With an especially contentious campaign season in full swing, corporate political spending is a hot topic this proxy season.
Though regulators don’t require it, more than half the S&P 500 companies make some effort to disclose their political activities or spending policies, according to an October study by the Center for Political Accountability and the Wharton School’s Zicklin Center for Business Ethics Research.
Investors, however, are demanding a fuller picture of companies’ political giving and lobbying efforts.
More than 100 resolutions on the subject have been, or could be, presented to the largest U.S. companies, according to ISS Voting Analytics. That figure is based on proposals filed as of Monday, plus a tally of proponents who say they plan to propose similar ones.
“Disclosure, board oversight and robust compliance are intertwined and an integral part of enterprise risk management of political spending,” said Bruce Freed, president and founder of the CPA, which advocates greater disclosure of such spending.
Investors aren’t necessarily looking to end corporate involvement in politics, but some of them want to make sure it is aligned with a company’s stated goals, and say disclosure will bolster accountability.
“What we are asking for in disclosure is that a company be upfront and explain why such spending is important” for the company’s strategy, said Timothy Smith, director of environmental, social and governance shareowner engagement at Walden Asset Management, which manages about $ 2.7 billion of assets.
Cash donated to trade groups, political candidates and political-action committees has come under greater scrutiny, especially if they involve hot-button issues.
“CFOs pay attention to material financial results; they also pay attention to risk and compliance,” Mr. Smith said.
The amounts companies spend and disclose vary widely. Last year, Verizon Communications Inc. VZ 0.76 % contributed $ 199,450 to individual candidates and just over $ 1 million to party organizations, ballot initiatives, political-action committees and other groups, according to a report on its website. The figures don’t include contributions by employee-funded PACs, which Verizon compiles separately.
General Electric Co. GE -2.19 % , meanwhile, contributed $ 695,850 to U.S. campaigns and organizations last year, down from $ 891,094 a year earlier, but doesn’t disclose contributions by its employee-funded PACs.
Verizon declined to comment, as did a GE spokeswoman.
Corning Inc. GLW -0.24 % will begin in July to post semiannual reports on its contributions and lobbying, responding to shareholder request for more information. The voluntary disclosure “supports our good-governance practice,” said Corning finance chief Tony Tripeny.
One thing that frustrates investors is the lack of a central repository for data on corporate giving. Finding out how much a company gave to politicians, causes and trade groups would require searches of dozens of databases, and even that might not yield a complete record.
Despite the increased attention, shareholder resolutions on political spending received an average of 27% support last year, according to ISS.
In many cases, such proposals don’t come to a vote at all, but they often open a discussion between a company’s management and investors.
New York City Comptroller Scott Stringer, who manages the city’s pension funds, is pressing the issue at several companies.
“We want to ensure that any corporate political spending advances the long-term interests of the company and its shareowners, not the personal political preferences of a particular executive with access to the corporate purse strings,” he said.
One way of measuring progress on openness about corporate political contributions is the CPA-Zicklin index, which shows that 25% of the companies in the S&P 500 index placed some type of restriction on their political spending in 2015. The CPA-Zicklin Index has registered a steady improvement in transparency and accountability in that area.
“Companies need to think strategically about these issues,” said Zachary Parks, special counsel in Covington & Burling LLP’s Washington office. “Companies that ignore disclosure initiatives have been the target of shareholder resolutions, bad press and lawsuits. But kitchen-sink disclosure isn’t risk free,” he said.
Mandatory reporting may be on the horizon.
In 2012, the Securities and Exchange Commission proposed requiring companies to disclose their political activities, but it hasn’t acted despite support for the idea in most of the 1.2 million comment letters it received.
A rider to the federal budget passed in December barred the agency from spending its resources pursuing a political-spending measure through the end of the fiscal year.
The SEC declined to comment.
With or without a prompt from Congress, the SEC is likely to adopt a rule requiring some kind of disclosure on corporate political giving by public companies, said William Lawlor, a partner in Dechert LLP.
“It’s really a question of when, not if,” he added.