Center for Political Accountability Newsletter

July/August 2011

Latest Political Disclosure News

For the latest news on political disclosure, visit the Center for Political Accountability website

Leading Law Professors Petition SEC to Adopt Political Disclosure Rules

A group of legal academics, citing a growing shareholder demand for transparency, is urging the Securities and Exchange Commission to require public companies to disclose their political spending.

Also In This Issue

The 10 prominent academics submitted a formal CPA to Release Political rulemaking petition Aug 3. It cites investors' increasing desire for disclosure and companies' voluntary adoption of Disclosure Index Oct. disclosure policies in response. 14 at Wharton School Leading Law Professors Petition SEC to Adopt Political Disclosure Rules The Center for Political Accountability, working with its partners, was the driving force behind many of the accomplishments relied upon to frame the SEC petition. In addition, the Center commissioned a landmark 2006 survey of shareholders' opinion that is another pillar of the petition. The academics call themselves the Committee on Disclosure of Corporate Political Spending. Their petition points to shareholder attitudes and protection from risk in strongly urging rules for disclosure of corporate political spending: Corporate Political Spending 'Opaque' "Shareholders in public companies have increasingly expressed strong interest in receiving information about corporate spending on politics, and such spending is likely to become even more important to public investors in the future. "Furthermore, shareholders need to receive such information for markets and the procedures of corporate democracy to ensure that such spending is in shareholders'

CPA to Release Political Disclosure Index Oct. 14 at Wharton School

The Center for Political Accountability will release on Oct. 14 its new index rating companies on the strength of their political disclosure and accountability practices. The announcement will be made at the University of Pennsylvania's Wharton School in Philadelphia.

The Corporate Political Disclosure and Accountability Index will initially score companies belonging to the trendsetting S&P 100. It will be expanded in 2012 to companies belonging to the S&P 500.

interest. "Still, while many large public companies have begun to provide such information, no existing rule requires disclosure of this information to investors, and corporate political spending remains opaque to investors in most publicly traded companies."

Lucian A. Bebchuk of Harvard Law School and Robert J. Jackson Jr. of Columbia Law School led the petition. The other signers were Bernard S. Black of Northwestern At presstime, CPA had University Law School; John C. Coffee Jr. of Columbia Law; determined preliminary James D. Cox of Duke Law School; Ronald J. Gilson of scoring of all companies in Stanford Law and Columbia Law; Jeffrey N. Gordon of the S&P 100, had sent Columbia Law; Henry Hansmann of Yale Law; Donald C. letters to companies with Langevoort of Georgetown Law; and Hillary Sale, these preliminary results, Washington University in St. Louis School of Law. They and had heard responses represent a cross section of top corporate governance and from 32 companies before securities law professors from around the country. a late July deadline. Bruce F. Freed, CPA president, said the companies were taking the Index seriously. Responding companies focused on the underlying best practices that the Index highlights and on practice changes that could help them improve their scores. 'Important Step Forward' The SEC disclosure petition represents "an important step forward," said Bruce Freed, CPA president. "It builds on the foundation created by the Center and is an outgrowth of a conference on the changing political role of the corporation co-sponsored by CPA and the Wharton School's Zicklin Center for Business Ethics Research last year," Freed said. The 11-page petition spells out as a premise the idea that the SEC's disclosure rules have evolved over time in response to shifting investor interests and needs. Then it documents a growing demand for transparency in corporate political spending.

"Equally important, the companies are giving us valuable feedback that will help us tweak the Index The petition cites shareholder disclosure resolutions in the for 2012," Freed said. 2011 proxy season. Most of the resolutions were based on a CPA model. On July 8, a major proxy solicitation firm issued an 2011 Proxy Results Cited alert to inform companies about the CPA Index, This year, 25 companies in the S&P 100 and another 19 explain how it works and outside of it held votes on disclosure proposals, the advise companies to make petition says, and these resolutions received 32.5 percent a timely response so that support, on average. By contrast, it continues, when the the Center would have SEC considered revising executive-pay disclosure rules in their accurate and clarified 1992, it noted that nine large public companies had held information. votes on related proposals, and those proposals received support of 11.2 percent of shareholders casting votes for The firm, Georgeson, bills and against. itself as "the world's preeminent proxy Zeroing in on the proposals this year at 25 companies in

solicitation firm." Its report spotlighted the growing number of shareholder proposals on corporate political spending. It included the following heads-up: "If you are an S&P 500 company, you should know that the CPA is planning to expand its Index scoring in 2012 to cover your company. Although the indicators may change slightly, it is worthwhile to stay ahead of the game and review the current rating system. There may be some disclosures and clarifications to your policies and reports that you may want to begin to consider making, if you have not already done so." (Continued in main column)

the S&P 100, the petition emphasizes that "proxies at one out of four of America's largest corporations included proposals requesting disclosure of corporate spending on politics." Eyeing this year's activity in another way, the petition says that at the S&P 100 companies not already agreeing to disclose information about political spending, "50% of these firms included shareholder proposals on political issues. Thus, half of the S&P 100 companies that have not yet voluntarily agreed to provide this information to investors held a vote on a proposal related to these issues in 2011." In addition, the petition cites evolving disclosure practices at companies as solid evidence that it's feasible for them to be more transparent. Eighty-five companies have pledged to adopt the Center for Political Accountability's framework for political disclosure and oversight of their political spending with corporate dollars, including 51 in the S&P 100. The Center launched its campaign to bring transparency and accountability to corporate political spending in late 2003. The petition is available by clicking here.

CPA to release Political Disclosure Index Oct. 14 at Wharton School

(Continued from side column) The Georgeson report urged companies to keep abreast of political contribution issues, which "will continue to be ... increasingly important" in the lead-up to the 2012 elections. "We recommend," it said, "that companies be aware of the relevant issues and how these issues may have repercussions for them." The annual Index will draw on emerging best practices identified in the Handbook on Corporate Political Activity, released in November by The Conference Board and coauthored by CPA. The Index will rely entirely on information that is publicly available from company websites.

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