Standing up to Corporate Cash: The Investor Case Against Corporate Campaign Spending
By Shelley Alpern of Trillium Asset Management and Larisa Ruoff of Green Century Capital Management
April 5, 2012 - When the Supreme Court’s Citizen United ruling unleashed the floodgates of unlimited corporate political spending, it transformed the once un-sexy topic of campaign finance reform into a hot issue. But while television viewers across the country are deluged with corporate-sponsored political ads, a broad coalition has emerged to fight back the rising waters.
As prominent citizens groups such as Common Cause and the U.S. Public Research Interest Group promise a “shareholder spring” of protests against corporate involvement in politics, investors are also making their voice heard. Proxy Preview 2012, a joint publication of the As You Sow Foundation and the Sustainable Endowments Institute, has dubbed political spending “the headline issue” on corporate ballots this spring.
While Citizens United may have spurred this renewed interest in corporate campaign financing, an incident in its wake encapsulates why many organizations believe that corporate political spending doesn’t pay dividends. In 2010, Target Corporation* used an independent committee to make a large donation to a candidate known for his anti-LGBT (lesbian, gay, bisexual, transgender) views. When the news broke, the company endured a full-scale backlash of in-store protests, a grassroots boycott and widespread media coverage.
The other corporate contributors to the committee, known as MN Forward, must have breathed a sigh of relief that Target took the brunt of the public’s wrath. 3M*, however, defiantly made a second contribution to MN Forward after the Target controversy broke, telling shareholders that it was important to support “pro-business” candidates even if they took positions in direct opposition to the company’s other values.
Trillium Asset Management and Green Century Capital Management have been leaders calling for increased disclosure and accountability of political spending and have filed dozens of resolutions on the issue over the past few years. But as corporate spending has taken on new forms and poses new risks in the wake of Citizens United, our position has evolved.
We believe that even though corporations’ right to spend shareholders’ money freely in the political process has been affirmed, it is inappropriate, unwise and overly risky to do so. We will continue to advocate for complete transparency and board-level oversight of political contributions at those companies that choose to engage in the political process, but where we can, we will encourage corporations to simply refrain from making political contributions entirely. Companies should not be in the business of making political decisions on behalf of their shareholders, who cannot “opt out” of their contribution to these efforts in the way that union members can collect a refund for the portion of their dues used for political campaigns.
Our resolutions at 3M, Bank of America* and Target represent a watershed moment – the first time that institutional investors are calling upon companies to refrain completely from all categories of political spending. Their recent mishaps well illustrate why we believe 3M and Target are good candidates for a “no spending” policy. Bank of America, is a member of an industry still reeling from the financial crisis and worldwide economic meltdown caused in part by its own misdeeds and miscalculations. Financial services firms were described by the Center for Responsive Politics, a group that tracks political spending, as “far and away the largest source of campaign contributions to federal candidates and parties.” Many believe that this massive use of financial resources to influence the political process is inappropriate in the wake of a taxpayer-funded bailout which saved their firms and their industry.
Companies that refuse to refrain from all types of political spending tend to claim that it would be a form of unilateral disarmament. However, this argument conveniently ignores other ways in which their voices can be heard on public policy issues – through lobbying, corporate PACs, and via the personal donations of employees—three routes our resolutions do not address. Nor would they be breaking new ground, as a number of companies either have policies banning all forms of political spending or have refrained from such spending even in the absence of such policies.
As attention to this issue grows, so do the risks for companies that continue to make political contributions. It is time for Bank of America, Target and 3M to respond to their shareholders and acknowledge that corporate political contributions don’t pay dividends that are worth the risk.
* As of December 31, 2011, neither the Green Century Balanced Fund nor the Green Century Equity Fund held Bank of America. As of December 31, 2011 Target Corp. comprised 0.00% of the Green Century Balanced Fund and 0.63% of the Green Century Equity Fund and 3M comprised 0.00% of the Green Century Balanced Fund and 1.05% of the Green Century Equity Fund. Please refer to the Green Century Funds website for current information regarding the Funds' portfolio holdings. These holdings are subject to risk as described in the Funds' prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor.
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Trillium Asset Management, LLC is the oldest independent investment advisor devoted exclusively to sustainable and responsible investing. With over $1 billion in assets under management, Trillium has been managing equity and fixed income investments for high net worth individuals, foundations, endowments, religious institutions, and other nonprofits, since 1982. A leader in shareholder advocacy and public policy work, Trillium's goal is to deliver both impact and performance to its investors. References to the investments in the above article should not be considered a recommendation to buy or sell the specific investments. Existing client accounts may or may not hold the specific investments referenced above. Should you have specific questions regarding Trillium's products or services please visit the website at www.trilliuminvest.com or call 617-423-6655.
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