Corporate Social Responsibility

Business and Politics

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On this page

• Canada's Top 100 Lobbyists
• US Corporate Political Spending Primer
• Political Giving - GE, AEP, HP, Home Depot
• US Tech Companies and Chinese Censorship
  
  
  

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Canada’s Top 100 Lobbyists

Naming The “Most Influential” Lobbyists Can prove Difficult, Canada’s The Hill Times Tries

The Hill Times published Canada’s Top 100 Lobbyists, or those “lobbyists [who] register their clients and public policy concerns in a federally regulated, online public registry.” This political newspaper in Ottawa, Canada pictures the most influential lobbyists on its front page, but candidly admits that determining who is most influential is difficult.  In Brussels, Washington DC and in other important capitals this question is being asked more and more as the numbers of lobbyists rise rapidly. 

The detailed report in The Hill Times, which includes short profiles of each of the 100 lobbyists, coincides with continuing reporting in Canada on alleged corruption involving former Canadian Prime Minister Brian Mulroney and Europe’s Airbus Industries.

The newspaper reported that the investigation by the Canadian Government’s Ethics Committee has ended. However, further public inquiries are likely.

According to Democracy Watch, a Canadian civic advocacy group, and the February 25 cover of The Hill Times, concerns about unethical relationships between politicians and lobbyists are not new.  The publication of Canada’s Top 100 Lobbyists, or those “lobbyists [who] register their clients and public policy concerns in a federally regulated, online public registry,” is not negative about lobbyists’ activities, but defines the most influential lobbyists (the ones on the list) as those who have “the capacity to impact federal government policy or receive favorable treatment from the government.”  The article highlighted the difficulty of developing the list: "Like HT's list of the 100 most influential people in Ottawa, this was a difficult list to create." There are many ways lobbyists can exert influence, the article says.

"Many if not most important regulatory decisions affecting business interests are not made by Cabinet ministers. They are made inside departments and regulatory bodies, and that's where lobbyists with good strategic advice can prove to be influential for their clients. Lobbyists who know government processes have the ability to provide valuable analysis, insights, and strategic advice. They may know that it is crucial to submit a certain position paper to a certain director at a certain time, and can advise on the best strategic approach. The lobbyists on the list, then, must be influential with the current government."

In addition, the lobbyists on the Top 100 have to be registered, since many people in Ottawa take part in lobbying activities, but are not registered as such, the article says. Such distinctions complicate who is actually a lobbyist and who isn't.

Democracy Watch puts the matter more forcefully - “The System is the Scandal.”  The government oversight organization recently wrote an editorial condemning the extent of corruption in Canadian politics - see excerpts below. 

“The federal Liberals’ recent promotion of an illegal fundraising scheme, along with the federal Conservatives’ court battle with Elections Canada over spending during the last federal election, and the widespread ongoing involvement of lobbyists in all political parties, reveals just how much the attitudes of the inside-Ottawa-elite and wannabe-elite are the main barrier to having an honest, ethical, open, representative and, therefore, waste-preventing federal government.”
 
“Four years have passed since the first law limiting annual donations of money, property and services to federal political parties and riding associations was passed by the then-Liberal majority government; three years have passed since ethics rules for MPs and senators came into force, and one-year has passed since the Conservatives’ so-called “Federal Accountability Act” (FAA) banned any donations from corporations, unions or other organizations and lowered the annual limit on individual donations.”

“Yet the Liberals recently advertised an auction offering the highest bidder (whether an individual or corporations) the opportunity to play golf with Liberal MP Paul Martin, attend a hockey game with Liberal MP Ken Dryden, or play tennis with Liberal by-election candidate Bob Rae and his brother John, Executive VP at Power Corporation (which lobbies the federal government).  The Liberals changed their plans when the auction was questioned in media articles, and ended up limiting bids to individuals up to their annual party donation limit of $1,100.  However, the Liberal MPs expressed no concerns about selling access to themselves for cash, a clear violation of ethics rules that prohibits MPs from accepting any such gift or benefit other than the compensation they receive as an MP (in particular gifts that could compromise their integrity) and that require MPs to uphold the highest standards, to maintain and enhance public trust and confidence in their integrity, to avoid real or apparent conflicts of interest, and to act in a manner that bears the closest public scrutiny.”
 
