Shareholder proposals on political issues—particularly lobbying spending disclosure and campaign finance issues—have been a common part of the proxy landscape for some time now. This proxy season, proposals seeking greater transparency around corporate political spending had surprising success compared to the past. Especially given this development, companies should be aware of both the risks and consequences of these proposals.
According to reporting by Law360 based on information from the Center for Political Accountability (“CPA”), campaign spending disclosure proposals passed at five companies this season, and eight others saw similar resolutions. Across all thirteen companies, the reports indicate that the nonbinding proposals drew 42 percent support on average, up from 26 percent in 2024. It is not clear whether the 2025 surge is a one-off outlier, or the start of a trend toward greater shareholder receptivity to such resolutions.
In general, the resolutions require each company to report, at least semiannually, its monetary and non-monetary contributions and expenditures for “any campaign on behalf of (or in opposition to) any candidate for public office, or [to] (b) influence the general public, or any segment thereof, with respect to an election or referendum.” Both “direct spending” and “indirect spending” are covered under the resolution.
As defined in the resolution’s informational materials, a company’s direct spending that must be disclosed is its contributions to candidates and party committees; contributions to Section 527 political organizations; contributions to ballot measure committees; and direct independent expenditures. Such spending is already publicly disclosed on the Federal Election Commission website, state campaign finance databases, and/or the IRS website, though the resolutions ask companies to consolidate the information on their corporate websites.
The informational materials define the indirect spending to be disclosed by a company as payments to politically active trade associations and other politically active tax-exempt groups, such as 501(c)(4) social welfare organizations. Corporate payments to trade associations and 501(c)(4) organizations are generally not required to be publicly disclosed on campaign finance or IRS filings.
The shareholder who made each of the successful proposals often highlighted a company’s low ranking in the CPA-Zicklin Index as part of his arguments for passage. CPA publishes the annual CPA-Zicklin Index, which evaluates public companies on a matrix based on the information disclosed on the company’s website about the company’s political activities.
Against this backdrop, companies concerned about potential shareholder resolutions should pay close attention to their annual CPA-Zicklin score. Companies can sometimes take various steps to improve their score in ways that are not overly intrusive or burdensome, including by disclosing information about already-public contributions to candidates, Section 527 political organizations, and ballot measure committees.
On the other hand, some disclosures may present business and other risks. For example, companies may have valid economic reasons for keeping 501(c)(4) spending private, including avoiding providing competitors with a window into their corporate strategies. Additionally, a factor on the CPA-Zicklin Index asks whether the company discloses amounts and recipients of payments “made by trade associations or other tax-exempt organizations of which the company is either a member or donor.” Trade associations may be reluctant to disclose how they spend their own money, and they could deny a corporation’s membership request as a result. Accordingly, disclosure decisions involve a careful balancing of administrative burdens, corporate transparency interests, and business reasons for keeping some spending anonymous. Covington regularly advises companies on strategies for minimizing the risk of attracting political disclosure proposals in the first place and helps companies navigate these proposals when they are submitted.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Election and Political Law practice.
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