Which politicians - and which political causes - are your companies financing? Will those contributions come back to haunt them as prosecutors go after lobbyists for expenditures that could be deemed contributions - or bribes?
These are questions that most shareholders are not in a position to answer. Few major companies now disclose what soft-dollar contributions they have made, or what contributions to politicians they have made in states where corporate contributions are legal.
But under pressure from some institutional shareholders, a handful of major companies are disclosing the information, albeit not always in the speediest possible manner. Today the Center for Political Accountability, a foundation-financed group, will announce that Coca-Cola, PepsiCo and Eli Lilly have agreed to make disclosures and provide board oversight of donations. Other companies that have in the past agreed to do so include Morgan Stanley, Johnson & Johnson and Schering-Plough.
"As we see it, political spending can create serious issues for corporate reputations," said Bruce F. Freed, a co-director of the center.
In part, that is because corporate contributions often go to soft-dollar groups that redistribute the money. Such contributions are at issue in the Texas indictment of Representative Tom DeLay, where the prosecutor claims that redirecting corporate contributions to Texas state races amounted to money-laundering.
In some cases in the past, Republican groups have forwarded the money to issue-oriented groups that take positions companies may not be comfortable with, leading to embarrassing disclosures.
Mr. Freed argues that companies should be responsible for knowing the ultimate recipient of their money, but that is not required now.
While some companies are agreeing, more have opposed the proposals, and they have generally been voted down by shareholders, garnering about 10 percent of the votes cast. Companies point out that recipients already have to make disclosures, and sometimes add that where privacy is possible, it may be in the company's interest.
As Wal-Mart put it in opposing a shareholder resolution calling for disclosure, "Because parties with interests adverse to Wal-Mart also participate in the political process to their business advantage, any unilateral expanded disclosure requirements could benefit these parties while harming the interests of Wal-Mart and its shareholders."
In a letter to Green Century Capital Management, a mutual fund manager that had asked for a disclosure policy to be established, an official of Home Depot that said a proposed requirement that the company's board approve contributions "would unnecessarily distract the board from other matters."
It is quite true that contributions are now usually disclosed by the recipient, but that does not mean they are easy to find. Morgan Stanley, for example, gave $25,000 to a candidate for state Supreme Court in Illinois. That race could easily be overlooked by a curious shareholder.
These proposals go only part of the way to getting real disclosure. They do not deal with contributions made by industry groups, a growing source of political funding. But the disclosures are a start.
Corporate contributions to politicians come in several flavors. Some reflect real partisan support - preferences that may not be shared by all shareholders. Some are pushing a specific legislative proposal to help the company. And some come perilously close to shakedowns by politicians. Making companies explain their contributions to shareholders might help all of us to understand just why the money is flowing.
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