Ahead of the midterm elections, several major corporations in the Philly area are setting a high bar for being transparent about their political spending practices, according to a new report that tracks disclosure among S&P 500 companies.

Student-loan servicer Navient, along with drug manufacturers Johnson & Johnson and Merck, made the growing list of "trendsetter" companies that scored 90 or higher on the 2018 CPA-Zicklin Index, produced by the Center for Political Accountability and the Zicklin Center for Business Ethics Research at the Wharton School. The index ranks companies based on factors such as whether they disclose payments to candidates, super PACS, and trade associations; whether they spell out their policies for making contributions; and the extent to which board members have oversight of those policies.

Navient, with a score of 91.4, and Johnson & Johnson, with a 90, both improved their scores enough this year to join the "trendsetter" ranks for the first time. Merck maintained its "trendsetter" status with a score of 90. That high-scoring group has more than doubled in size since 2015 — from 28 companies, to 57.

Several local companies bested the index average of 44.1 with scores that remained the same, or roughly similar, over the last year: pharmaceutical distributor AmerisourceBergen (82.9), Comcast (80), Hershey (61.4) and PNC Financial Services (70). (Campbell Soup's score, which was being recalculated as this was being published, is expected to be close to its 68.6 in 2017).

Transparency Test

The CPA-Zicklin Index ranks members of the S&P 500-stock index based on how transparent they are in the disclosure of their political spending. This list includes S&P 500 members based in the Philadelphia region or index members with major operations here. Campbell Soup is not included because its score is being corrected.
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"Companies are finding that disclosure and accountability policies protect them," said Center for Political Accountability president Bruce Freed. "The expenditure that they made yesterday or today can come back and really bite them tomorrow. Companies have to pay really close attention to the consequences of their spending — does it align with their core values?"

This year's index is the first to cover a full year of corporate political transparency under a Trump presidency — an environment the report's authors deem "hostile" to disclosure in general.

"The whole tone that comes out of the White House is opposed to disclosures," said Freed, harking back to President Trump's refusal to release his tax returns. Added to that, he said, the Federal Election Commission "at this point is moribund." Congress, for its part, tucks a rider into spending bills that prevents the Securities and Exchange Commission from requiring companies to account for their political spending.

Even so, companies that have been in the S&P 500 since 2015 — a collection of 414 "core" firms — continue to take up more transparent practices, according to the report. Their average index score is 49.7, up from 41.6 in 2015. The number of core companies that disclose or prohibit political donations has "consistently increased," in several contribution categories. For example, 226 of them now either fully disclose or ban contributions to candidates, parties, or campaign committees, compared with 196 in 2015.

Across this year's entire index of 493 companies, 231 disclosed some or all election-related spending, down from 236 that did so last year. Freed said the variation largely owes to new companies entering the S&P 500, and that the longer a company remains on the index, the more likely it is to adopt and strengthen disclosure policies.

That's a big shift from the early 2000s, when political disclosure among major companies was practically nonexistent. "We started from zero in 2003," Freed recalled.

Disclosing spending policies and payments is now seen as a common risk-management practice. It can give companies more clearly defined parameters for what they choose to spend money on — or an excuse to say no to a request for a contribution.

This year's report found that 176 companies, or 36 percent of the index, prohibited at least one type of election-related spending – up from 143 companies, or 29 percent of the index, in 2016.

Navient scored higher, in part, by clarifying that it does not spend on ballot measures. The company also added a new level of board oversight, so that a committee of directors oversees political spending practices.

Johnson & Johnson started disclosing its membership in trade associations to which it contributes $50,000 or more — and the percentage of its dues used for federal lobbying.

For 2017, the company published a list of 16 such organizations, including five groups that received more than $500,000 from J&J: Advanced Medical Technology Association (9 percent of dues used for lobbying), Biotechnology Industry Organization (33 percent), Consumer Healthcare Products Association (6 percent), Pharmaceutical Research Manufacturers of America (6 percent), and the U.S. Chamber of Commerce Institute for Legal Reform. (10 percent)

Chemical maker FMC landed on a list of "backslider" companies whose scores decreased by 10 points or more. According to the center, FMC didn't post its most recent political spending report, despite an agreement by the company to do so.

A spokesperson for FMC said the company complies with federal law by reporting political contributions to the Federal Election Commission, as required. The company "also voluntarily requests that trade associations, of which we are members, provide data regarding the percentage of our paid dues used for political expenditures," the spokesperson said. "That data is published and housed on our website, and we plan to update that page shortly with recent data."