Like it or not, political advertisements will bombard us throughout the summer and in the fall. And if this spring is any indication, we will witness some of the most negative ads in history. According to a study by the Wesleyan Media Project, presidential ads so far this year have been 70 percent negative compared to just 9 percent during the entire campaign in 2008.
Erika Franklin Fowler, co-director of the project said, “One reason the campaign has been so negative is the skyrocketing involvement of interest groups who have increased their activity by 1,100 percent over four years ago.” It is also because of that outside spending that the 2012 election is expected to be the most expensive in history.
This outrageous spending is due in part to the Supreme Court’s Citizens United decision. That decision undermined a generation of good government reforms enacted in the wake of Watergate and opened the door to unrestricted corporate and union political expenditures for the first time since 1947. As a result, the demand for political contributions from the business community is intensifying.
Corporations should resist the temptation to engage in this arms race because corporate political spending is both bad for business and bad for our democracy. That is why 3M shareholders should support a resolution at the annual shareholder meeting today that urges the board of directors to adopt a policy prohibiting the use of corporate funds for any political election or campaign.
The risks of corporate political spending
Such a policy is the right business decision because of the risks associated with corporate political spending. In 2010, Target received unwanted attention, consumer boycotts and protests for its support of candidates that were in direct contradiction to the values of the corporation – and many of its customers. Executives at 3M made similar expenditures and continued to donate even more money after the controversy, placing the company in serious risk.
In a Harris Poll released in October 2010, a sizable portion (46 percent) of respondents indicated that if there were options, they would go elsewhere if they learned that a business they shopped at had contributed to a candidate or a cause that they oppose.
That is why a growing number of companies are adopting policies prohibiting spending of political funds directly or indirectly to influence elections. These include IBM, Colgate Palmolive, Wells Fargo and others.
Moreover, academic research in this area has found that corporate political spending can be detrimental to shareholder value. An April 2012 study at the Carlson School of Management at the University of Minnesota concluded that companies making large political contributions had poor corporate governance and lower shareholder value. The study suggests that when managers use corporate funds to make political donations, the donations often advance their political views and own careers – not the interests of the corporations they manage.
Evidence of spending’s effects
Shareholders should be concerned that corporate executives are diverting corporate resources from business functions like research and development to political spending. There is growing evidence that these political expenditures have no real benefit to the corporations making them.
In a letter to the Securities and Exchange Commission, professor Michael Hadani at Long Island University reviewed much of the academic research on corporate political spending and found that, “firms’ political spending, in particular contributions to policy makers, at best has an insubstantial impact on their bottom line and more often results in a negative effect of firm financial performance, as well as an increase in risk taking which will also erode future earnings.”
Our nation greatly depends on the strength of our democratic system of governance. But corporate political spending is weakening the vitality of our democracy. It undermines accountability, transparency and adherence to the rule of law, all of which are essential safeguards against corruption and abuse of the political process.
This shareholder proposal is valuable because it reduces shareholder risk, stops wasteful corporate spending and removes the power of corporate executives to use shareholder profits as their own personal political action funds. Today, 3M shareholders should take a stand and tell corporate executives that the company should stick to business.
Mike Dean is the executive director of Common Cause Minnesota.
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