Tuesday, August 16, 2011

Int’l Corporate Governance Group Praises SEC Rulemaking Petition on Disclosure of Corporate Political Spending

A recent petition from academic experts to the SEC advocating rulemaking to require the disclosure of corporate political spending to public company shareholders would ensure transparency and accountability of corporations to their investors, said the International Corporate Governance Network in a letter to the Commission. More robust disclosure of corporate political spending is of interest to investors, noted the ICGN, and is particularly relevant in the United States given last year’s Supreme Court decision in Citizens United v. FEC, which confirmed the rights of U.S. companies to provide funding for political purposes.

While corporate political activity can be positive, noted the governance network, when corporate resources are deployed to seek political influence there is also a potential for abuse. In the extreme case this can lead to serious breaches of business ethics, particularly when influence is sought through corrupt practices or in ways that are not consistent with promoting the long-term interests of the company and its investors

The ICGN told the SEC that it would be publishing a broader guidance statement on corporate political lobbying and donations later this year. The guidance will advocate a set of best practices relating to corporate political influence, addressing corporate policies, procedures, board oversight, transparency and disclosure and relevant shareholder approvals. This ICGN initiative reflects the significant, and growing, interest of investors with regard to corporate political activity. However, while best practices are important, this is not a substitute for disclosure, cautioned the network, because, absent disclosure, investors would not know whether companies are following these
practices.

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