Knowing what you need to know

What effect could the holding in Citizens United have on proxy elections of corporate board if directors? Theoretically, with Citizens United now allowing corporations to use treasury funds to support “electioneering communication” for or against candidates in political races, those seeking places on corporate board of directors could find their political beliefs a central issue rather than their business knowledge or acumen; the qualities typically under scrutiny when electing those to help make the decisions to run a corporation. In essence, by allowing corporations to use general treasury monies to fund political advertisements, it adds another element of decision-making to those already burdened with the decisions necessary to run a successful corporation. Think of it this way, many times shareholders disagree with business decisions boards of directors make because they may not believe it’s in the best interest of the corporation. Now it seems added to the list of decisions being made will include which candidate the corporation finds to support their concerns the best. Shareholders now have another facet to consider when looking at just how happy they are with the board of directors actions.

An issue discussed in the Citizens United opinion was that “disclosure requirements can chill donations to an organization by exposing donors to retaliation.” Kennedy noted in his opinion that, “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Essentially, disclosure is what allows the voter, and shareholder to know where money is being spent so informed decisions can be made. This same information must be utilized by the shareholder when looking at just how its corporations funds are being spent on political issues. The Court also noted that many findings when Congress passed the BRCA were premised on a system without adequate disclosure. As long as there is a system of disclosure in place, there will be enough transparency in the process that all involved parties can know where money is being spent and show support or disdain for that action. However, does this transparency exist or are we closer to a system where disclosure is inadequate.


In a study recently issued by the Investor Responsibility Research Center Institute and the Sustainable Investments Institute, entitled “How Companies Influence Elections: Political Campaign Spending Patterns and Oversight at America’s Largest Companies” found that while almost 80 percent of S&P 500 companies have disclosed direct political campaign spending policies, 86 percent have no disclosed policies regarding indirect political expenditures. Further than that, only 20 percent of corporations disclose how much is actually spend and which organizations or causes receive the funds. (http://www.businesswire.com/news/home/20101014005545/en/Study-Finds-86-SP-500-Companies-Disclosed) The study discussed how backlash from corporate political spending, specifically from the boycott stemming from Target’s indirect political expenditures, show that shareholders want greater disclosure so the system is more transparent, allowing investors to protect their investments. One fact the study found is that while nearly 80 percent of S&P 500 companies have disclosed political campaign spending, a vast minority only have policies readily accessible to describe the decision process of that spending, and the oversight given to it. If this is the case, how can the majority of shareholders have enough information outside of where the money was spent to assess the actions of boards of directors? Beyond this still is the issue that corporations can still donate now unlimited amounts of money to non-profit organizations and trade groups which do not have to show where their donations come from. The question still remains, is there enough transparency in the process to really leave all interested parties satisfied. From a shareholders perspective, as much information about where a corporation is spending money is key, otherwise, without it how can one determine if a company is being mismanaged? As the election comes and goes hopefully information about spending will become more readily available, but it would seem for now without some government intervention we may be slowly falling toward a system where disclosure is inadequate.