Last month, two of the nation’s most influential elected officials who oversee investment of public employee pension funds took the lead in demanding transparency and accountability for political spending by corporations. California Treasurer Bill Lockyer and New York City Public Advocate Bill de Blasio, who control hundreds of billions of dollars in public investments, each wrote to their respective funds encouraging the use of their power as shareholders to demand political spending reforms by portfolio companies in order to protect their investments from undue risk.
On June 1, Treasurer Lockyer sent letters to the investment committees of the California Public Employees Retirement System’s (“CalPERS”) and the California State Teachers’ Retirement System (“CalSTRS”) requesting they take action to address political campaign spending by taking the following steps:
- CalPERS and CalSTRS should support shareholder initiatives to require disclosure of corporate political spending, including contributions to trade associations and non-profit organizations;
- CalPERS and CalSTRS should support more accountability over the process through which a corporation decides to engage in political spending. Treasurer Lockyer calls for CalPERS and CalSTRS to support shareholder initiatives to require direct supervision by a portfolio company’s board of directors for all political contributions; and
- CalPERS and CalSTRS should lead efforts to build support for shareholder initiatives on corporate political spending among other institutional investors.
Treasurer Lockyer emphasized that “[s]tudies have shown a negative link between a company’s political spending and the resulting value of the firm. . . . As fiduciaries, it’s our duty to ensure investors have the information they need to accurately evaluate a firm’s profitability and long-term sustainability. And shareholders should be able to count on a company’s board of directors to diligently oversee campaign spending policies and practices to make sure they serve the best interests of the company and investors.”
While Citizens United emphasized the importance of transparency to investors, Treasurer Lockyer noted that it “shift[ed] to shareholders most of the burden of actually enforcing transparency and accountability.” Third-party groups served as conduits for much of the secret spending that dominated the 2010 election, and those groups have fought to prevent the disclosure of their underlying donors. Having companies that support such groups disclose the contributions they make themselves attacks the problem of secret political spending from another direction.
As Treasurer Lockyer explains, “Increasingly, corporations are using such groups in an attempt to cloak massive political spending in secrecy… many of which are notorious for making unfair and unfounded personal attacks with which no company or its investors would want to be publicly associated.” Shareholders need access to information about any and all corporate political spending because "in order to accurately assess a company’s sustainability, shareholders must be able to analyze whether political spending is consistent with the company’s values, and whether it poses risks to the firm’s brand, reputation or profitability.”
CalPERS, the largest public pension fund in the country, has more than $233 billion in assets. CalSTRS, the nation’s largest teacher’ public pension fund, has more than $155 billion in assets. Their leadership in pursuing reforms through the exercise of shareholder democracy will have major repercussions in the fight to demand transparency and accountability of corporate political spending.
New York City’s Public Advocate Bill de Blasio, a trustee of the $40 billion New York City Employee Retirement System (“NYCERS”), also took a strong stand to protect New York City’s investments and to advocate for transparency and accountability of corporate political spending. He wrote to New York City Comptroller John Liu on June 7 expressing concern that the City’s investments in Target Corporation might be at risk.
In 2010, Target Corporation faced a public boycott after revelations of political spending. Public Advocate de Blasio wrote that, since this incident, and despite a decline in stock price, Target has not committed to full transparency for its political spending. The company refuses to disclose contributions made to trade associations, such as the Chamber of Commerce, which alone spent more than $32 million to influence the 2010 elections, more than any other outside organization. “Target has clearly not taken the steps necessary to mitigate the risk involved from its political spending and until it does NYCERS is  at risk of suffering additional losses from Target’s political activities,” wrote de Blasio.
Moreover, Public Advocate de Blasio emphasized in a statement that "if Target continues to prioritize lax rules on political spending over the interests of its investors and the public, then I will urge New York City’s largest pension fund to oppose company board members.”
Ultimately, voting for or against a corporation’s board of directors represents the definitive exercise of shareholder assertion of control over the companies they own. It is an indication of how important the issue of corporate political spending is to investors that they would threaten to withhold support for directors over the company’s failure to comply with their wishes on the issue.
It is heartening to see these elected officials, who are responsible for managing the public’s investments, exercising leadership in fulfilling the democratic role of shareholders that Citizens United expected and demands. These officials are taking a strong stance to defend their investments (upon which the retirement future of millions of public employees depends) from undue risk. Our democracy will be the stronger for it.