Corporations are ramping up disclosure of political spending amid intense scrutiny of their advocacy by the public and by shareholders focused on social justice and governance issues in the wake of the Jan. 6 insurrection at the Capitol. 

Some 295 S&P 500 companies now have policies for general board oversight of political spending, up 13.9 percent from 2020, according to a report released this week from the Center for Political Accountability and the Wharton School of the University of Pennsylvania. The document is based on published company reports, statements on political spending and CPA staff’s outreach to firms in the first 10 months of 2021.

The number of companies with board committee review of direct political contributions and expenditures rose 12.3 percent, to 255, the report said. “Dark money” contributions to trade associations and other tax-exempt organizations that are not required to disclose their donors also saw increased probing: 228 companies now say they review such payments, a 14.6 percent increase from the year before. The extent of disclosure to shareholders or the public of those reviews varies, however.

“We believe companies are moving in a turbulent political climate to better manage the risks of spending to sway elections,” CPA President Bruce Freed said in a statement. “In the months both before and after January 6th, this has accelerated at the board level, with more directors, through board committees, paying closer attention to company political activity.”

Six companies had perfect scores of 100 percent for political disclosure and accountability on the CPA-Wharton Zicklin Index: AT&T; medical device maker Becton, Dickinson and Co.; New York-based utility Consolidated Edison; medical technology firm Edwards Lifesciences; HP; and Visa.

The number of companies with scores of 90 percent or higher rose to 87 from 79 last year. Overall, the average score for political disclosure and accountability rose to 54.1 percent from last year’s average of 50.1 percent.

The index found a strong positive correlation between companies’ shareholder engagement on the issue of corporate political spending disclosure and accountability, and their scores. 

Some 218 companies on the index have worked with shareholders on such resolutions since 2004. Of these companies, 145 have reached agreements with shareholders. 

“For companies with an agreement, the average overall Index score is 80.2 percent, as compared to 64.0 percent for the 73 companies that were engaged but did not reach an agreement,” according to the report.

The disclosure progress is evident nearly a year after the Jan. 6 attack on the Capitol during Congress’ certification of the 2020 presidential election results, which prompted some companies to pause their political spending to reassess which politicians and candidates they contribute to. 

Direct corporate donations to candidates are illegal, but employees and executives of companies can pool their contributions through PACs, which must disclose donors and expenditures and are subject to limits on both. Companies can also give unlimited amounts to groups that spend money to influence politics, some of which disclose their donors and some which do not.

Environmental, social and governance advocates expect political spending to come up more in the upcoming proxy season, when activist shareholders present proposals to convince other investors to support more transparency and disclosure on companies’ political contributions and lobbying activities. According to law firm Gibson, Dunn & Crutcher LLP, shareholders filed 76 proposals related to civic engagement between Oct. 1, 2020, and June 1, making up about 9 percent of submitted proposals.

Since Jan. 6, most companies have resumed political contributions ahead of the 2022 midterm elections. Representatives for Becton, Dickinson and Co.; Edwards Lifesciences; and Visa did not respond to CQ Roll Call’s inquiries on how the Jan. 6 attack affected their political spending policies, including decisions on which candidates the company backs through PAC contributions, trade associations or other nonprofit groups.

“By providing our customers, shareholders, employees, and the general public maximum visibility into the company’s political activities — from our PAC and corporate political giving to our lobbying expenses — Con Edison has demonstrated our commitment to political transparency and disclosure,” spokesperson Allan Drury said in an email.

AT&T spokesperson Megan Ketterer declined to comment.

An HP spokesperson said in an email that the company ended its PAC in mid-January following the Jan. 6 attack and it will “continue to advocate for issues and causes that strengthen our business and our communities.”

Republican riders

Democratic lawmakers also want to see more disclosures from companies on their political spending. Maryland Sen. Chris Van Hollen’s fiscal 2022 Financial Services appropriations bill would end Republican-supported riders that block the Securities and Exchange Commission from mandating that public companies reveal their political spending with shareholders and that block the Treasury Department from clarifying its definition of “political activity” for 501(c)(4) social welfare groups that provide the lion’s share of undisclosed election spending. 

“Shareholders and the public have a right to know what political causes their money is being used to support, decisions that can go against their values or put their investments at risk,” said Van Hollen, the Senate Financial Services Appropriations chair. “More transparency in political fundraising is part of the essential mission to restore faith in government.”

While the SEC hasn’t required political spending disclosures from companies, Chair Gary Gensler has maintained that the agency should evaluate disclosure on “material” information, and investors are increasingly pushing companies for transparency on their contributions.

“Nondisclosure of corporate influence was once a blot on electoral integrity,” said William S. Laufer, director of Wharton’s Carol and Lawrence Zicklin Center for Business Ethics Research. Failure to disclose political spending is increasingly hard to explain amid efforts to ensure free and fair elections and is difficult to justify to electoral officials in jurisdictions around the world that admire and seek to emulate U.S. electoral laws and practices, he said, adding that they are also impossible to square with the many voices claiming U.S. exceptionalism with respect to our legal institutions.

With this report, “there is evidence of greater integration of disclosure and accountability policies throughout the corporate hierarchy, including board involvement, oversight and review,” Laufer said, noting that there needs to be a closer look at the alignment between company policies and actual spending practices.

Ultraviolet, a women’s advocacy group, found that AT&T — which had a perfect score on the index and has made commitments to gender equality and the empowerment of women — was one of seven companies that gave more than $100,000 in campaign contributions to Texas state lawmakers who sponsored an abortion ban. 

“But the sum total of skepticism and cautious optimism must be put into context,” Laufer said. “There is a documented history of significant progress toward disclosure and accountability that, over the course of a decade, could not be accomplished with the formalities of laws and regulation.”