US companies are under unprecedented pressure from shareholders to disclose details of their political donations and hold directors accountable for them, in a sign of deepening investor concerns over the use of corporate funds.
Shareholder groups say that recent scandals on Wall Street and in Washington have prompted investors to demand more transparency on companies' political contributions, which totalled $184 million (€143.47 million) in 2002, the latest major election cycle.
The issue is likely to become more prominent in the run-up to November's elections because candidates in close races are expected to step up their fund-raising efforts with companies.
The moves on political donations underline investors' growing desire to have better oversight of management after the Enron and WorldCom scandals.
It will put a spotlight on the close and complex ties between US companies and politicians.
Institutional Shareholder Services, which advises fund managers on how to vote at shareholders meetings, expects investors in US-listed companies to put forward a record number of resolutions asking for more transparency on political donations at this year's annual meetings,
So far, 35 companies, including Citigroup and Wal-Mart have put such resolutions to the vote. In 2002, no US company was asked by shareholders about political donations, while in 2003 only two had to put the matter to investors.
"This is an issue of disclosure and accountability," said Jim Letsky, senior analyst at ISS, which in April scrapped its stance of always advising shareholders to vote against demands for more transparency on political funding.
- (Financial Times Service)
