10/17/2016 06:21 pm ET | Updated Oct 17, 2016

Which Companies Keep Political Contributions Secret?

Since the Supreme Court's Citizens United decision, corporations can make unlimited contributions to political candidates, and most often there is no way for investors or other corporate constituents to find out how much they are spending and which candidates they are supporting. The Center for Political Accountability (CPA) has a number of programs for tracking corporate political spending and urging companies to be more transparent. Their annual report, the CPA-Zicklin Index, produced with the Zicklin Center for Business Ethics Research at The Wharton School at the University of Pennsylvania, benchmarks the political disclosure and accountability policies and practices of leading U.S. public companies. In an interview, CPA director Bruce Freed talked about the increase in corporate political spending, the problem of "dark money," and what makes companies improve their disclosure.

You say that disclosure of corporate political contributions is "more important than ever." Why, when candidates like Donald Trump and Bernie Sanders commit to not taking any corporate money?

Companies are the dominant political donors in congressional and down ballot races, and their spending is increasing in those campaigns. The Center for Political Accountability highlighted this in an op-ed in US News & World Report last April. Companies give directly, but they also channel their political money through third parties - trade associations and "social welfare" organizations - that keep their contributors secret. This is why corporate political disclosure is more important than ever.

Are corporations under pressure to be more transparent in their political disclosures? Where is it coming from?2016-10-14-1476486254-8187248-ScreenShot20161014at6.56.43PM.png

Companies face increasing pressure to adopt disclosure and board oversight of their political spending. You see the pressure in the growing calls for transparency from the public, shareholders and companies themselves. One of the things CPA has found from its exchanges with companies through the CPA-Zicklin Index is that companies keep a close eye on what their peers are doing and want to be in sync with them. As the number of companies adopting disclosure and accountability policies grows, companies do not want to be seen as outliers. This is a case of competition promoting political disclosure and accountability.

Another important factor that is leading companies to adopt political disclosure and accountability is the risk posed by political spending. Companies face much greater pressure today to contribute to "dark money" groups and Super PACs. Having policies in place gives them much greater control over whether or how they'll spend politically and helps protect them from the reputation, legal and business risks posed by political spending.

How have political contributions changed since the Citizens United decision in terms of amounts and allocation?

Political contribution patterns of companies have changed several times over the past decade. Following the enactment of the Bipartisan Campaign Finance Act, also known as McCain-Feingold, companies began to move their political spending underground. They did that by routing it through trade associations and "social welfare" organizations, public advocacy groups also known as 501(c)(4)s after their designation in the Internal Revenue Code. These entities can accept unlimited contributions and are not required to disclose their donors. Citizens United and related court decisions significantly expanded the opportunities for corporate political spending by opening the door to Super PACs, c4s and trade associations to engage in "independent expenditures." An example: The U.S. Chamber of Commerce went from spending a few million dollars an election cycle before Citizens United to more than $30 million a cycle on "independent expenditure" political ads following the Citizens United decision.

Do you track lobbying expenditures as well as campaign contributions?

CPA focuses on political spending. The reason: much political spending is undisclosed, unlike lobbying spending where there's a fair degree of disclosure at the federal level.

Who advises corporations on the most effective use of campaign contributions?

Corporations are advised by their Washington offices and political consultants.

Do disclosures reveal the role of board members in overseeing corporate policy and amounts of political contributions?

The Center sees political transparency and accountability as intertwined and urges companies not just to disclose their spending but to have their boards oversee it. CPA benchmarks companies in the CPA-Zicklin Index on these policies and has found a steady increase from year to year in company adoption of disclosure and board oversight.

The 2016 Index reported that the number of companies with robust board oversight of political spending has increased sharply. In 2016, 111 companies have policies requiring board oversight of political spending and board committee review of company policy, political expenditures and trade association payments. This represents a 28 percent jump since 2015 when only 87 companies required board oversight. (Last year, the Center co-authored a Harvard Business Review article outlining the role of corporate directors in overseeing political disclosure and accountability.)

The number of companies with some level of political disclosure stands at 305, according to the latest Index. That's 60 percent of the companies in the S&P 500.

What is the best way for customers or shareholders to learn about the political contributions made by a particular corporation?

Customers and shareholders should go to the corporate political spending database on CPA's website. It provides a full picture of the disclosed and undisclosed political spending by companies and company policies on political spending.

What is "dark money" and how can it be traced?

"Dark money" is political spending that's underwritten by political contributions where disclosure is not required. This means that the public and investors do not know who are the contributors. There's been a significant increase in "dark money" spending, primarily by trade associations and "social welfare" organizations registered as 501(c)(4)s that are not required to disclose their contributors. "Dark money" spending today runs into the hundreds of millions of dollars. Since the contributions are not disclosed, they are difficult to trace. The public and investors can get a glimpse into "dark money" through inadvertent disclosures and through voluntary disclosures by companies of trade association payments and contributions to c4s. These disclosures are a result of the Center for Political Accountability's campaign for corporate political disclosure and are available on CPA's database.

What information do companies want from CPA as they update their policies?

Many want examples from other companies about their political disclosure and accountability policies. They will use the examples as guidance for policies they should adopt.

Where does CPA's funding come from, and what is your goal?

CPA's funding comes from individuals and foundations. The Center's goal is to bring transparency and accountability to corporate political spending.

Do you have a sense for the transparency of the companies below the S&P 500? Any plans to expand your coverage?

The Center benchmarks companies in the S&P 500 on their political disclosure and accountability policies and practices. Our experience has been that the larger companies have the most comprehensive policies. They also tend to be the biggest political spenders. Companies toward the bottom of the S&P 500 have far less or no disclosure and no board oversight. They also tend to contribute less if at all. CPA encourages all companies to adopt policies for political spending. While the Center's focus in the index will remain the S&P 500, our work as a whole is much broader and establishes norms and best practices to be followed by all companies.

What are some of the most frequently cited criteria disclosing companies use for determining their contributions?

Companies usually say they contribute based on issues affecting their business and to elected officials who represent states or congressional districts in which their facilities are located. Some will say that they contribute to create a sound business environment. As important, some companies have told us that disclosure leads to greater consideration of political spending decisions and helps them avoid risks posed by this type of spending.

Why do some companies exclusively or primarily direct their political contributions through PACs?

Companies that rely on PACs for political spending see that as a way to control the amount of their contributions and to keep their spending above board. They also see it as helping protect them from the threat of shakedown and extortion posed by secretive c4 groups that are closely associated with influential elected officials.