Proposal presented to the State Investment Council of New Jersey on January 26th, 2012


The New Jersey Investment Council should institute a formal policy of supporting shareholder proxy votes that increase disclosure of political contributions.  This policy should provide financial benefits to the beneficiaries of the pensions. 

The 2010 Citizens United vs. FEC Supreme Court decision eased disclosure requirements on corporate political spending.  Corporations can now spend near unlimited amounts on political expenditures without being required to disclose their spending.  According to the TIAA-CREF corporate governance policies, “excessive or poorly managed corporate political spending may pose risks to shareholders, including the risk that corporate political spending may benefit political insiders at the expense of shareholder interests.”[1] To minimize shareholder risk, it is important to be able to assess corporate political spending practices.

Bill Lockyer, Treasurer of California, wrote in a letter to the two largest California state pensions, CalPERS and CalSTRS: “Concerns about the negative impact of corporate political spending on shareholders are borne out by recent academic studies.  A Harvard Law School study by John Coates found a strong negative correlation between political spending and firm value. Similarly,… a University of Minnesota School of Management study examined corporate contributions to political candidates for federal offices and found that donations are negatively correlated with future excess returns.  The study, which examined contributions from 1991 to 2004, found that an increase of $10,000 in donations corresponded to a reduction in annual excess returns of 13.9 basis points.”[2]  (The California pensions later implemented his suggestion to support disclosure)

The movement to minimize risk to shareholder value by requiring political spending disclosure is growing.  International Shareholder Services, or ISS, whose mission is “Enabling the financial community to manage governance risk for the benefit of shareholders,” changed its Proxy Voting Guidelines this year to recommend support for greater disclosure of a company's political contributions and trade association spending policies and activities.[3]  In addition, “almost three fifths of the largest publicly traded companies in the United States disclose their direct corporate political spending and have adopted board oversight.”[4]

In conclusion, I propose that the State Investment Council of New Jersey amends the New Jersey Division of Investment Proxy Guidelines to include support for any shareholder proxy votes that increase disclosure of a company's political contributions and trade association spending policies and activities.


[1] “TIAA-CREF Policy Statement on Corporate Governance – 6th edition”

[2] “Letter from California Treasurer Bill Lockyer to CalPERS Board of Administration”

[3] “ISS 2012 U.S. Proxy Voting Summary Guidelines”

[4] “The CPA-Zicklin Index of Corporate Political Accountability and Disclosure”