosure and accountability edged up to 57. That's seven more than last year's 50 companies, and more than double the 28 firms in 2015, the report said.

Also significant, the study said, is that the average overall index score for the 414 companies that have remained part of the S&P for three years (called “core companies” in the report) has continued steadily rising, from 41.6 in 2015 to 49.7 in 2018. The higher score correlates with more disclosure.

The nonpartisan study was released Tuesday by the Center for Political Accountability and the Zicklin Center for Business Ethics Research at The Wharton School at the University of Pennsylvania.

CPA president Bruce Freed told Corporate Counsel he thought the most important finding of the study was that hundreds of companies were holding steady despite “a hostile environment” against disclosure by Congress, the Trump administration and trade groups like the National Association of Manufacturers.

“Despite all these attacks, including prohibiting the SEC from addressing the issue, we still see progress in companies' disclosing,” Freed said. (In 2015 Congress voted to prohibit the U.S. Securities and Exchange Commission from considering a proposal to require public companies to disclose their political spending.)

The index scores “mean companies are concerned and recognize that disclosure and accountability are good governance and help manage risk,” Freed explained.

Freed said, “Disclosure and the index have become the norm. Companies that haven't adopted are seen as outliers.”

What general counsel should take away from the study, Freed said, is that “there is a need for a broader understanding and definition of risk. Political contributions have consequences, and can pose very significant risk for companies reputationally and business-wise. “

Nike Inc. felt that risk last month when shareholders called for greater transparency into political spending. Indeed, political spending was one of the dominant issues that prompted shareholders' filings of resolutions during this year's proxy season.

Lawrence Zicklin, who helped establish the Zicklin Center in 1997, wrote in a foreword to the report, “When shareholders are secretly forced to support candidates or positions in conflict with their personal beliefs, it is wrong in principle and unacceptable in practice. Yet this is exactly what happens when a publicly held company conceals its use of shareholder funds to support candidates or actions that may be contrary to shareholders' wishes or to a company's long-term interest.”

Other key findings in the report include:

  • The number of core companies fully disclosing their election-related spending or prohibiting it entirely has increased in all five categories measured since last year, and since 2015.
  • Some 62 companies were ranked as basement-dwellers, while another 15 backslid as their overall scores declined more than 10 points.
  • Six companies that had reached disclosure agreements in the past failed to make any disclosure this year. They are PulteGroup Inc., Kroger Co., Boston Scientific Corp., CSX Corp., Delta Air Lines Inc. and FMC Corp.
  • Eight companies were rated “most improved” for gains in their overall scores: Public Storage; United Rentals Inc.; Regeneron Pharmaceuticals Inc.; Franklin Resources; Xcel Energy Inc.; Quest Diagnostics Inc., BorgWarner Inc. and Lincoln National Corp.
  • While citing a “definitive win” on disclosure, William Laufer, director of Wharton's Zicklin Center, offered a caution. “No matter how far we have come,” Laufer said, “it is still fair to say that the road to corporate political transparency remains long and winding.”