The International Corporate Governance Network (ICGN) would like to voice its support for the recent petition that was sent to the Securities and Exchange Commission on August 3, 2011 by the Committee on Disclosure of Corporate Political Spending, advocating a rulemaking project to require disclosure of corporate political spending to public company shareholders. The ICGN concurs with this group of academic experts in corporate and securities law that more robust disclosure of corporate political spending is of interest to investors. While the ICGN’s purview is a global one, we believe this matter 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.
The ICGN recognises that corporate political activity can be positive. However when corporate resources are deployed to seek political influence there is also potential for abuse. In the extreme 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.
Given these concerns we believe that disclosure of corporate political spending is only a basic first step to ensure transparency and accountability of corporations to their investors. Indeed, the ICGN is publishing a broader guidance statement on corporate political lobbying and donations later this year. This document 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, because absent disclosure investors would not know whether companies are following these practices.
We hope this puts into a clearer context our support of the petition put forward by the Committee on Disclosure of Corporate Political Spending, and from our perspective as investors we encourage the SEC to adopt the rulemaking project on corporate political spending as outlined in this petition.
Our full comment letter is available here.