Political Disclosure and Corporate America

Stephen Davis

Stephen Davis

Guest Post from Stephen M. Davis, Ph.D. is associate director of the Harvard Law School Programs on Corporate Governance and Institutional Investors, and a senior fellow at the Program on Corporate Governance. He is also a nonresident senior fellow in governance at the Brookings Institution. From 2007-2012 he was executive director of the Yale School of Management’s Millstein Center for Corporate Governance and Performance and Lecturer on the SOM faculty.


Jonathan Macey

My high school classmate and friend Jon Macey wrote an oped last week in the WSJ criticizing the drive to get US corporates to disclose political contributions. For those interested, here is my take on the matter (letter submitted to the Journal):

When did “capitalism” get shortened to “CEOs”? And when did prudent ownership get translated as “activism”? That’s what you’d ask on reading Jonathan Macey’s Using ‘Disclosure’ to Silence Corporate America (WSJ Oct. 22 2013).

Macey’s ostensible target is the CPA-Zicklin index (pdf download), which tracks how corporations handle political contributions. But his real beef is with investor authority. Business isn’t just about CEOs, though. It includes boards and capital providers.

Most investors aren’t advocating political celibacy among corporations. That’s a straw man. But institutional investors often hold shares in companies that compete against each other. The last thing they want is an arms race of political donations using their cash. Instead, they favor a level playing field, with disclosure to check if donations are justified.

Macey counseled executives to ignore the CPA-Zicklin Index. Here’s a word to boards: don’t. So long as the Citizens United decision stands, the issue of political donations is a legitimate investor concern. Boards who fail to understand that unwittingly paint a big sign on their backs: ‘Come Get Me.’ Don’t be surprised if real hedge fund activists see it. Macey quotes James Madison to justify corporate political spending; in fact, Madison fiercely backed checks and balances, which is what corporate political disclosure is all about.

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