“Unfortunately, loopholes in federal laws and rules and weak enforcement and penalties, along with lack of interest by some in the media, continue to encourage these kinds of unethical actions…”

Read the whole op-ed on the Democracy Watch website about the many loopholes that still exist in campaign finance rules and lobbying regulations.

Posted 2/29/08

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U.S. Corporate Political Spending -
A Guide for Companies, Shareholders and the Media

The Center for Political Accountability, a U.S. non-profit organization that works to increase transparency in corporate political giving, released a primer on U.S. corporate political spending and disclosure requirements to help companies, shareholders, and the media understand the various ways in which corporate money can be used for political purposes. The paper defines corporate political spending, the different routes that corporate money can take, and provides a map of corporate political spending and disclosure, noting where there are significant breaks in transparency.

According to the primer:

• Corporate political spending can follow a variety of routes some of which enable companies to limit and even escape disclosure of their political activity. These include contributions to state and local candidates, political parties and political committees with varying degrees of state disclosure requirements; contributions to other political entities organized and operating under 26
  US Sec. 527 of the US Internal Revenue Code; and political payments to tax exempt organization such as trade associations (see below).
  
  
• Corporate political contributions are not disclosed in any central place, leaving shareholders to
  cour countless state campaign finance reports and IRS filings. While campaign finance watchdog groups provide helpful information on corporate political giving, no one source provides comprehensive picture of corporate political contributions.
  
  

• Corporations are allowed to funnel their political activity through trade associations and other tax exempt entities. Under current tax laws corporate political spending can be run through a trade association with little risk that the corporate donors will ever be disclosed, and great risk that the corporate donors are not even aware of how their money is being used.
  
  

The primer argues that these “gaps in transparency and accountability create serious financial, legal, and reputational risks for companies that make political contributions or that belong to politically active trade associations.” Because of this, “companies should adopt approval, oversight, and disclosure policies that cover the full range of corporate political activity”

To view the full primer visit the Center for Political Accountability's website.

Posted 3/20/07

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GE, HP, AEP, Home Depot, Join 15 Other Major U.S. Companies In Agree to Widen Disclosure of Political Giving

January 24, 2007: The Center for Political Accountability reports increasing transparency in political giving by corporations at a time when major actions are being taken to strengthen ethics in U.S. politics. Companies are facing public pressures to increase disclosure of all of their political activities. Both houses of the U.S. Congress approved ethics reform legislation in January, 2007.

The Center for Political Accountability made the statement together with Trillium Asset Management and Green Century Capital Management, which are part of a nationwide campaign to bring transparency and accountability to company political spending. They stated:

The In a major expansion of company political disclosure, General Electric,  Hewlett-Packard and American Electric Power have agreed to report their trade association payments used for political purposes as part of their overall disclosure of political spending with corporate funds. In addition, Home Depot has adopted disclosure of its soft money political contributions. All of the companies agreed to board oversight of their political spending.

These companies join 15 other major companies which adopted political transparency and accountability policies during the 2005, 2006 and 2007 shareholder resolution seasons. The companies are Bristol-Myers Squibb, Staples, Amgen, McDonald’s, Southern, General Mills, Morgan Stanley, Johnson & Johnson, Schering-Plough,  PepsiCo,  Coca Cola, Eli Lilly, Verizon, Monsanto, and General Dynamics.

Last month, General Dynamics became the first company to agree to report and have board oversight of its payments to trade associations that are used for political purposes. Previously, company disclosure and accountability was limited to political contributions made with corporate funds, popularly known as soft money.

“GE, HP and AEP are to be congratulated for recognizing the importance of much broader political disclosure. Through their agreements, they are establishing a new best practice. This will encourage companies to pay much closer attention to how trade associations use their money politically and will give shareholders a fuller understanding of how their money is being used,” said CPA Co-Director Bruce Freed. “The Center applauds Home Depot for recognizing its responsibility to make public and account for its political spending with shareholder money.”

Shelley Alpern, Director of Social Research and Advocacy at Trillium Asset Management, said, “These resolutions have clearly touched a sensitive nerve. Nearly every company we have approached has been interested in complying. Many are realizing that they have as much to learn from gathering the information as we will learn when it is disclosed. It is a very positive step forward for good governance and political risk management.”

Andrew Shalit, Director of Shareholder Advocacy at Green Century Capital Management, said, “Companies often push back on requests from shareholders, but in this case we’re seeing the majority of companies agree with our assessment. Full disclosure and oversight of political contributions is a basic good business practice. It costs very little to implement, it increases public confidence, and it reduces the risk of abuse.”

