Abstract
Recently, corporate stakeholders and regulators, such as the United States Congress and the Parliament of the United Kingdom as well as professional organizations (e.g., the Chartered Financial Analyst Institute), have called for more transparent disclosure of political activities. In this general discussion article, we analyze the recent developments in a related emerging area of corporate non-financial disclosure: corporate political disclosure (CPD). Using the USA as our experimental setting, we deploy a trended descriptive and comparative analysis of CPD practices for a sample of S&P 500 firms (2011–2016) based on a new CPD index developed by the Center for Political Accountability and the Carol and Lawrence Zicklin Center for Business Ethics Research of the Wharton School of the University of Pennsylvania. We find that firms’ CPD increases year over year. Notably, industries that are more regulated and are more politically sensitive (such as chemicals and allied products, healthcare and drugs, and utilities) are more transparent in their CPD than other industries (such as consumer durables). This study has important implications for emerging and developed countries where political activity interacts with corporate governance. It is especially relevant to the role of the board of directors in overseeing the transparency and accountability of a company’s political activities.
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Notes
The FEDCPA at the time was the sole authority regulating federal elections and campaign finance. Its authority was subsequently extended to cover election committees and multi-state parties. It required disclosure reports of finances on a quarterly basis. However, these revisions did not sufficiently regulate campaign finance. There were no punishments for lack of compliance and no regulatory vehicle to disclose finances to the public. In addition, it did not address total contributions. Limits on total contributions could be easily worked around by having various entities all make multiple donations under the spending limit. Finally, the law was rarely enforced and was ultimately repealed by FECA in 1972 (Columbia Law Review).
The FEDCPA was repealed in 1972 and should not be confused with the Foreign Corrupt Practices Act of 1977 (FORCPA), which primarily requires accounting and reporting transparency under the 1934 Securities Act and restricts bribery of foreign officials. The FORCPA deals with persons who engage in foreign corrupt practices who have a substantial connection to the United States. The law applies to any actor participating in foreign corrupt practices residing within or outside the United States, whether it be American residents, citizens, nationals, or an American business or foreign corporation that trade securities in the U.S. The present study focuses on federal election campaign financing under the umbrella of Citizen’s United vs FEC (2010).
Consistently, the U.S. Chamber of Commerce and the Business Roundtable have actively campaigned against efforts to get their members to open up about political spending on the grounds that the pressure on business to increase corporate political transparency could be driven by the private interests of small hostile groups rather than by the interests of stakeholders in general. In such cases, disclosure could exert unnecessary pressure on firms’ business decisions (https://www.bloomberg.com/politics/articles/2015-08-31/democrats-pressure-sec-to-forcedisclosure-of-political-spending).
While the data on corporate contribution disclosure (captured in DISCLOSURE PERCENTAGE TRANSPARENCY) are available from the Federal Election Commission (FEC, https://www.fec.gov/data/advanced/?tab=other), the Center for Responsive Politics (http://www.opensecrets.org/dark-money/explore-our-reports/), and the Sunlight Foundation (https://sunlightfoundation.com/transparency-camp/), the data on the oversight of and policies on corporate political contributions (captured in POLICY PERCENTAGE TRANSPARENCY and OVERSIGHT TRANSPARENCY) are not available through any channels other than corporation websites. Moreover, corporate political contribution disclosure (DISCLOSURE PERCENTAGE TRANSPARENCY) makes the information more accessible than the data on the websites of the above three organizations. Hence, our measure of CPD PERCENTAGE TRANSPARENCY comprehensively captures the transparency of the overall informational environment of the corporate political contributions.
Source: The 2014 CPA–Zicklin Index of Corporate Political Disclosure and Accountability. Available at politicalaccountability.net/index. We adopt the weight of the each scoring items as defined in the CPA–Zicklin Index.
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DeBoskey, D.G., Luo, Y. Recent trends in corporate political disclosure for a sample of S&P 500 firms: a new and emerging corporate disclosure area. Int J Discl Gov 15, 176–184 (2018). https://doi.org/10.1057/s41310-018-0045-z
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DOI: https://doi.org/10.1057/s41310-018-0045-z