The 8th Circuit Court of Appeals ruling earlier this week upholding Minnesota’s disclosure requirement for corporate political-campaign contributions promises to figure in the next big shareholder corporate-governance battle.
Among several shareholder proposals calling for more disclosure of political contributions up for a vote this proxy season, one at Home Depot refers to Minnesota’s recent gubernatorial campaign in which corporate contributions figured prominently.
A shareholder proposal from Boston-based NorthStar Asset Management Funded Pension Plan cites “a major national controversy with demonstrations, petitions, threatened boycotts and considerable negative publicity” following disclosure of Target Corp.’s $150,000 contribution to an organization supporting Republican Tom Emmer’s campaign for governor in 2010.
Target came in for criticism for the contribution because of Emmer’s voting record as a state legislator opposing gay rights issues such as same-sex marriage, surrogate parenting and domestic-partner benefits for state workers.
Shareholder activists’ calls for greater transparency in corporate political contributions became more urgent following the U.S. Supreme Court’s Citizens United ruling last year. In that case, the court struck down limits on political speech by corporations and unions, but upheld the need to disclose spending and cited the ability of shareholders to “hold corporations and elected officials accountable.”
Minnesota’s law was adopted in the wake of that ruling.
During last year’s campaign, Minnesota Citizens Concerned for Life, the Taxpayers League of Minnesota and Coastal Travel Enterprises sought an injunction barring implementation of the Minnesota law. But U.S. District Court Judge Donovan Frank declined to strike down the law, saying voters have “an interest in knowing who is speaking about a candidate on the eve of an election.” Earlier this week, the Court of Appeals upheld Frank’s ruling by a 2 -1 vote.
The appeals court said: “Minnesota did not ban corporate independent expenditures. Instead, based upon the lower court’s findings, as strongly supported by the record, we find that Minnesota created a statutory scheme designed to require corporations to disclose certain information when making independent expenditures.”
Earlier this week, a prominent mutual-fund pioneer, John Bogle, called for requiring corporate political contributions to be approved by “the holders of at least 75 percent of its shares outstanding.” In an OpEd article published in The New York Times, Bogle argued: “Shareholders — not self-interested corporate managers — should, and can, decide policies on corporate political contributions.
“What makes this strengthening of shareholder rights particularly important is that over the past 50 years control of corporate America has shifted from individual stockholders to institutional stockholders. But these institutional investors have been unwilling to challenge political activities by corporate boards, even when those activities are not in their shareholders’ interests,” Bogle writes.
“I believe that, in the wake of the Supreme Court case, known as Citizens United, the institutional investor community has an obligation to act. Institutional investors should insist that the proxy statement of each company in which they invest contain the following: ‘Resolved: That the corporation shall make no political contributions without the approval of the holders of at least 75 percent of its shares outstanding.’
“I hope a groundswell will develop that will give corporate owners a say not only over political contributions, but many other policies — executive compensation being the most obvious example.”