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Should Shareholders Have a Say in Corporate Campaign Spending?

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Craig Holman of Public Citizen says that for transparency's sake, responsible corporate governance demands that shareholders be aware of companies' decisions to spend their money on candidates.

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Introduced today by Rep. Michael Capuano (D-Mass.) and Senators Robert Menendez (D-N.J.) and Richard Blumenthal (D-Conn.), the Shareholder Protection Act is, in the words of Craig Holman, government affairs lobbyist for non-profit consumer advocacy group Public Citizen, a "necessary response to the US Supreme Court decision last year that let corporations spend as much money as they want to influence elections."

"Responsible corporate governance requires that shareholders and investors are aware of, and participate in, decisions to spend their money on candidates, ensuring that political spending decisions are made transparently and for sound business purposes," he added, in a statement released this morning.

Some background for the uninitiated:

"For nearly a century, America prohibited direct campaign contributions and spending of corporate funds in federal elections. As a result, the problems posed by a CEO dipping into the corporate treasury without telling shareholders or investors and freely spending that money to promote or attack candidates have never been the subject of responsible corporate governance – until now. But in January 2010, the Supreme Court opened the floodgate of unlimited corporate spending in elections without providing shareholders and investors any safeguards over how their money is spent. Shareholders, investors and the public today rarely are told when a CEO is spending company funds on candidate elections.

"The Shareholder Protection Act would require CEOs to receive annual shareholder approval of an overall political expenditure budget and mandate board ratification of specific campaign expenditures in excess of $50,000. Shareholders and investors would be notified of these campaign spending decisions, which also would be posted on the Internet for the public to see."

Over the past year, there have been a number of high-profile cases in which shareholders protested a corporation's political donations.

Last August, Target (TGT) shareholders revolted after the big-box retailer (as well as Best Buy (BBY) and a handful of other Midwest companies) donated $150,000 to MN Forward, a group opposed to gay rights that was backing Minnesota gubernatorial candidate Tom Emmer.

"Target should have carefully considered the implications that direct political contributions can have toward shareholder value," said a spokesman for New York Comptroller Thomas DiNapoli, who held 3.8 million shares in the New York State pension fund at the time. "It's troubling to think that they can fund controversial candidates without properly assessing the risks and rewards involved."
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