“We the People”, Not “We the Moguls”

The TakeAway: Controversial corporate political spending spurs shareholder activism aimed at aligning company values with American values.

With election season around the corner, today we question if our democracy, founded on the ideal of representing “We the People”, has been eclipsed by a government more beholden to “We the Moguls”—and look at ways to revitalize self-governance.  George Packer’s recent New Yorker article on “The Empty Chamber” paints a depressing picture of how the Senate has devolved into petty obstructionism and servitude to corporate lobbyists.  The January 2010 Supreme Court decision in Citizens United opened the door to unlimited corporate giving to political campaigns, resulting in controversial donations by Target, Best Buy, and News Corp (which recently gave $1 million to the Republican Governors Association).

In the wake of Citizens United corporate political contributions are under greater scrutiny, says Bruce Freed of the Center for Political Accountability (CPA), author of the forthcoming Conference Board publication, Handbook on Corporate Political Activity. However, recent actions by shareholder activists  are a bright spot because they ask if such company moves advance or betray American values of tolerance, diversity, and justice.

The Packer essay describes a Senate that has become “a sclerotic, wasteful, unhappy body” over the past few decades through the influence of money and C-Span, with independent minds falling victim to blind partisanship.  Party maneuvering, filibusters, and “secret holds” (the anonymous blockage of Administrative appointments) form a perpetual gridlock.  Senators, like their House counterparts, spend half of their free time (or more) fundraising, according to one Senator.

Meanwhile, there was evidence last week of an invigorated “electorate” mobilized to combat the corrosive impact of corporate money in politics.  Last Thursday, three leaders in socially responsible investing – Walden Asset Management, Trillium Asset Management, and Calvert Investments – filed resolutions at Target and Best Buy in connection with recent controversial campaign donations.  The Los Angeles Times wrote, “Together they hold $57.5 million of Target stock.  Other institutional investors, including the New York state pension fund and union investment managers, are considering co-signing the resolution…[T]he Target case suggests that customer and shareholder pressure is emerging as an unexpected factor that could rein in at least some of that corporate spending.”

According to the filers’ joint press release, both Target and Best Buy “are under fire for making sizable political contributions to a group channeling funds to a Minnesota gubernatorial candidate known for his opposition to lesbian, gay, bisexual, and transgender (LGBT) rights.”  Resolution sponsors called attention to the “misalignment between the donations and the companies’ corporate values.”  Both firms have “exceptionally strong workplace policies for LGBT employees, and have supported LGBT community activities in Minnesota.”  The Target proposal asks the company’s independent board members to undertake a “comprehensive review of Target’s political contributions and spending processes including the criteria used for such contributions” and “oversight processes by management and the Board.”

“A good corporate political contribution policy should prevent the kind of debacle Target and Best Buy walked into,” said Shelley Alpern, vice president at Trillium, in the LA Times article.  “We expect companies to evaluate candidates based upon the range of their positions — not simply one area — and assess whether they are in alignment with their core values.  But these companies’ policies are clearly lacking that.”

Judging from the “ask” of these proposals, boards clearly play a key role in setting guidelines for political donations.  That’s why proxy access – the ability of shareholders to nominate board candidates – is so important.  On Wednesday, the SEC will consider proxy access, a sign that corporate elections are more important than ever as bricks in the base of representative democracy.  Wise stewardship at the board level can mean fewer shenanigans affecting corporate political activity.  Self-governance is a means through which a free people remain free—as applied to capital markets and corporate governance, as well as public life.  With enough citizen activists – be they community folk or shareholders – and elected representatives – be they Senators or board directors – who are mindful of American values and wise stewardship, maybe, just maybe, we can keep it “We the People,” after all.

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