Views on improving the integrity of global capital markets
20 December 2012

Corporate Governance Outlook 2013: Political Spending

An issue that received increased interest in the 2012 U.S. proxy season was political spending — and the level of disclosure investors could expect from issuers.

We first wrote about this topic at the height of proxy season in the United States back in May.

After the U.S . proxy season ended, it became clear that political spending had emerged as one of the most popular issues for investors to place on the proxy. The Institutional Shareholder Services (ISS) 2012 U.S. Proxy Season Review: Environmental & Social Issues shows that political issues took the top spot for the first time in the list of shareholder resolutions concerning environmental or social issues.

Here‘s a summary of key statistics on political spending proposals in 2012 (through 1 August):

  • 118 proposals filed (many withdrawn due to accommodation by an issuer or SEC action)
  • 71 such proposals made it through to proxy statements (versus 53 in 2011)
  • None have passed
  • Average support just above 20%
  • 19 proposals earned 30% support or higher

One of the unique aspects of political spending proposals is their obvious tie-in to political cycles. While proxy issues such as “Say on Pay” or majority voting were in years past mainstays of proxy proposals, political spending proposals may wax and wane with the political cycle. We will have to see if the number of proposals linked to political spending falls in 2013 with no U.S. presidential or congressional elections to drive donations from either side of the aisle.

A number of groups aren’t waiting to find out. Among them is a committee of 10 law professors whose chairs are Lucian Bebchuk of Harvard and Robert Jackson Jr. of Columbia. These professors submitted a rule-making petition calling on the U.S. Securities and Exchange Commission (SEC) to adopt rules that would require public companies to disclose information about their political spending. The SEC has indicated that it is considering the petition and looking into whether to recommend such a regulation.

In their article, “Shining Light on Corporate Political Spending,” Bebchuk and Jackson argue the case for SEC rules requiring public companies to disclose their political spending. The professors state that a substantial amount of corporate spending on politics occurs without the knowledge of investors, who have an interest in ensuring that such spending is consistent with shareholder interests. They go on to argue that voluntary disclosure is not enough, as few companies — and only very large ones at that — disclose political spending. The professors surmise that the current private ordering voluntary regime only offers investors non-standardized and often non-comparable information, and fails to set a baseline of quality information that the SEC already uses to regulate other areas of disclosure.

Will the new SEC chairman and staff take up the issue of political spending in the coming year? If and until they do, should we expect more action through the corporate proxy from shareowners? Just what level of transparency should investors expect on these issues?

What say you?

Photo credit: ©

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

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