AEP pledged to ask its trade associations receiving more than $25,000 in annual AEP payments for the portion of the company’s payments used for political and lobbying purposes. (The $25,000 threshold may be reanalyzed in 2009.) The company said it will include the dollar amounts reported by the associations in its annual sustainability report. HP said that it would include in its annual report the company’s soft money political contributions along with its political payments made to trade associations “and any other [corporate] payments used for political purposes.”

In its Statement on Political Contributions, GE committed to asking each association that reported that it has or will spend $25,000 or more of GE’s money on non-deductible lobbying or political expenditures to tell the company the amount used for political campaigns. “We will include in our political contributions report any responses we receive to such request,” GE said.

Current campaign finance law allows corporations to make donations in many states and to political committees commonly known as 527s, but not to federal candidates. However, companies aren’t required to disclose political contributions made with corporate funds or payments made to trade associations that are used for political purposes. Moreover, associations aren’t required to disclose the specifics of their political spending or their membership. This secrecy leaves institutional investors and individual shareholders in the dark about the use of company resources for political activities.

For the past two years, the CPA, a non-partisan, non-profit advocacy group, has been leading a shareholder campaign that includes 19 institutional investors and allied groups to get companies to agree to political disclosure and accountability. For the upcoming proxy season, CPA-model resolutions will be filed with more than 50 companies.

Background: Center for Political Accountability’s Corrporate Political Spending and Accountability Statement of Principles

Corporations have the responsibility to use corporate resources to build shareholder value.
Corporate political activism unrelated to core business objectives poses unique risks to
shareholder value. To guard against those risks, corporate political activity should be transparent
to shareholders and the line of accountability clearly drawn.

To achieve these ends, companies should adopt the following principles in their use of corporate
resources for political purposes:

· The purpose of political spending by a company should be to protect and enhance shareholder value.

· A company’s political spending should reflect the firm’s interests and not those of its officers or directors.

· Companies should disclose their expenditures on political activities to shareholders.

· A company’s board of directors should assume responsibility and be accountable for overseeing the company’s spending on political activity.

· Management should conduct due diligence on a company’s political spending to assure that management and directors know the purpose and ultimate destination of the company’s expenditures.

· Political spending by a company should be consistent with established corporate policies and practices.

· Normally, a company’s expenditures for political activities should be made directly and not through conduit or intermediary organizations. When this practice is not followed, the board should recognize a special need to monitor the use of corporate funds and identify the ultimate recipients and purposes of the expenditure to assure consistency with the
company’s own goals and interests.

· Long-term interests, not expediency, should guide a company’s political spending decisions.

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Google, Yahoo, Microsoft, Cisco – China and Corporate Ethics

Update 7.20.2006 - Amnesty International Launches Global Campaign Against Internet Repression, Releases Report on U.S. Tech Companies. The report, "Undermining Freedom of Expression in China" provides useful background information on international norms and regulations regarding the internet and the human rights responsibilities of companies, as well as the human rights situation in China. It also includes a compelling analysis of Yahoo, Google and Microsoft's policies, actions and publicly stated arguments. To download the report visit Amnesty International's website, www.amnesty.org or click here.

Are Profits More Important Than a Corporation’s Values?
The specter of U.S. government laws being passed to restrain US media companies from compliance with Chinese government censors when seeking to sell their information services in China has been raised in the US Congress.  It was one of the suggestions at a heated February 17, 2006 hearing convened by the US House of Representatives’ Subcommittee on Africa, Global Human Rights and International Operations on:

“The Internet in China: A Tool for Freedom or Suppression?”
Over the past few months a series of events involving compliance by US Internet companies with Chinese censorship policies have attracted media attention and extensive criticism.  The issue has raised questions about the choices Western corporations face between pursuing profits and adhering to their own publicly stated principles, which advocate basic social responsibility rights.  Senior executives from Microsoft, Cisco, Google and Yahoo were at the Capitol Hill hearing and sought to defend working with China’s censors. 

Note:  For example, Google declares in its corporate ethics code: “The core message is simple: Being Googlers means striving toward the highest possible standard of ethical business conduct.” And, it adds, “Our communications with our users should be appropriately clear and truthful. Our reputation as a company our users can trust is among our most valuable assets, and it is up to all of us to make sure that we nourish that reputation.”

