Should Companies Disclose All Political Spending?

By Steve Arthur, Vice President

What public policy spending should our company disclose? Recent news events have rekindled this debate, and it is an issue on which I have provided guidance to clients. This has involved reviewing the policies of other companies and what the public benefits and drawbacks have been. As we move into another election season, the legal and policy debates over campaign financing and disclosure are likely to intensify once again. Clearly, any contributions required by law to be disclosed must be, and companies should not attempt to hide contributions required to be disclosed. The question really is, “what additional information should our company release?”

For companies, disclosure used to be a simple matter of complying with existing laws such as PACs filing FEC reports and some states requiring certain filings for corporate campaign donations. In other cases, only the candidate or political committee needed to report those contributions and a company had no filing requirement. But again, the focus was on the candidate and from where contributions were coming. In those circumstances, disclosure could help shareholders decide whether political contribution decisions were being made to enhance the value of the company.

However, in recent years an increasing number of companies have been pressured in shareholder meetings and other forums to publicly disclose more information about their public policy activities. This ranges from any contribution to political organizations like the Democratic and Republican Governors Associations to non-profit think tanks and trade associations. And rather than looking at a candidate or committee’s broad political views, advocates have increasingly used campaign style tactics to claim a company shares every position a candidate espouses.

For companies, this makes political giving even more complicated. They have to decide whether the benefits of giving to a candidate or committee is the right decision on the merits, and then they have to consider every public policy position that candidate has ever taken and determine how to defend that contribution. And this is likely the goal of those pushing for broad disclosure.

A Washington Post article reported last year on the sentiments of disclosure supporters: “Proponents of disclosure say shareholders need to know precisely how a company is spending money on politics in order to assess if the spending exposes them to reputational, business or legal risks.” In light of some of the recent boycotts and threats of boycotts, companies are now assessing if the reporting of the spending exposes them to reputational, business or legal risks.

Even columnist George Will, formerly a big proponent of full disclosure, recently stated on the Fox News Channel show Special Report, that the goals of campaign finance disclosure advocates have changed:

“The people who want to reform our finances and increase government control over political speech and spending say ‘well, everyone surely can be in favor of full disclosure of campaign contributions.’ This (Eich resignation) is an example of why some of us who used to be for full disclosure no longer are. The people advocating full disclosure of campaign contributions say, ‘we just want voters to make an informed choice.’ That not what they’re doing at all. They really want to enable themselves to mount punitive campaigns and deter people and to chill political speech.”

While many companies have disclosed a wide variety of contributions in the past, will they continue to do so in the future? If companies have to start defending every dollar that every trade association to which they belong spends, will some of them simply decide it is easier to take the hit for not providing any information about their memberships?

Finally, in addition to the reputational reasons to decide whether it is better to disclose or not to disclose, there are competitive business reasons as well. If a company would like to significantly expand a facility in a county, but one or two members of the county board oppose any growth, the company might want to support candidates that would be more open to properly managed growth. The contributions would be disclosed locally, but might not be rolled up into one neat package with other contributions made around the country.

Having easy access to all political spending of a company in one nice report could yield some very helpful clues for competitors trying to guess what that company may be planning in the future. If a company puts all of its political spending in one place, it could be like giving away corporate secrets to those competitors who can look for any trends in giving. It might not be cost effective for that competitor to look for all those contributions from around the country, but it would be very easy to look at one report. Most of the time, there probably wouldn’t be any discernible trends, but why would a company want to package everything in one neat report for its competitors?

So the question of what to disclose is not as simple as it might at first appear. There are both competitive and reputational reasons for and against disclosure. When I discuss some of these issues surrounding contributions with clients, it can lead to a broader discussion internally about corporate values, and at other times it prompts a discussion about how else the company’s public policy objectives can be achieved. Each company needs to make the assessment about whether it is more of a risk to disclose or not to disclose, and that answer will vary from company to company.

However, the one certainty is that this debate is likely to continue for years as the courts continue to rule on campaign finance laws and companies respond by deciding what is right for their company reputation and its bottom line.

###

Steve Arthur is Vice President and brings more than 20 years of public policy experience in both the public and private sector to his work at Stateside Associates. Mr. Arthur provides clients with hands on state government relations support from strategic planning and issue management to lobbyist management and direct lobbying. He is one of the leaders of Stateside’s Attorneys General practice, guiding clients through the process of working with, and lobbying, state Attorneys General.

Burning Water

By John Howell, Esq., Vice President

The debate surrounding hydraulic fracturing, or “fracking”, is hot…almost as hot as burning water. At the federal, state, and local levels a battle is being waged and there seems to be no middle ground, no room for negotiation. While fracking has been around for decades, this battle over its future viability is just beginning. Pitting the environment against energy independence, a stream of documentaries and even a feature film, has certainly led to greater awareness and, perhaps, greater vitriol on both sides of the issue. If nothing else, watching this debate and monitoring the regulatory activity across the country is a fascinating exercise as the federal government, state legislatures, governors, local municipalities and courts are all active participants.

