Shareholders of Home Depot Inc. rejected a closely watched shareholder proposal seeking to expand the amount of information investors may seek about corporate political spending.

Fred Blake, Home Depot chairman and CEO, reported the results at the company's annual meeting, based on preliminary figures, but didn't announce any numbers; final figures will be filed next week, he said.   (6/9/2011: See this update for final vote results.)

Although the measure was defeated, it is considered to be a template for similar proposals at other corporate annual meetings.

The proposal by NorthStar Asset Management, a Boston money manager, requested that the company annually report on its political policies and contributions, disclose future anticipated spending, and provide an analysis of how such spending matches company values or policy.  It asked Home Depot to give shareholders an advisory vote on those policies and plans, although the vote would be non-binding.

Julie Goodridge, NorthStar CEO, told the Home Depot annual meeting that the resolution was "an opportunity to cast an historic vote" for shareholder democracy.

NorthStar's proxy material said the proposal was needed to minimize “risk to the firm’s reputation and brand through possible future missteps in corporate electioneering.” It noted that Target Corporation last year was threatened with boycotts and received negative publicity after donating $150,000 to a Minnesota political group that backed a Republican candidate for governor who opposed same-sex marriage.  Target, which said it made the contribution to support economic growth and job creation, apologized and revised its policies for approving political contributions.

Sanford Lewis, a Massachusetts attorney who represented NorthStar, told the Securities and Exchange Commission that while Home Depot has a “clear and firm non-discrimination policy,” political contributions by the Company or its PAC have gone to candidates who oppose same-sex marriage or various policies protecting gay individuals.

The SEC’s division of corporation finance in March rejected Home Depot’ s effort to exclude the proposal; the company said the proposal was vague and indefinite, sought seeks to micromanage the company, and declared the company has substantially implemented the proposal – all arguments companies often make in
justifying exclusion of shareholder proposals.

Asked about the significance of the SEC ruling, Mr. Lewis said “Although disclosure proposals are routinely filed and found nonexcludable, to our knowledge this was the first time the SEC ruled directly on a proposal providing an annual shareholder advisory vote on electioneering spending…This first time decision has cleared the way for further efforts, building upon the model established by the Home Depot proposal.”

The website CampaignMoney.com, which tallies records filed with the Federal Election Commission, says that in 2010 the Home Depot PAC raised $2.2 million and distributed $1.99 million.  Political action committees raise money from individual contributions.

Shareholders have voted on political disclosure resolutions at 28 companies this year, according to Bruce Freed, president of the Center for Political Accountability, receiving an average of more than 30% support.

In May, New York City Comptroller John C. Liu claimed a victory on the issue when 53% of the votes cast at the Sprint Nextel annual meeting endorsed the NYC Pension Funds’ proposal that the company report its policies and procedures for political contributions and identify the people who make the decisions. (However, the company – which counts abstentions as “no” votes – says the resolution lost by 59% against and 41% in favor.)

The Home Depot proposal was crafted as part of the national response to the 2010 Supreme Court Citizens United decision finding that limits on independent corporate and union political spending violate free speech provisions of the Constitution.

The decision involved spending by corporations on advocacy campaigns; corporate contributions to federal candidates is still illegal, although a federal judge in late May in Virginia threw out an indictment against two people charged with illegally reimbursing donors to Hillary Clinton campaigns, citing Citizens United as his reason.  Judge James Cacheris seems to be having second thoughts, however; he has asked the parties to submit additional briefs on whether he should reconsider his ruling, the Associated Press reported.

Democrats in Congress last year tried to lessen the impact of the Citizens United ruling via the DISCLOSE Act – Democracy is Strengthened by Casting Light on Spending in Elections Act -- which would require that donors to political campaigns and political advertising be identified.  It passed the House, which at the time had a Democratic majority, but failed in the Senate.  Some politicians have proposed a Constitutional amendment to reverse the decision.

Earlier this year, President Obama proposed an executive order requiring that federal contractors disclose their political contributions, a move Republican leaders said would intimidate contractors.

Political observers, meanwhile, expect the Citizens United case to result in an unprecedented flood of political spending between now and the 2012 elections – much of its done invisibly through aggregated contribution sites or through trade associations.

