Corporate Political Disclosure: Theoretical Construct Development and Measure Validation

Abstract

Corporate political activity (CPA) has long been a venue by which firms seek to enhance competitive advantage, either at the firm or industry level. On 21 January 2010, the Supreme Court of the United States delivered its verdict in Citizens United v. Federal Election Commission. The Court struck down sections of the Bipartisan Campaign Reform Act of 2002 (the McCain-Feingold Act), giving corporations more freedom in election activities. Activists and business leaders quickly responded to the Court’s decision. The former sought greater disclosure; the latter anticipated more pressure from politicians and parties. A slight majority of business leaders also disagreed with the practice of unlimited and undisclosed political contributions. In this context, we define and develop an index to measure the construct Corporate Political Disclosure (CPD). We extend extant research by measuring the information companies voluntarily disclose rather than what candidates are mandated to disclose. We compiled a list of potential index items from research and consultation with activists, institutional investors and corporate officers. We content analyzed publicly available information from the S&P 100’s corporate websites to pilot our index. We find that CPD varies greatly. The mean score on our 57-indicator index was 22 (s.d. = 23). We identify a few disclosure exemplars and more laggards with 3 percent of firms achieving a 50 or more and 8 percent of firms disclosing no information on their websites. We demonstrate that CPD can be measured and that an index can be used to benchmark and compare companies over time.