New York state is quickly becoming ground zero in the fight over free speech and corporate political spending as a top state official with ties to left-wing campaign finance reform groups attempts to pressure private companies into making their political contributions public.
New York State Comptroller Thomas DiNapoli, who is the state’s top accountant and is spearheading the campaign, cites the importance of transparency.
Observers warn that "shareholder activism" in pursuit of political disclosure represents the first stage of coordinated intimidation campaigns against private companies conducted in the hope of discouraging them from donating to right-of-center nonprofit groups.
DiNapoli’s push is focused on major companies in which the state’s retirement fund is invested. DiNapoli, the fund’s sole trustee, wants those companies to disclose all of their political expenditures.
DiNapoli has already succeeded in convincing KeyCorp, a major commercial bank based in Cleveland, Ohio, to make its political activities public. The company agreed in December to disclose political spending if DiNapoli would withdraw a shareholder resolution designed to force those disclosures.
Three other companies agreed early last year to disclose political spending in the face of shareholder resolutions filed by the comptroller’s office.
DiNapoli boasts that he has filed 26 additional shareholder resolutions for 2013 demanding that companies in which the New York State Common Retirement Fund is invested make their political expenditures public. A spokesperson declined to say which other companies have been targeted.
DiNapoli’s office is also suing QualComm Inc., one of the nation’s largest mobile technology companies, alleging that it has refused to comply with the state’s efforts to force disclosure of its political spending.
Sarah Lee, the communications director of the Center for Competitive Politics, claims the lawsuit was filed "with the intent of pressuring the company into withdrawing support from trade groups that fight liberal political initiatives."
Former Securities and Exchange Commissioner Paul Atkins warned that DiNapoli’s campaign is part of an attempt to "clear the playing field of any kind of opposing viewpoint."
"All this is coordinated," Atkins, now the CEO of Patomak Global Partners, said in a telephone conversation. The objective is to "strangle the other side’s resources."
KeyCorp’s political action committee gives significantly more to Republicans than Democrats, and has in every election cycle but one since 1996. QualComm’s founder, billionaire Irwin Jacobs, is a major Democratic donor, but the company’s PAC is more even-handed in its contributions.
DiNapoli spokesperson Eric Sumberg denied that the shareholder resolution effort is partisan in nature.
"It’s about transparency and disclosure," he said.
Sumberg also said that the comptroller had not coordinated with any of the nonprofit groups promoting corporate political disclosure.
However, DiNapoli is closely associated with a pair of those groups.
He is a founding member of the Coalition for Accountability in Political Spending, a pro-disclosure nonprofit funded in part by George Soros’s Open Society Institute and the Rockefeller Brothers Fund.
DiNapoli has also "worked alongside" a similar group called the Center for Political Accountability, according to the comptroller’s website. Both the Open Society Institute and the Rockefeller Brothers Fund, in addition to other prominent liberal foundations, have financially supported that group.
These liberal foundations have also funded other organizations that make little effort to hide the partisan nature of their shareholder activism tactics.
Those tactics have become a major component of left-wing attempts to attack companies that donate to groups they do not like.
Left-wing activist blog Media Matters for America, which has received donations from both the Open Society Institute and the Rockefeller Brothers Fund, laid out the strategy in a 2010 publication.
Media Matters argued that disclosure of corporate political spending allows the group or its allies to attack companies that support conservative policies or organizations and, ideally, pressure the companies to cease that support.
"Media Matters Action Network will track all [hypothetical company’s] campaign expenditures in its database and may aggressively attack [the company], or provide the information to progressive partners to attack [the company] for supporting policies" that run counter to the left’s agenda.
Media Matters added that it would use public campaign finance information to distort companies’ political views by portraying every contribution to a candidate with which the group disagrees "as a complete endorsement of everything that a politician has said or done."
Those tactics were effectively deployed against retail giant Target Corp. Target disclosed in 2010 that it donated to a pro-business group called Minnesota Forward. Left-wing groups, spearheaded by MoveOn.org, organized an attack campaign against the company, claiming it endorsed the views of every candidate to which Minnesota Forward contributed.
Target was forced to apologize for the contribution.
A small group of left-wing individuals and organizations continues to submit the vast majority of political spending-related shareholder proposals, according to a study of the practice by the Manhattan Institute for Policy Research.
More than two thirds of all disclosure-related shareholder resolutions aimed at Fortune 200 companies in 2012 were sponsored by labor unions, labor union-affiliated pension funds—including New York’s Common Retirement Fund—or one of four individuals the study dubs "corporate gadflies."
Only 17 percent of shareholders supported resolutions requiring disclosure in 2012, according to the study. However, critics of the practice are concerned DiNapoli’s effort could be more successful.
With KeyCorp. and other companies voluntarily disclosing their political spending, the New York campaign could initiate a domino effect as disclosure becomes the norm.
"Increasing the number of companies that have adopted political disclosure is important because it begins to create pressure on other companies that have not adopted to do so," said Bruce Freed, the founder and president of the Center for Political Accountability (CPA). "That will make political disclosure a standard."
Former SEC commissioner Atkins sees that strategy at play in New York.
"They’re trying to get the momentum up," he said. The goal is to create a "chilling effect … so that [other companies] see what’s going on."