GOP strategist Karl Rove has set up a pair of fund-raising entities, American Crossroads and  Crossroads Grassroots Political Strategies; Crossroads GPS will accept contributions while keeping donor identifies secret. Federal filings record more than $15 million of spending by Crossroads GPS last year.  In response, Democrats are organizing similar  groups called Priorities USA and Priorities USA Action

John C. Bogle, founder of the Vanguard Group of mutual funds, widened the debate in a  May 14 New York Times column, declaring: “Shareholders – not self-interested corporate managers – should, and can, decide policies on corporate political contributions.”  In view of the Citizens United case, he said, “the institutional investor community has an obligation to act,” and urged that that corporations have shareholders vote on a resolution that “the corporation shall make no political contributions without the approval of the holders of at least 75 percent of its shares outstanding.”

He said the Home Depot and other votes “this proxy season will be a powerful indication of whether our money managers are observing their fiduciary duty and putting the interest of the small investors and pension funds that are their clients before their own.”

Photo by Ildar Sagdeje via Wikimedia

Shareholder support for disclosure of corporate political support continues to build.

The Center for Political Accountability, examining results of disclosure proposals for the 2010 annual meeting season, found that shareholder support for disclosure rose to a record 30.25% at 28 meetings.

Since 2004, about 200 disclosure resolutions have been submitted on corporate proxies.

Disclosure support at four companies was particularly strong: Coventry Healthcare, 46%; Express Scripts, 42%; CVS Caremark, 41.35%; Sprint Nextel, 41.2%, and Allstate, 39.7%.

Bruce Freed, President of the CPA, says the results indicate that “more and more (investors) are calling for an end to the secrecy that has cloaked corporate political spending and want accountability.”

He added: “When you consider that the majority of votes side with management as a matter of course, the substantial support from retail and institutional shareholders shows the broad support for political disclosure.”

The Center recently launched an online database that allows users to examine how specific companies treat political accountability and disclosure.

Corporate political campaign support has become a hot button issue this year, particularly in view of the January 5-4 decision by the U.S. Supreme Court removing limits on corporate and union spending on political ads.

Critics of the decision fear a deluge of corporate spending, prompting Democrats to seek to limit the decision and to require contributors to disclose their identities.  The legislation, labeled the DISCLOSE Act, passed the House 219 to 206 in late June, but backers had to make key concessions to achieve passage.  One change would exempt the National Rifle Association from the bill’s disclosure requirements. And opponents, led by the U.S. Çhamber of Commerce, have labeled the measure an assault on free speech.

Similar legislation introduced in the U.S. Senate faces an uncertain future, particularly in an election year.

Durbin’s initiative follows Google’s announcement that it had been the victim of cyber attacks aimed at gaining access to the email accounts of Chinese human rights activists. Google has said it is considering pulling out of China because of the attacks and what the company called “attempts over the past year to further limit free speech on the web.”

Only two weeks ago, U.S. Secretary of State Hilary Clinton called on American technology companies to make a “principled stand” against attempts at censorship.

Sen. Durbin, Chairman of the Judiciary Subcommittee on Human Rights and the Law, said his hearing next month will feature testimony from Google and other companies about their business practices “in internet-restricting countries,” as well as from high-ranking Obama Administration officials about the Administration’s efforts to promote internet freedom.

“I commend Google for coming to the conclusion that cooperating with the ‘Great Firewall’ of China is inconsistent with their human rights responsibilities,” Durbin said. “Google sets a strong example in standing up to the Chinese government’s continued failure to respect the fundamental human rights of free expression and privacy. I look forward to learning more about whether other American companies are willing to follow Google’s lead.”

Durbin’s letter asks each firm for details of its business in China, and what, if any, measures it will implement to ensure that its products and services do not facilitate human rights abuses by the Chinese government.

This week’s letter also follows up on a letter that Durbin sent last year, urging technology firms to join a voluntary code of conduct known as the Global Network Initiative (GNI). The code of conduct, which regulates the actions of technology firms operating in countries that restrict the internet, has been backed by Google, Microsoft, and Yahoo! and a number of leading socially responsible investment firms.

Durbin’s office said the list of companies that responded to his previous letter included Apple, AT&T, Cisco, Dell, eBay, Facebook, HP, McAfee, News Corp, Nokia, Nokia Siemens, Siemens, Skype, Sprint Nextel, Verizon, Vodafone, Websense.

According to Senator Durbin’s office, companies that did not respond to his previous letter were Acer, Juniper, Toshiba, Twitter; companies that “partially responded” to his previous letter were Fortinet, Lenovo, Motorola.