Attention on corporate political spending promises to ratchet up from next month, and it’s not just because the US presidential campaign is swinging into full gear.
Proxy adviser Institutional Shareholder Services (ISS) is changing its policy guidelines in favor of shareholder proposals that call for disclosure and board oversight of contributions to political committees and trade associations.
The new policy, which will go into effect for proxy votes after February 1, moves ISS from a ‘case by case’ approach to recommending that clients ‘generally vote for’ shareholder resolutions on political spending.
Pointing to the controversial landmark Supreme Court ruling that lifted prohibitions on corporate and union contributions to independent committees, ISS spokesperson Ted Allen says the issue has received increasing shareholder attention since the decision.
Impetus for change
ISS, which advises more than 1,700 institutional investors on proxy votes, says the policy change grew out of input and feedback from its clients and issuer companies.
It also cites the negative media attention companies received in 2010 for their political contributions in California and Minnesota ‒ both of which have disclosure requirements in state campaigns ‒ as well as the ‘increasing traction’ of investor campaigns that have seen support for shareholder resolutions grow in recent years.
In 2010, 40 shareholder resolutions concerning corporate political spending received an average of 33 percent affirmative votes.
Support ranged from a high of 53.3 percent (Sprint Nextel) to a low of 11 percent (PepsiCo). Several resolutions were withdrawn by activist sponsors when companies agreed to implement changes in their disclosure and oversight policies on political spending.
50 resolutions pending
So far this year, more than 50 shareholder resolutions on the topic are pending for the upcoming 2012 proxy season, according to ISS.
The proxy adviser says a majority of investor respondents to its policy survey consider both contributions themselves and ‘political spending-related disclosure, policies and practices’ as either ‘critical’ or ‘important’ to their organization.
The ‘consensus view’ of institutional investors and issuers attending an ISS policy roundtable discussion favored the policy change and written comments from institutional investors ‘were generally in favor of the updated policy,’ ISS adds.
