Does your company keep political secrets?
FORTUNE 500 companies are becoming more open about executive pay, product safety and environmental impact. But many still resist pressure to disclose campaign donations.
By Marc Gunther, FORTUNE senior writer

NEW YORK (FORTUNE) - Transparency is a big trend these days in corporate America.

Under pressure from regulators, shareholders and activists, Fortune 500 companies are becoming more open about executive pay, the makeup of their workforce, the safety of their products and their environmental impact.

It would have been an ideal candidate to merge with a cable company or ISP. But the Internet phone provider is going it alone. Here's why (and why it's not such a good idea). (Read the column)

But many companies go into hush-hush mode when they are asked to explain how and why they spend money to influence campaigns and legislation. This is a new form of openness - call it political transparency - and it is dividing corporate America.

Chevron (Research), Citigroup (Research), J.P. Morgan Chase (Research), SBC Communications (Research) and Verizon Communications (Research) have all opposed shareholder resolutions asking the companies to disclose contributions and institute board oversight of political giving. By contrast, Amgen, Coca Cola, Morgan Stanley, PepsiCo, and Staples have agreed to disclose their campaign contributions.

When shareholder resolutions at about 25 companies have come to a vote this spring, they have achieved relatively high levels of support. At Verizon, for instance, 33 percent of shareholders supported disclosure.

"You are starting to see some real momentum," says Shelley Alpern, director of social research and advocacy at Trillium Asset Management, a socially-responsible investment firm.

The campaign for political transparency is being led by a small Washington nonprofit called the Center for Political Accountability (CPA), with the backing of socially-responsible and faith-based investors. They argue that shareholders have a right to know how their money is being spent in the political arena.

Political donations, they say, provide a window into a company's culture, ethics, business strategy and potential for scandal.

"As a shareholder, you need to know where your money ends up because your company's contributions could end up embarrassing you or even causing legal problems," says Bruce Freed, co- founder of the Center for Political Accountability (CPA) in Washington, D.C., which has led the charge for openness.

The companies that are resisting say that campaign contributions already have to be made public. (They are usually reported by candidates, but not by donors.) They say keeping lists of their donations creates a burden and provides no benefit to shareholders.

Some go further and say openness could help their competitors. In its proxy statement, Citigroup says: "Public disclosure of its rationale for political donations could negatively impact it by making it reveal its strategies and priorities." It makes you wonder what the big bank is up to, doesn't it?

Corporate giving, to be sure, is heavily regulated. Companies cannot, for example, give their own money directly to candidates for federal office. But many millions of dollars of corporate money still finds its way into politics.

Companies can give to so-called Section 527 groups, which try to influence elections without endorsing candidates, and they can give money to state candidates. They can also support trade associations, which are the subject of a new report called Hidden Rivers, from the CPA, which can be found at www.politicalaccountability.net.

The report describes trade associations as "the Swiss bank accounts of American politics" and says six big groups - including the U.S. Chamber of Commerce and the National Association of Manufacturers - helped companies direct about $100 million into campaigns during 2004.

According to the CPA, some of that money flowed into the campaign coffers of candidates who hold controversial positions. In Mississippi, for instance, a candidate for the state Supreme Court named Samac Richardson strongly opposed abortion rights and gay marriage - hot-button social issues that most companies prefer to avoid - and he was accused by the local press of using racial code words in his campaign. (Richardson, who was running against the court's only African-American justice, used the slogan "one of us.")

Richardson, who lost in a runoff election, got direct contributions from Merck (Research), MetLife (Research), R.J. Reynolds and others, as well as large sums of money from a variety of business groups.

Another example: In highly-politicized campaigns for judgeships in Alabama, several candidates who opposed abortion and gay rights, and supported school prayer and the public display of the Ten Commandments, got money from Pfizer (Research), GlaxoSmithKline, MeadWestVaco and Georgia-Pacific, as well as trade associations.

All of this is perfectly proper, of course, and companies have every right to participate in the political system. Drug companies, for example, may want to support judges who are likely to curb oversized damage awards, just as personal injury lawyers support candidates who make it easier to sue big companies.

The question is, should shareholders be able to find out how companies are trying to influence politics? Right now, they can't.

"There is no way to know the full scope of a company's political spending and lobbying activity," Freed says. "You don't have accountability."

It's hard to see how this lack of accountability is good for business, or for the rest of us. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.