Progressive Intimidation

In the nearly two years since the Citizens United decision, the progressive movement has used every avenue it can find to adapt anti-corruption regulation into a force for intimidating corporations out of engaging in independent expenditures.

One of the outcomes of this tactic has been a rise in activist investing.  Taking advantage of SEC regulation, activist shareholders buy the requisite value of stock needed to introduce shareholder proposals and propose burdensome disclosure rules targeting political expenditures.

Reform groups can hem and haw all day about the merits of various disclosure regimes, but at the end of the day, it would be disingenuous not to acknowledge that these proposals are in the service of cultivating political power and control.

Take, for example, the California union pensions fund CalPERS. CalPERS, with a portfolio worth approximately 225.4 billion dollars, is the largest state pension fund in the country.

CalPERS is administered by a thirteen member board.  Three of the board members are political appointees made by the governor and legislature, while two of the ex-oficio members are elected positions held by politicians.

CalPERS has a distinguished history as engaging in shareholder activism.  Most recently, they stepped into the realm of campaign finance by voting to enact a policy requiring disclosure of political contributions by companies in which they have a stake. 

But why would CalPERS enact such a policy?  According to one spokesperson (Calpers Urged to Reject Proposal to Limit Corporate Politicking , Bloomberg, 10/7/2011):

“The recommendations of Calpers staff are based on the widely held belief that robust board oversight and public disclosure of corporate activities can ensure alignment with business strategies to further the interests of all shareholders,” said Brad Pacheco, a spokesman for the pension.

Ostensibly, having access to complete disclosure information allows CalPERS to better assess where they should invest.  The rationale is that they want to avoid situations such as the Target debacle in 2010, where the company attracted negative press due to the fact that the beneficiary of an independent expenditure opposed gay marriage.

However, the Target “scandal” suggests that the uproar over controversial political expenditures has almost no real effect on a company’s valuation.  Even with calling for consumers to boycott the retail chain, customers kept buying.

In December, the Center released a report detailing the prevailing attitudes about and the usefulness of disclosure information.  We found that although disclosed information is rarely used by voters, potential supporters were significantly less likely to actively support candidates if they are required to publically disclose information about themselves.

What does this mean?  CalPERS, a public entity administered in part by politicians and appointees with political ties, is leveraging its vast economic powers to enact a flimsy solution to a supposed problem that did not pan out in reality.  Also, that solution just so happens to have the proven effect of stifling speech.  It makes one wonder why an organization capable of realizing the minute impact of such an event, would attempt to institute such a burdensome policy for any other reason than political leverage.

These are the actions of an entity concerned with cultivating power and influence, not the actions of an organization primarily concerned with financially benefiting pension holders.

Thankfully, these political spending proposals have universally failed in shareholder votes.  The Wall Street Journal recently ran an article about shareholder proposals:

According to the Manhattan Institute’s Proxy Monitor, 92% of these proposals were sponsored by social investing funds or, surprise, labor union pension funds. We’ll go out on a limb and guess these outfits don’t rank increasing shareholder value as a top priority. For unions and their allies, the goal is to limit corporate spending on political causes while unions endure no such restraint. 

The political spending proposals have all failed so far, but the vote itself is meant to send a message that a company should shut up or face more political harassment.

With the level of intimidation levied on private industry by politicians, is it any wonder why corporations are as involved in politics as ever?


The Center for Competitive Politics is now the Institute for Free Speech.