By Timothy Smith
From the Winter 2012 Edition of Values

Stories flood the media with descriptions of money that poured into political campaigns in 2012. Stimulated by the 2010 U.S. Supreme Court Citizens United decision, which opened the door for massive inflows of corporate funds, these headlines remind readers of the potential risks to our electoral process.

The pricetag for the 2012 House, Senate, and Presidential races was estimated at over $6 billion, by far the most expensive U.S. election in history. Some of the funding came from large party coffers—the Democratic and Republican National Committees spent $114 million and $96 million, respectively, on House and Senate contests, according to the Sunlight Foundation. Resources deployed in the Presidential race alone were also unprecedented at $1.05 billion for Mitt Romney and $948 million for President Obama. Hidden money channeled through third parties that do not have to disclose funders included more than $36 million from the U.S. Chamber of Commerce (the Chamber) and $105 million from Karl Rove’s American Crossroads GPS. More than a hundred such “dark money groups” were formed—registered as nonprofits—injecting $300 million into the 2012 election, of which 80 percent supported Republican candidates. In addition, new Super PACs, which do disclose contributors, raised hundreds of millions of dollars from wealthy individuals who yearned to be kingmakers. Most companies avoided the disclosure of Super PACs, though Chevron contributed $2.5 million to support a Super PAC for House Republicans.

In spite of all that, at least in this inning, the batting average for secret political spending was dismal. The Chamber put $24 million into 15 high-profile Senate races, yet only two of its candidates won. American Crossroads fared about the same. Now, many companies that funded the Chamber campaign are evaluating what they got for their money and whether such expenditures were in their shareholders’ best interests. The more than 100 companies serving on the board of the Chamber face a critical set of questions: What does it mean when the nation’s most prominent business trade association becomes unapologetically partisan, supporting predominantly Republican candidates including many with a far-right bent? Does this funding really serve the interests of member companies, many of which have pragmatic rather than ideological perspectives? What is the impact on the reputation of an IBM, PepsiCo, or Pfizer—all Chamber board members—to be associated with what can legitimately be called an ideological attack group?

While some may say, “It didn’t work; big money didn’t buy this election,” the precedent established in 2012 is alarming. Going forward, politicians will have to raise even more cash to earn or retain their seats, donation limits will be meaningless since Super PACs can be formed to raise and spend unlimited funds, and floods of negative ads are likely the wave of the future. In short, the consequences of Citizens United are just beginning to be felt. What’s the response of investors who are concerned about the impact of corporate political spending, as well as lobbying (expenditures on the latter are nine times greater)?

  • More than 100 companies are receiving shareholder resolutions requesting that they voluntarily report on their political spending or lobbying activities.
  • Companies that are financial supporters of ALEC (American Legislative Exchange Council), a right-wing, state-oriented lobbying organization, have been asked by some investors and others to end all financial ties. More than 40 companies have withdrawn, including Bank of America, General Electric, McDonald’s, and Merck. We expect other companies will simply declare that they don’t have the budget to continue funding ALEC.
  • The Securities and Exchange Commission (SEC) indicated recently that it may draft a rule requiring all companies to disclose political spending, prompted by a group of a dozen prominent professors who petitioned the SEC and were supported by a strong investor voice and a record-setting number of letters and petitions. This would be opposed vigorously by the Chamber, which strives to provide anonymity for corporate donors to its election fund.

These events suggest that full political spending disclosure may be an idea whose time has come. Our democracy demands it.