Political Advertising and Corporate Responsibility: A Call for Shareholder Action
As the midterm election cycle drew to a close, the flurry of media attention around whether the election was or was not a “referendum on Obama” left some looming issues in the public discourse. One of the most important being the fact that more than $3 billion dollars was spent on political advertising this campaign season. More precisely, as the Center for Responsive Politics has reported, House and Senate candidates had raised a combined $1.7 billion, and spent $1.4 billion. Fundraising by parties and spending by outside groups brought the total dollar amount raised to $3.2 billion in a time when our nation suffers from an unemployment rate of 9.2% and where the impacts of the near-devastating economic downturn are still being felt.
The Supreme Court has indicated its support for such corporate expenditures, particularly through its holding in the Citizens United v. Federal Elections Committee case, which ruled that corporate funding of independent political broadcasts in candidate elections cannot be limited under the First Amendment. The decision also overturned parts of a 63-year-old law that prevented corporations and unions from using money from their general treasuries to produce and run their own campaign ads urging the election or defeat of particular candidates by name. Further, the Justices struck down part of the McCain-Feingold campaign finance bill that barred union and corporate-paid issue ads in the closing days of election campaigns.
Questions of transparency have also arisen in the context of this election as some groups spending in this election cycle are not required by law to disclose their donors. Thus, the dawn of a new era, one that makes many, including this author, uncomfortable.
A survey by Zogby International reveals that many American business owners are concerned about the pressure to donate to political campaigns. The survey also lays out the growing number of undisclosed contributions made by corporations. Six in ten business leaders said they felt pressure to help fund political efforts. Approximately 77% said that organizations should disclose all of their direct and indirect political expenditures. Of the 301 business leaders who were polled, two-thirds agreed that a lack of transparency in political activity encourages behavior that damages its reputations and puts a corporation at legal risk.
Even media outlets are finding it difficult to keep up, with inventory for air-time shrinking as Ken Wheaton reported in Advertising Age, points out. He quotes a general manager of a network affiliate: “Yes, there’s definitely a lot of political advertising, and it does put a lot of pressure on your inventory. It’s a bit of a juggling act. You have to manage it.”
Shareholder groups have been anticipating this outcome since the Citizens United case was decided. As reported by the Christian Science Monitor, in late February, the Center for Political Accountability (CPA) and the Council of Institutional Investors jointly sent letters to 427 of the companies in the S&P 500 stock index, asking them to disclose all their political contributions. The letters, signed by 44 other groups, also asked corporate boards to approve and review all company political outlays.
Another example of shareholders demanding a say on political contributions: the $129.4 billion New York State Common Retirement Fund in Albany asked American International Group (AIG) to give shareholders a vote on its political spending for the prior year, a request the fund calls unprecedented.
The record number of dollars spent this election is a boon for the advertising industry, but raises some serious questions that we as shareholders and citizens need to ponder. By not demanding transparency in political spending, and flooding the airwaves with advertisement after advertisement, we are cheapening our democracy. The Supreme Court has indicated an unwillingness to stem this flow. Nevertheless, smart companies should know better than to get too political. If they don’t stop spending on politics, their shareholders should speak out.
Read more about Citizens United here.
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April 7th, 2011
- Guiding Principles for Business and Human Rights from the United Nations
January 3rd, 2011
- President Obama Proclaims Human Rights Day, Bill of Rights Day and Human Rights Week
December 10th, 2010
- Ruggie Releases Draft Guiding Principles on Business and Human Rights
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- Promoting Corporate Citizenship by Crowdsourcing Market Power
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- Political Advertising and Corporate Responsibility: A Call for Shareholder Action
November 8th, 2010