Last month, the U.S. Department of Energy’s Secretary of Energy Advisory Board (SEAB) published its Task Force Report on FracFocus 2.0. FracFocus is the reporting mechanism through which companies engaged in fracking disclose the chemicals added to their respective fracking fluid. This disclosure is intended to provide stakeholders with sufficient information to make informed decisions concerning environmental impacts due to fracking. FracFocus is maintained by the Ground Water Protection Council (GWPC) and the Interstate Oil and Gas Compact Commission (IOGCC) lending credibility to the data contained in FracFocus.

The Task Force Report is informative and I believe it is a good tool to limit the environmental impacts of fracking fluid…but, absent a willingness to find a middle ground concerning fracking, will it be effective? Claims of sickness, higher concentrations of cancer, undrinkable water, and even earthquakes have been attributed to fracking by its opponents. Will detailed and effective reporting of chemical use somehow lessen the import of these claims when those same claims are based on the use of chemicals? Not in Butte County California.

Last week, the Butte County Board of Supervisors voted to draft an ordinance that could ban fracking in the county. If this ordinance is ultimately passed Butte County will be the first county in California to enact a ban. One Supervisor, speaking in support of drafting an ordinance, cited a concern that fracking “is moving a lot of stuff underneath us that’s holding us up…by taking the foundation away, we’ll crumble”. Can middle ground exist if people are concerned with falling into the earth? It is worth noting that there have been no fracking operations in Butte County to date so, perhaps, everyone is safe.

Texas – a solidly pro-fracking state – utilizes a framework of sophisticated industry-friendly regulation that governs recycling practices for fracking flowback fluids and for casing, cementing, and well control of fracking well holes. Similarly, the Texas Commission on Environmental Quality adopted rules in 2013 to regulate disposal of certain radioactive tracers used in the exploration, development, and production of oil and gas resources. In Flower Mound Texas that may not be enough. Last week the Flower Mound City Council convened to “discuss and consider action related to gas drilling and development” with a focus on “community health issues related to hydraulic fracturing.” In Denton, Texas, a local activist group is working to place an ordinance banning fracking on ballots. The ordinance may result in a possible legal battle over the authority of local governments to ban fracking in Texas. In New York State, the November elections appear to be keeping the fracking discussion to a slow crawl. Now in the 6th year of a moratorium to study the effects of high-volume hydraulic fracturing, New York is not expected to issue final regulations anytime soon….certainly not before the elections. Despite dozens of bills sitting in the State Legislature and claims that the lack of movement in New York on the issue is having a significant economic impact and stunting job creation, final regulations are not expected from the Department of Environmental Conservation until at least April 2015. As a result, in February, a pro-fracking group filed suit against Governor Andrew Cuomo (D) to compel the state to complete its review of high volume hydraulic fracturing. In addition, the New York Court of Appeals is expected to hear cases soon regarding whether municipal governments have the authority to ban fracking within their borders.

While the fracking battle is being waged in these states and others across the country, money is flooding into North Dakota due to roughly 1 million barrels of oil production per day from the Bakken shale formation. This oil boom transformed North Dakota into the second largest oil producer in the country, only surpassed by Texas in terms of oil production. As a result, the unemployment rate in North Dakota is the lowest in the nation and the state has the most counties with increases to median household income. While North Dakota supports disclosure of fracking fluid chemical use in FracFocus and has recently adopted rules addressing oil and gas exploration, neither the court of law nor the court of public opinion seem to be impeding the state’s economic velocity.

Effectively monitoring state legislative and regulatory activity surrounding fracking is a true national effort. We are aware of the same dynamic playing out in Maryland, Minnesota, Los Angeles and everywhere else in between. Rarely have we monitored an issue this polarizing and divisive. Federal activity and the jurisdictional battles being waged in courtrooms across the country only add complexity and dimension to this effort. While issues often start out contentious and resolve with a predictable compromise, we do not see a compromise on the fracking horizon. Rather, we see the hydraulic fracturing debate being waged for years to come by two sides firmly entrenched in their beliefs.

About that burning water: in certain localities across the country, tap water can be lit on fire due to the level of methane in the water. Opponents of fracking claim methane in tap water as direct evidence that fracking fluid is poisoning groundwater and is not worth the environmental risks. Supporters of fracking point to the fact that tap water has been lit on fire since the 30’s – predating the first fracking operation. How, then, is fracking to blame? If we cannot agree on burning water, what can we possibly agree on?

###

John Howell is Vice President of Regulatory Services at Stateside Associates. With substantial policy and legal experience, Mr. Howell guides Stateside Associates’ regulatory counsel and provides clients with hands on Regulatory Issue Management support from strategic planning, regulatory advocacy, and working with groups of state and local officials.

