A Framework for Corporate Political Spending

In a Harvard Business Review article on corporate governance, Constance E. Bagley, Bruce Freed and, Karl Sandstrom offer a framework and series of recommendations to  corporate Boards of Directors when the companies that they oversee are considering corporate donations for political activities.

In their article, Bagley, Freed, and Sandstrom point out that although many corporations contribute to political activities, often those corporations lack a formal decision-model guiding their behavior.  The authors state that  corporations that lack an effective approach guiding their political spending activities can expose their companies to legal jeopardy, conflicts with their employees and public embarrassment.

The authors’ model addresses three issues: (1) deciding whether contributing to political activities is appropriate, (2) determining whether and how the organization should disclose its political spending, and (3) establishing effective policies and oversight procedures to identify, monitor, and prevent inappropriate spending activities.

The article includes several examples of corporate political spending “gone awry”, including controversial spending by Aetna and Chevron.

 

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About docjonz

I am an Associate Professor of accounting at Hofstra University in Hempstead, NY. Additionally, I have more than 30 years of professional accounting experience in various capacities including auditing, accounting standard setting and corporate accounting policy.
This entry was posted in Corporate Governance, General Business, Politics and tagged . Bookmark the permalink.

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