With the Supreme Court Case Citizen’s United Corporations were given the freedom to flex their political muscle by eroding the regulation of their political contributions on the basis that it infringed on their freedom of speech. In this Supreme Court Case Justice Anthony Kennedy stated that this freedom ought to be further exercised by the shareholder community who could assure that corporate expenses on political matters could represent the interest of the corporate owners rather than the executives. In this suggestion Justice Kennedy placed the onus of corporate accountability on the shareholders who could correct potential abuses “through the procedures of corporate democracy.”
At the May 18th shareholder meeting of Northrop Grumman, a small but dedicated group of religious investors took up this gauntlet and brought to the floor a proposal to do just that. The shareholder proposal requested that the company provide a detailed report that disclosed to the shareholders the monetary and non-monetary political contributions that would influence the general public in support or opposition to any political candidate. I moved this resolution at the shareholder meeting where it was well received by the shareholders even though the Board of Directors requested a vote against the resolution. The vote failed but there was enough support to keep this resolution moving and we hope to engage with the company on a discussion over promoting transparency on their political contributions.
In the wake of Citizen’s United many socially responsible investors have brought these resolutions to the floor at a number of different companies. Although many of us were
displeased with the ruling of Citizen’s United in that it empowered the corporate community to have further influence in the political system we were pleased by the Security and Exchange Commission’s ensuing support for shareholder action on developing accountability on issues like political spending. It is in this judicial environment that socially responsible investors have come together to promote corporate accountability on political contributions.
As with so many other issues regarding corporate governance this issue remains an uphill battle but we have noticed a recent surge of shareholder support for the promotion of corporate accountability. With our federal government having relinquished this level of regulation many shareholders recognize that the further collusion of multinational businesses with the political system could further erode our representative system of government to the powerful special interest of corporations. We recognize that businesses
like Northrop Grumman lobby the government with their interest in mind and as shareholders we also recognize that their business interest becomes our financial gain. But as Catholic religious communities we also recognize a moral responsibility to be responsible stewards so that our financial gain does not become the cause for unintended social consequences. With that in mind the United States Catholic Bishops offered guidelines for socially responsible investments reminding us of the proper social role of our investments.
Individual Christians who are shareholders and those responsible within church institutions that own stocks in U.S. corporations must see to it that the invested funds are used responsibly. Although it is a moral and legal fiduciary responsibility of the trustees to ensure an adequate return on investment for the support of the work of the church, their stewardship embraces broader moral concerns. As part owners, they must cooperate in shaping the policies of those companies through dialogue with management, through votes at corporate meetings, through the introduction of resolutions and through participation in investment decisions. (U.S. Catholic Bishops, Economic Justice For All, 354)
While it is good that the shareholder community is becoming more engaged with promoting responsible corporate governance some of us continue to question the wisdom of the Supreme Court in deregulating the financial influence of the business sector within the American political system. Even if we succeed in establishing internal mechanisms of corporate accountability we must nevertheless recognize that many other stakeholders will
remain disenfranchised from the development of corporate policies. In the long run we cannot hope to be an effective substitute for promoting the common good which is a principle responsibility of government. Catholic social teaching recognizes that “the free market can have a beneficial influence on the general public only when the State is organized in such a manner that it defines and gives direction to economic development.” (Compendium, #353) The State cannot be said to be “organized in such a manner” if it is under the influence of the corporations.