Political Contribution Proposals (U.S.)

Background and Overview

The public policy debate over corporate political contributions has evolved in recent years, as have shareholder expectations regarding corporate disclosure of related policies and practices. The changes appear to be a result of factors such as the multiyear shareholder campaign on corporate political contributions disclosure and the 2010 Citizens United decision by the U.S. Supreme Court. Recent incidents where companies have received unfavorable media attention as a result of their political contribution activities demonstrate the risks/consequences of gaps in the oversight and evaluation of such activities due to the issue's higher profile.

According to ISS' 2011-12 Policy Survey, more than half of the investor respondents consider the various types of contributions of corporate funds for political purposes including direct contributions, contributions to trade associations, or payments made for grassroots lobbying as either "critical" or "important" to their organization.  Furthermore, more than half of investor respondents also indicated that political spending-related disclosure, policies, and practices are either "critical" or "important."

Key Changes under Consideration

The proposed changes would shift ISS' current policy on corporate political contribution disclosure shareholder proposals from a CASE-BY-CASE approach to a Generally Vote FOR recommendation. In addition, the text in the proposed policy is being updated and disclosure of oversight mechanisms is more explicitly noted as a point of consideration, and is as follows:

Generally vote FOR proposals requesting greater disclosure of a company's political contributions and trade association spending policies and activities. However, the following will be considered:

• The company's current disclosure of policies and oversight mechanisms related to its direct political contributions and payments to trade associations or other groups that may be used for political purposes; including information on the types of organizations supported and the business rationale for supporting these organizations; and
• Recent significant controversies, fines, or litigation related to the company's political contributions or political activities.

Intent and Impact

ISS' proposed policy is intended to address an evolving issue and to reflect investor views. ISS currently recommends support for a significant majority of shareholder proposals requesting greater disclosure of corporate political contributions policies and practices. As such, the proposed policy will enhance clarity and is not expected to have a significant impact on ISS' recommendation practices regarding this issue.

Request for Comment

Please feel free to add any additional information or comments on the proposed policy change.  In addition, ISS is specifically seeking feedback on the following:

• Does your organization believe that the proposed ISS policy appropriately and reasonably addresses corporate political contributions disclosure as a proxy issue?

• Is additional information from companies regarding their political contributions policies and oversight mechanisms sufficient, or would your organization prefer disclosure on specific information about actual political contributions (aggregate or individual) reported in company materials such as on a Web site or in a company report?

To submit a comment, please send via e-mail to policy@issgovernance.com.Please indicate your name and organization for attribution. While ISS will consider all feedback that it receives, comments will not be published without attribution.

All comments received will be published as received, unless otherwise requested in the body of the e-mail submission.