Companies that hide their political spending from shareholders have less value on the market, according to a report released Tuesday by researchers at Harvard law and the Public Citizen consumer advocacy group.
Harvard law and economics professor John Coates and Taylor Lincoln with Public Citizen’s Congress Watch division compared 80 companies in the Standard & Poor’s 500 that voluntarily disclose their electioneering activities with other S&P 500 companies in the same industry.
The companies with disclosure policies had a 7.5 percent higher industry-adjusted price-to-book ratio than other firms, according to the report. The duo looked at price-to-book ratios, as opposed to year-to-year earnings, to reflect the market’s evaluation how a company is managing shareholder resources.
Coates and Lincoln are using their study to ask the Securities and Exchange Commission to require publicly traded companies to disclose to shareholders and the public their expenditures used for political purposes, including donations to trade associations that help finance electioneering and lobbying activities.
The Supreme Court’s January 2010 Citizens United decision opened corporate spending to third-party groups which do not have to disclose their donors. The ruling resulted in a flood of undisclosed dollars into the 2010 mid-term elections.
Of $266 million spent by outside groups to influence the 2010 elections, more than $135 million was spent by groups that did not disclose their funders, according to the report.
Coates and Lincoln’s request would only deal with publicly traded companies, which are not considered to be the biggest spenders on political campaigns.
Legislation that would have required organizations to disclosure funders failed to pass the Senate. The draft of an executive order that would have required government contractors to disclose their third-party contributions was leaked in April but has yet to be issued.
The report comes about a month after a group of law professors proposed a similar rule to the SEC.
“Shareholders of publicly traded companies have a right, at a minimum, to know how the companies in which they are invested are attempting to influence public policy,” the report concludes.