Retailer Target was once seen as a paragon of social responsibility. The company offers scholarships and steers 5% of profits to programs in the communities in which its stores are located. As recently as 2008, socially responsible investment firms hailed it as a model business. Then last summer, Target became a target--of a boycott by activists angry that the company contributed $150,000 to Minnesota Republican gubernatorial candidate Tom Emmer, known for his opposition to gay marriage.
Target could well find itself facing an embarrassing shareholder resolution seeking a proxy vote on political action at its next annual meeting. If so, it will join as many as 60 major companies, including Wells Fargo, CVS Caremark, 3M and State Street, that are being confronted by shareholders over corporate political activities, says Bruce Freed, president of the Washington, D.C., Center for Political Accountability, which is monitoring and helping to organize such actions.
"Target has become the poster child of the Citizens United case," says Freed, referring to the Supreme Court's landmark 5-4 decision last January that gave corporations the right to fund independent advertising in political races. "It shows the risks that a company faces when it gets involved in politics."
Target insists it supported Emmer (who at the end of November was narrowly behind in a vote recount) for his position on economic development issues, not his position on gays.
The Center for Political Accountability's research shows that as of Dec. 1, 42 companies could face proxy votes on political action transparency at their coming annual meetings, Freed says. The resolutions generally require that a company post all political contributions on its Web site and establish clear guidelines for how the board decides on a political contribution. Another 20 companies plan to discuss the issue of political transparency and political actions at their annual meetings.
Boards often avoid proxy votes by negotiating some compromise with dissident shareholders, usually activist institutional investors such as pension funds, religious orders and socially responsible investment funds. But when there have been proxy votes on the issue of corporate political action, those opposed to secrecy and management freedom of action have been gaining ground.
Seven years ago, the average vote for proxy measures calling for political transparency was 9%. Last year, it was 30%, and at the last annual meeting of Unisys, a motion on political transparency garnered 51% of the votes.
The Conference Board, a leading business organization, has weighed in, working with the Center for Political Accountability to develop a Handbook on Corporate Political Activity, released in November, which sets out best practices in this area. The handbook calls for transparency, an approach that Freed says would go a long way toward eliminating the hundreds of millions of dollars that corporations contributed to national political campaigns this past election cycle.
The Center for Political Accountability plans to release a new Political Accountability Index next year ranking S&P 100 companies on their openness about political actions, and it will expand the index in 2012 to cover the S&P 500. As the focus on corporate political actions increases, more companies that are expanding their funding of political campaigns may start finding themselves becoming targets of shareholder activism.