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The machinations of the 2012 election cycle are fully in motion, with each televised debate and catchy tax proposal marking the countdown to the primaries and general election—and in the national, state, and local election processes, general counsel will have a pivotal role in developing oversight for corporate political spending, according to the authors of a new report by The Conference Board. Amongst the complex thicket of state and federal regulations that govern this sphere, “one way for corporations to mitigate the potential risks of political spending and other political activities is to employ strong internal processes and structures at the management level and to consider some degree of oversight at the board level,” according to an advance copy of the report, released yesterday at an event in New York City. In this area, general counsel are “absolutely critical,” says Bruce Freed, president of the Center for Political Accountability. He is also a member of the advisory group to The Conference Board’s committee on corporate political spending, which produced the report. “[GCs are] the ones who really should have the final review of a company’s political spending decisions—ensuring that it’s complying with the law, and also that the proper risk assessment has been done.” Co-chaired by senior executives Dan Bross, of Microsoft Corporation, and Charles Grezlak, of Merck & Co., Inc., the committee was convened in April by The Conference Board, a non-advocacy, not-for-profit business membership and research association. Their report offers a compilation of approaches to disclosure undertaken by companies that, in addition to Microsoft and Merck, include Altria Group, Cambell Soup, Exelon Corporation, Pfizer Inc., and Procter & Gamble. The report draws strong connections between the value of transparency to the public and shareholders, and the perceived trustworthiness of a company—at a time when “ public trust in U.S. corporations is at near-record lows, according to many of the trust-measurement tools corporations now use.” Last year’s Supreme Court decision Citizens United v. Federal Election Commission has also raised questions about corporate transparency and accountability. The Court’s ruling allows corporations to make anonymous donations—in the form of independent expenditures—to tax-exempt organizations for political purposes. But even before that ruling, shareholder resolutions have been key in prompting some corporations to be more forthcoming on their websites about company spending decisions. At Thursday’s event, representatives from Altria, Microsoft, Merck, and Pfizer all said that shareholder engagement has played a big part in decisions about sharing policies and spending information online. Freed says that since 2005, there has been a growing recognition among companies that corporate political spending poses a risk to shareholder value. “They began to look at it as: This is another aspect of risk management,” he said. Now, over half of the companies on the S&P 100 are disclosing information about the political spending and related policies on their websites, says Freed. The Center for Political Accountability indexes corporate transparency on political spending using 29 indicators—including the level of involvement from the office of general counsel in that process. Over the course of the day, other speakers and committee members also stressed the importance of the general counsel in corporate political matters. “This area is one that is littered with a lot of regulation,” said Bruce Wilson, general counsel of Exelon, a public utilities company. “The compliance task here is enormous for a company that’s national, or even international, in scope. I think general counsel can help guide a company into a compliance framework that deals with it in a more manageable way.” That’s not just compliance with the law, Wilson said, but “compliance with the policy guidelines that we set for how we’re going to act in this arena.” He believes general counsel can both “help a company establish what its boundaries are,” as well as partner with the board of directors “in helping them to understand what the policy decisions are, and having them ratify those decisions.” At Microsoft, general counsel Brad Smith “played an active leadership role in helping us get where we are,” said Bross, the company’s senior director for corporate citizenship. “Brad’s guidance was, rather than establishing a bunch of policies. . . let’s first develop some principles that will inform and help develop the policies.” Out of those discussions, Bross said, “we developed these principles around transparency, public advocacy, accountability, compliance. And then, once we had those, we set the policies under them.” At Pfizer, it’s about having a process in place around political spending, said Matthew Lepore, chief counsel for corporate governance. That process revolves around determinations of how the company decided to give money, to whom they gave it, and what they disclose on their website. Grezlak, Merck’s vice president for state government affairs and policy, said the company isn’t claiming to be perfect when it comes to disclosure. Hearing from other companies, he said, offered opportunities for continued improvement, and to learn what others “think the risks are in this area, so to the extent we’re not mitigating reputational risks and the legal risks, we can take appropriate action.”

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