Background
The controversy gained momentum in September of 2005 when Reporters Without Borders, a free-speech advocacy organization announced that it had proof that a subsidiary of internet company, Yahoo! Inc. aided the Chinese government in jailing a prominent journalist, Shi Tao, by providing information necessary to track him down. Shi Tao was arrested because he e-mailed foreign websites saying that he and his colleagues had been warned against commemorating the 15th anniversary of the 1989 Tiananmen Square pro-democracy protests (please see the story in our China country report at our Country Reports page).  Then, on February 9, 2006 the group reported another case, also involving Yahoo. The company’s Hong Kong unit offered information about Li Zhi, a Chinese citizen who was later thrown in jail in 2003 for subversion after publishing his criticism of state corruption online.

Google’s Special Service in China
The debate over compliance with China’s freedom of speech policies has been heightened by the actions of Google Inc., Miscrosoft and Cisco who have all been reported to have worked with the Chinese censorship authorities.  Google, for example,  launched a new Chinese search engine, Google.cn, that explicitly permits Chinese government censors to review and edit content. This impacted the search results of such topics, for example, as “democracy” or “Taiwanese Independence.” For example, New York Times reporter Joseph Kahn pointed out in a story from Beijing on February 12, 2006 (“So Long, Dalai Lama: Google Adapts to China”), Google in China does not provide current pictures of the Dalai Lama and, Google.cn does not even make users aware of what the search-engine is blocking. 

Miscrosoft & Cisco
In another case, on December 30, 2005 Microsoft Corp. complied with the Chinese government’s request that it shut down the website of Zhao Jing, a popular Chinese blogger. The site, which was critical of Beijing, covered controversial issues such as China-Taiwan relations and Chinese media freedoms.

Finally, Cisco Systems Inc., a leading networking equipment and management company, has become embroiled in this situation because it has sold hardware to the Chinese government that facilitates censorship and tracking of Internet mail. 

The controversy has been a public relations nightmare for the tech companies, which have responded with varying degrees of defensiveness. Prior to the hearing the most vocal had been Microsoft which announced on January 30, 2005 a new set of guidelines on blog closings: it pledged to make a blog or website available elsewhere, even if it was legally obligated to block it in a particular country. Furthermore, the company promised to clearly inform users when a website has been blocked due to a legal order. Previously, it had only reported that its content was unavailable.

At the February 15 hearing several Congressmen publicly decried the companies behavior charging them with violating American principles of free speech and bowing to pressure from China.  For instance, James A. Leach (R-Iowa) said to Elliot Schrage, a Google executive, “So if this Congress wanted to learn how to censor, we’d go to you – the company that should symbolize the greatest freedom of information in the history of man?” His point is underscored by the fact that the company’s motto is “Don’t Be Evil,” as well as by its stated emphasis on corporate ethics.

All four companies testified, despite their notable absence at a similar Congressional Human Rights Caucus hearing earlier that month. They made the argument that, as a whole, despite individual cases of censorship, the Internet has increased national Chinese dialogue and access to information simply by existing. Elliot Schrage of Google emphasized that, “this was not something we did enthusiastically, or something that we’re proud of.” The companies also suggested that the US government could and should do more than US companies to advance human rights overseas.

Moreover, many argued that the use of free, web-based email and the porousness of the Internet has empowered users to circulate information in spite of legal efforts at restriction. This view mirrors that of Microsoft Chairman, Bill Gates, who said on January 29 at a forum in Portugal,  "The ability to really withhold information no longer exists...You may be able to take a very visible Web site and say that something shouldn't be there, but if there's a desire by the population to know something ... it's going to get out very broadly."

However, many argue that the stance being taken by the companies is insufficient, as ordinary Chinese citizens cannot maneuver their way around security walls anymore than the average American can.

On February 14, 2006 the US State Department reported that it had created a task force to help technology companies protect free speech in countries like China that engage in Internet censorship. State Department officials vowed to encourage foreign countries to allow greater freedom of expression online as well as aid US businesses in their business strategies when they are called on to uphold repressive laws in countries where they operate.

However, numerous NGOs and Congressmen, such as Christopher Smith (R-NJ) Chairman of the committee that held the hearing, believe that the government must go further. They are calling on Congress to enact new laws to regulate the behavior of companies negotiating with foreign governments with questionable human rights records. Congressman Smith announced at the hearing his plans to introduce an “Online Freedom Act of 2006.” Congressman Smith’s Speech. 

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