“If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.”
– Mick Mulvaney, acting director of the Consumer Financial Protection Bureau
Mr. Mulvaney’s statement is sadly illustrative of the outsized role that political contributions play in politics today. The need to raise big money to run for office leads directly to these sorts of pay-to-play schemes. And in a world where access matters to corporations, particularly ones with business before the Congress or the CFPB, it makes sense that corporations such as Equifax feel pressure to spend money on politicians. And spend they do. But how much and on which candidates is almost impossible to say, even if you are an owner of the company. This week, the shareholders of Equifax have a chance to adopt an important policy: They can support the proposed resolution to require the company to disclose all of its political spending.
Disclosure may seem like a small thing, but it’s important, especially under current law. Corporations have always wanted to influence politics, but it’s only recently that they have been able to buy their way into elections. Our democracy is supposed to be based on the principle of one person, one vote. Consequently, until very recently, the right to spend money on elections was reserved for the voters and corporate money wasn’t allowed at all. But over the years, misguided jurisprudence has undermined that principle. Most notably, the Citizens United decision declared corporations people, and unleashed a flood of corporate political spending.
So corporate spending in elections is the current law of the land. But who decides how a corporation spends? It’s hard to say. The owners of the corporation — the shareholders — should be the deciders. However, under most corporate governance, the shareholders don’t even have a right to know if the the company is spending money on politics, let alone who they are spending the money on or how much is being given. Requiring that a company like Equifax disclose its political spending is the first step to placing control back in the hands of the owners of the company.
In general, shareholders should know how a company is spending money, but this is particularly true when it comes to spending money on elections. Is the company giving money to controversial candidates who could spark a consumer backlash and hurt the bottom line? Is the company giving money to politicians with whom the shareholder disagrees politically? It’s easy to imagine questions that a shareholder could reasonably expect the corporation to answer.
While Equifax does disclose what it gives directly to candidates, a potentially significant amount of giving is still totally hidden from the shareholders. Giving directly to candidates is only one of the ways corporations can purchase influence with politicians. A corporation can also give unlimited amounts of money to a trade association or 501(c)(4) nonprofit organization that can then use that money to support or oppose candidates without ever disclosing the origins of the money. This undisclosed, secret money makes up a significant portion of political spending. These groups spent over $175 million during the 2016 election cycle.
The secret money contributions should raise even more questions for shareholders, yet Equifax management is arguing that because it doesn’t totally control what a trade association will do with its contribution, the contributions are of no interest to shareholders. That argument is so flimsy that it is hard to believe management’s sincerity. Uncertainty about how the money will be used — to the extent that there really is any uncertainty about how a trade association will use its political money — hardly reduces shareholder interest in knowing about it.
Would management argue that money invested in a vaguely-defined research and development project was of no interest to shareholders because they don’t know what is going to come of their investment? Of course not. On the contrary, lack of clear expectations would only draw more scrutiny. Corporate political spending is no different (at least so long as the wrong-headed policy of allowing any corporate spending in politics survives).
On Thursday, the shareholders of Equifax, Inc., will vote on whether or not the corporation should disclose not just direct political contributions but also secret, dark money spending. The shareholders should not let this opportunity to know how their company is spending its money slip through their fingers.