As the U.S. mid-term congressional elections near, the level of outside campaign spending—that is, advertising and other spending by third-party organizations to influence the vote—threatens to be as high or higher than the 2012 presidential campaign. That growth has fueled an already heated debate about political spending by corporations.
And while the debate over the impact of unlimited money in politics may seem like an American problem, we probably shouldn’t get too smug. As a new study from the Shareholder Association for Research and Education shows, some well-known Canadian corporations have been spending on political influence south of the border as well.
As in Canadian federal elections, corporations are not permitted to donate directly to a U.S. federal political candidate’s campaign. But corporations in the U.S. are permitted to spend unlimited amounts to support or oppose a candidate as long as they or the organizations they contribute to do not coordinate this activity with the candidate. Spending by these “outside organizations” is at record levels, easily topping $300 million this election, with an expected $200 million in “dark money”—funds which can’t be traced to their original source.
Most of this “dark money” flows through tax-exempt non-profit organizations that aren’t required to disclose their donors. Outsiders caught a glimpse of that world last month when a secret donor list from the Republican Governors’ Association (RGA) was published in the New York Times, which included some Canadian companies like TransCanada, Barrick Gold, and Encana. The RGA, which is not affiliated with any particular campaign, has been running attack ads in key races across the country.
Other political money flows through trade associations in the U.S. such as the American Chamber of Commerce, which has already spent more than $21 million in campaign advertising this year, including $1.5 million on ads accusing Democratic Senator Mark Udall of driving up energy costs, largely in response to his refusal to support Republican demands for immediate approval of the Keystone pipeline.
Trade associations are also big spenders on political lobbying in the USA. Encana, Enbridge Energy Partners LP, Precision Drilling Oilfield Services Corporation, Talisman Energy Inc., and Transcanada are all members of the American Petroleum Institute which, between June 2008 and June 2013, reportedly spent more than $22 million lobbying the U.S. government in favour of the Keystone pipeline and/or oilsands issues. The API has spent more than $7.7 million on lobbying the federal government so far this year and is also spending $300,000 buying ads to urge Democratic Senator Mark Udall to approve the Keystone pipeline.
More directly, TSX60 corporations have registered at least $15.3 million in spending on direct lobbying of the U.S. federal government in 2014, including:
- $2.87 million by Canadian National Railways (who are facing increasing regulatory attention to their industry on both sides of the border);
- $2.59 million by Blackberry regarding patent litigation reform;
- $1.67 million by Manulife Financial, related to legislation concerning appropriate minimum capital standards for insurance companies;
- $1.07 million by TransCanada, whose Keystone pipeline project is up for approval at the federal level.
At the state level, more than half of US states allow corporate contributions to political candidates, and in six states contribution levels are unlimited. Barrick Gold, for example, has given more than $223,000 to state political candidates this year in Nevada, including $50,000 to the Republican governor’s campaign for 2014.
Although on balance these total amounts may be financially immaterial to shareholders, they may represent only a small part of what a company spends to influence political outcomes in the United States or here in Canada. There’s no requirement on either side of the border to disclose the full extent of political spending. And that’s a potential concern for shareholders.
Without effective and comprehensive disclosure, investors can’t determine whether the company’s political activity is consistent with their interests, whether it is subject to appropriate board oversight, and whether the company is vulnerable to reputational risks as a result of that activity.
There’s growing pressure for the U.S. Securities Exchange Commission to enact rules requiring disclosure of political spending by publicly-traded corporations, although it has yet to move on the issue. There’s no similar initiative in Canada so far, but concern is growing.
Although union and corporate contributions are banned federally in Canada, they are still allowed in many provinces, and the number of registered lobbyists working for corporations has increased steadily. That may be a good thing, as companies can provide valuable input into the policy-making process. But if a corporation is spending money in the political arena, shouldn’t its shareholders be the first to know?
Kevin Thomas is the Director of Shareholder Engagement with the Shareholder Association for Research and Education, promoting responsible investment services, research and education for institutional investors. Follow him @kthomas_share.