Call to Duty: Why Groups Enlist Business to Help with Military Challenges

By Michael J. Behm, Senior Vice President

Paying attention to the military has become much more than a nod to patriotism for state and local officials Groups, but rather an urgent recognition that military-related challenges facing public officials, the Department of Defense (DoD) and business are converging like never before.

The drawdown from the conflicts in Afghanistan and Iraq, a flood of returning veterans, massive defense cuts and the threat of a future round of BRAC base closures have created something of a perfect storm of challenges for DoD and the states and local governments which host its installations.

Over the last several years, state and local officials – through their respective Groups – have raced to create leadership-level task forces, special working groups, committees and websites to raise awareness about the military presence in their states, draw attention to incompatible growth around military installations, and focus on wide range of veterans issues.

As an active participant in many of these committees, I am frequently asked the question: If I am not an elected official with a military base in my backyard, should I care about what these military-focused committees are doing?

Business definitely thinks so.

The National Conference of State Legislatures’ (NCSL) Military and Veterans Task Force has been meeting since 2008, the National Association of Counties (NACo) has created a Veterans and Military Services Committee, the National League of Cities (NLC) has a Military Communities Council, the National Governors Association (NGA) has several ongoing projects addressing veteran employment and military base sustainability, the National Lieutenant Governors Association (NLGA) has featured presentations on veteran transition and the Council of State Governments (CSG) and US Conference of Mayors (USCM) have held meetings focused on military installation and veteran issues. The “Big Seven” now meets quarterly to discuss military and veteran issues critical to state and local government.

And private sector involvement with each of these Groups’ military-related programming is growing. Military-focused committee and task force meetings have featured presentations from the U.S. Chamber of Commerce’s “Hiring Our Heroes” program; Edison Electric Institute’s “Troops to Energy Jobs” Program; Walmart’s Welcome Home Commitment; and the Home Builders Institute’s training and certification of veterans for employment in the construction industry. The Groups are helping DoD and business to highlight the education, training, on-the-job experience and leadership skills that veterans bring to the civilian job market. Guiding state and local officials to interested employers, and focusing on the veteran employment challenges, have become a very high priority for the Groups over the last two years.

State and local officials Groups and businesses also recognize that finding employers is not the only challenge for recently-separated service members. Neither DoD nor state government has made it easy in the past to translate military education and training into recognized (and required) state professional certifications and licenses. With the prodding of NCSL, NGA, NACo, NLGA, and the support of organizations such as the American Trucking Associations and health professional groups, states have been enacting laws to make it easier for veterans with documented training, work experience and necessary skills to obtain professional licenses such as a CDL, EMT, LPN and PA – licensure for high demand, civilian trucking and health care jobs. In 2013 alone, legislators on NCSL’s Military and Veterans Task Force introduced bills in 16 states – that were then enacted – that ease the professional licensing requirements for skilled veterans.

The Groups are also highlighting the threats posed by uncoordinated and incompatible development and urban sprawl to the nation’s military installations and testing/training ranges and local economies. In many states, the military is among the largest industries and employers and is directly responsible for the economic health of neighboring communities by generating a steady stream of revenue and jobs. When an installation can no longer perform its intended mission – whether that’s sailing ships, flying aircraft, firing artillery, training infantry or testing new technologies – it impacts the ability to realistically train soldiers, sailors, airmen and Marines. It also puts that “mission” at risk of being relocated or subject to a future round of BRAC.

DoD’s REPI (Readiness and Environmental Protection Integration) Program has used these Groups forums to highlight its cost-sharing partnerships with organizations as diverse as The Nature Conservancy, agri-businesses, foresters, private landowners, conservationists and state and local governments to help avoid or relieve land use conflicts near military installations. These partnerships protect the local economy, critical habitats and at the same time sustain the military presence.

Raising awareness about these problems within the Groups forums, and the benefits the military provides its neighboring communities and businesses, is paying off: Dozens of bills have been enacted since the Groups began addressing everything from compatible land use policies, property buffering, coordination with local military installations about land use changes, limiting lighting that can interfere with military training to creating open space areas around military bases – many of these land use solutions having been born out of discussions at Groups meetings. A number of states – Hawaii being a good example – have also enacted legislation or implemented executive orders intended to protect the military mission by more closely coordinating with state chambers of commerce and other statewide business entities.

Many other issues are being discussed that have a state and local government-military-business nexus, such as renewable energy siting coordination, translating military training and experience into higher-education academic credit, military-energy utility partnerships, National Guard deployments, transportation and infrastructure and Tricare changes to name just a few.

Should your business be involved in those discussions?

###

Michael J. Behm is Senior Vice President and a Principal of Stateside Associates. During his 20 years working at Stateside Associates, Mr. Behm’s advocacy work and leadership roles in the state officials Groups have brought him to many state capitols and local governments yielding an extensive network of relationships with legislative leaders and other public officials across the 50 states.