Investors Seek More Disclosure On Political Spending

An effort by activist shareholders to prod companies to disclose political contributions is taking on new urgency following last month's Supreme Court decision loosening restrictions on corporate political spending.

The Council of Institutional Investors and the Center on Political Accountability this month plan to send a letter urging disclosure to the chairmen of 430 companies. Activist investors also have filed shareholder resolutions urging disclosure at 54 of those companies, according to proxy adviser RiskMetrics Group Inc.

The Supreme Court decision, which invalidated parts of the McCain-Feingold campaign-spending law, "is likely to put companies under immense pressure to use shareholder funds to support candidates, groups and causes whose positions and activities could threaten a company's reputation, bottom line and shareholder value," the groups say in the letter.

The Council of Institutional Investors represents government, labor and private pension funds that collectively manage roughly $3 trillion. The Center on Political Accountability is a private non-profit group supported by foundations.

The center lists 63 companies that disclose contributions, including General Electric Co., Chevron Corp. and Hewlett-Packard Co.

The disclosures typically include contributions to candidates, political parties and issue-based groups. Some companies also disclose memberships in trade associations which may lobby or contribute to candidates. Some of the contributions are not covered by disclosure laws.

Corporations cannot contribute to candidates for federal office. About half the states permit corporate contributions, which generally are disclosed by the candidates and publicly available. Corporations also can contribute to state and local political party organizations and to "issue" groups. Last month's Supreme Court ruling loosened restrictions on spending by issue-oriented groups that are backed by companies.

"Shareowners need to know how money is being spent," says Amy Borrus, deputy director of the investor council. The group has been urging boards to develop guidelines governing political contributions and to disclose contributions at least annually.

Investors filed shareholder resolutions at 49 companies last year, according to RiskMetrics. None won majorities. Among the 30 for which RiskMetrics has results, the resolution won an average of 29.9% support.

Drug maker Merck & Co. has posted its political contributions on its Web site for several years. In 2008, it added disclosure of trade-association dues used for lobbying, and last year, the company added political contributions in Australia and Canada. A Merck spokesman says the disclosures are "part of Merck's overall efforts to increase transparency about how the company operates."