Companies today face a high-risk landscape for their political spending and its impact. The crisis that confronts U.S. democracy and the gridlock blocking action on a broad range of issues from climate change to voting, women’s reproductive rights, guns and even democracy itself has put front and center the role of company political spending in contributing to the breakdown.

It’s not just investors who are closely scrutinizing a company’s use of its political money but also the media, employees and consumers. How a company spends can affect its bottom line. This makes it incumbent upon management and directors to take a hard look at the consequences of their company’s election-related spending, the immediate and broad risks that it poses and whether or how it should engage in political spending.

To address this, the Center for Political Accountability (CPA) has a new “Model Code” proposal that requests companies to report on their websites any election-related spending by third party groups, such as trade associations, 501(c)(4)s, super PACs or 527 groups, to which they make payments out of corporate treasury funds. The proposal has been filed at eight companies so far this proxy season with more to come.

The proposal is based on a provision in the Model Code of Conduct for Corporate Political Spending that calls on companies to fully report third-party giving. The Model Code provides a framework for companies to evaluate the goals and risks of their election-related spending, and in doing so, to align spending with both core company values and a needed commitment to democratic institutions.

The purpose of the resolution is to get companies to connect the dots to the ultimate destination of their money. If they don’t, someone else will, heightening the risk they face. In the language of business, this requires that companies conduct due diligence with regard to political spending. It’s a necessary implementation step to build on the disclosure that CPA has called for and to mitigate escalating risk.

Regarding the Model Code, CPA is actively speaking with companies to adopt it. The goal is to get a beachhead group to take that step and open the way for broader company adoption of the Code. This is the trajectory that has made political disclosure and accountability the norm through “private ordering.”

CPA is focusing on companies that are top scoring Trendsetters or in the upper first tier in the CPA-Zicklin Index. They have the robust policies that provide a strong foundation for taking the next step of adopting a framework for approaching and governing their election-related spending.

Why is this crucial today? It’s incumbent that companies create an internal culture that resists the pressures and reinforces a commitment to ethical and accountable participation in our politics. It is not just a question of abiding by the law, but of acting to protect and strengthen a well-functioning democracy. The Model Code and the resolution were developed to guide that effort, to give companies greater control over their spending and serve as a heat shield to protect them.

Bruce Freed
President, Center for Political Accountability

Dan Carroll
Vice President for Programs and Counsel, Center for Political Accountability