Shareholders of Aetna voted against a measure last week that would've required the Hartford, Conn.-based health insurance giant to disclose political donations that are directed toward not-for-profit groups.
That the proposal even made it to a vote indicates many with a stake in Aetna aren't thrilled with the company's clandestine political spending—a rising theme for numerous other corporations since a controversial U.S. Supreme Court ruling in 2010.
“When corporations spend money to influence politics, they are using their economic might to purchase political power,” said Adam Lioz, a lawyer and senior adviser at liberal-leaning public policy group Demos. “If you're going to live in a democracy where corporations are allowed to spend on politics, at the very least we need to hold those corporations accountable.”
Business research firm SNL Financial and watchdog group Citizens for Responsibility and Ethics in Washington highlighted Aetna's political contributions in 2012. The groups discovered Aetna funneled more than $3 million to the American Action Network, a not-for-profit conservative organization that qualifies as a 501(c)(4) “social welfare” group under the Internal Revenue Service code. Aetna also gave more than $4 million to the U.S. Chamber of Commerce, the pro-business 501(c)(6) trade group.
The American Action Network and the Chamber of Commerce have been fierce opponents of the Affordable Care Act and the expansion of health insurance. Conversely, Aetna has generally supported the ACA and viewed the law as favorable to its business.
Not-for-profit 501(c)(4) organizations such as the American Action Network are not required to publicly disclose their funding sources, and they can be involved with lobbying and political campaigns as long as that is not their “primary activity,” according to the IRS. Those organizations, known as “dark money” groups because of their opaque financial connections, have proliferated since the 2010 Citizens United decision loosened restrictions between companies and political contributions.
Aetna CEO Mark Bertolini replied to Citizens for Responsibility and Ethics in Washington in June 2012, saying his company was not trying to influence the electoral process. “No funds were provided to these organizations for lobbying purposes,” Bertolini wrote. “However, we have provided funds to these organizations for educational activities.”
Every year, Aetna also releases a political contribution report. In 2013, Aetna spent almost $6 million on state and federal lobbying through trade associations and political action committees. However, the reports make no mention of social welfare groups like the American Action Network.
“We agree that transparency and accountability with respect to political expenditures are important,” Aetna said in a statement. “The company complies fully with all state and federal laws concerning the disclosure of its political and lobbying activity.”
Many investors have not been satisfied with Aetna's responses. New York State Comptroller Thomas DiNapoli led the charge for the proposal at Aetna's annual shareholder meeting this year. DiNapoli is a trustee of the New York State Common Retirement Fund, the third-largest public pension fund in the U.S., which holds more than 1.2 million Aetna shares. He said that “funding partisan organizations like the Chamber and AAN may not be in the best interests of Aetna and its shareholders.”
“We need to know whether Aetna is using our investment in ways that benefit long-term value or if it is putting the company's reputation and its bottom line at risk,” DiNapoli said last week in a news release. “Aetna should join the growing ranks of major corporations that have chosen to pull back the curtain on their political spending.”
Ultimately, 71% of Aetna shareholders voted against the proposal. Similar proposals failed at Aetna's 2012 and 2014 meetings. Political science experts say these types of votes at publicly traded companies have been increasingly common since the Citizens United decision, even though they often flop. But many investors are still pushing to know if their money is being used to fund groups that advance certain causes or support specific legislation.
“Not all 501(c) groups are equally transparent in their motives,” said Robert Boatright, a political science professor at Clark University who studies political interest groups and campaign finance. “On the other hand, it's reasonable for shareholders to request a bit more disclosure of such expenditures, particularly because they are becoming more common.”
Lisa Gilbert, director of the Congress Watch division of advocacy group Public Citizen, said about one-fifth of Fortune 500 companies disclose all political spending. The New York State Common Retirement Fund has pushed seven of its portfolio companies to adopt those types of disclosures this year alone.
The proposals are unpopular with company executives. David Primo, a political science professor at the University of Rochester and a contributing scholar at the conservative Mercatus Center, said that's because the proposals give activist investors a roadmap to go after companies on political grounds without any financial benefits.
“Is it going to lead to better manager use of shareholder dollars? I think that's a very speculative sort of argument,” Primo said in an interview.
Citizens for Responsibility and Ethics in Washington started a petition with the Securities and Exchange Commission in April 2014 to create standard financial reporting of political activities. The group cited Aetna as one company that has not lived up to its commitment to provide full disclosure of all political spending.
The petition has received approximately 1.2 million comments. “It's political spending, but it shouldn't be a political issue,” Gilbert said. “It's information investors want.”