The U.S. Supreme Court decision Thursday that did away with long-standing restrictions on corporate spending on political advertising likely will usher in a host of governance issues for boards of directors and public company shareholders.
The questions for boards, management and concerned shareholders raised by the decision, which would allow corporation-funded advertising for or against specific candidates, are manifold.
The key one is whose decision will it be to make such direct contributions through ad spending: management or the board of directors? This is a different type of decision than current company sponsored political fund-raising through political action committees, which presumably call for voluntary contributions from employees, shareholders and affiliates.
Here are a few other questions. Who within a corporation will decide how much company money goes to such direct for or against advertising in political campaigns? Who decides which candidates to support? Should such spending be limited to candidates and issues that are directly tied to a company’s lines of business? Or should companies spend money to support candidates broadly seen as more pro-business than others?
What will shareholders think about all this? Will they want money that might otherwise hit the corporate bottom line or get paid out in dividends go instead to campaign ads? Will shareholders want a ‘say on politics’ in the same way the ‘say on pay’ campaign argues for some shareholder input into top executive compensation?
Will we see the formation of more politically oriented investment or mutual funds? Some now won’t invest in gun or cigarette companies. How about a fund that won’t invest in companies that spend their money supporting Republican candidates and others that won’t invest in companies that support Democratic political candidates?
It seems boards should have some say about the level and direction of political ad spending. It is a strategic as well as tactical decision and as such shouldn’t be left just to management.
It seems boards already had some additional politics coming their way in 2010 if the Securities and Exchange Commission goes ahead and passes proxy access to allow big shareholders to nominate some directors whose candidacies would be carried on company distributed voting materials. That could lead to some directors joining boards with specific social and political agendas.
But the Supreme Court decision potentially greatly increases boards’ exposure to politics and politically fraught decision making.