With c.100 US resolutions on political lobbying, ICGN guidance is timely

Shining some light on a grey area.

With an estimated 100 or so Annual General Meeting (AGM) resolutions on political contributions expected to be voted on in the 2012 US proxy season alone, the new ‘Statement and Guidance on Political Lobbying and Donations’ issued this week by the International Corporate Governance Network (ICGN) is timely. The US anomaly is being driven by the 2010 landmark decision by the United States Supreme Court, which held that the First Amendment prohibited government restriction on donations by corporations and unions to Political Action Committees (PACs), which then lobby on behalf of or against election candidates. Many of this year’s US shareholder resolutions refer to concerns about political spending, lobbying, and the influence of corporate money on government policy.
But as Carl Rosén, Executive Director of ICGN and former Head of Corporate Governance and Communications at the Second Swedish National Pension Fund (AP2), notes, the issue of political ‘donations’ is global and potentially less transparent in countries such as the BRICs: Brazil, Russia, India and China, where large amounts of institutional assets are now invested. He says the ICGN’s Business Ethics Committee will also examine potential links between political lobbying and corruption in different markets as part of future research. George Dallas, Director, Corporate Governance at F&C Investments and chair of the ICGN Business Ethics Committee that produced the latest statement on lobbbying, says the organisation wanted to put forward a best practice guide because the issue can be complicated: “Many companies seek to have input into government policy quite legitimately and can bring significant expertise to the table. But there can also be huge reputational risk when companies are perceived to be having illegitimate input into the politicalprocess or saying publicly one thing and lobbying for another behind closed doors. So it is a grey area. The rules are also very different between countries.” Dallas says the ICGN generally discourages political contributions, but where they are made the organisation recommends at best an approval shareholder vote or at least full disclosure of the payment and demonstration of consistency with the company’s interests.
As Rosen notes: “This really should be on the voting radar for international investors.”
The ICGN statement has four key recommendations for oversight of corporate political donations:

  • Legitimacy – that a donation clearly serves the interests of the company as a whole and its investors.
  • Transparency – the policy framework is clear on what the company is doing, who the decision makers are, and when and how the company seeks to influence public policy and the political process. This should include all direct and indirect costs of political activity.
  • Accountability – company managers involved with political activity should be held accountable by the company’s Board, which in turn, is held accountable by the company’s shareholders.
  • Responsibility – political influence should be sought within the constraints of legal and ethical norms and does not seek undue influence for special interest groups at the expense of broader public welfare.

See downloads for ICGN Statement and Guidance on Political Lobbying and Donations