Targeted Spending

For American corporations testing their new freedom to spend money directly on campaigns, the backlash against donations by Target Corp. and Best Buy Co. sends a stark warning: Proceed at your own risk.

Target has borne the brunt of public outrage over six-figure contributions that both retailers made to a Minnesota political group backing an anti-gay gubernatorial candidate.

Since news of Target's $150,000 donation to the pro-business group MN Forward broke in late July, irate customers have staged some 1,200 store protests; close to 300,000 have signed onto MoveOn.org's Target boycott; more than 74,000 Facebook users have joined an anti-Target group; and a trio of investment firms has filed a shareholder resolution demanding that Target re-evaluate its political spending policies.

In a sign that the furor has yet to die down, Washington University in St. Louis last week canceled a planned back-to-school event with Target, which would have involved after-hours shopping, free transportation and prizes for incoming freshmen.

"Contributions have consequences," said Bruce Freed, president of the nonprofit Center for Political Accountability. "And this is a dramatic illustration of those consequences and how they can affect and hurt companies."

Best Buy, too, has faced consumer and shareholder wrath for the $100,000 it gave to MN Forward. Both Best Buy and Target had received high marks from progressive investors and advocacy groups for their gay-friendly employee policies. Yet Tom Emmer, the Republican gubernatorial candidate backed by MN Forward, is a vocal foe of gay rights and same-sex marriage.

Even MSNBC has been dragged into the controversy following its refusal to run a MoveOn.org ad calling for a Target boycott. The $35,000 ad buy violated MSNBC policy because it directly attacked an individual business, an MSNBC spokeswoman told AP. But leading watchdog groups have blasted network executives and written them urging MSNBC to reconsider. The network's policy "is outdated in the wake of Citizens United," said David Donnelly, national campaign director of the Public Campaign Action Fund, referring to the Supreme Court's landmark Citizens United v. Federal Election Commission ruling, which lifted the longtime ban on direct corporate and union election spending.

It's too early to say whether that ruling will unleash a flood of new corporate campaign spending, as reform advocates predict. But public outrage over Citizens United and heightened media scrutiny of corporate money flowing through associations such as the U.S. Chamber of Commerce have made some corporate political spending radioactive.

Both the Center for Political Accountability and New York City Public Advocate Bill de Blasio have launched corporate spending disclosure databases. De Blasio has called on companies to voluntarily reform their campaign spending policies, and some have complied. Goldman Sachs, for one, has pledged to refrain from spending treasury money on election ads. De Blasio has also launched an online campaign to pressure Google to fully disclose its political spending.

Shareholders are registering record-high levels of support for corporate political disclosure and accountability, said Freed, who has launched a letter-writing campaign asking companies to spell out their political spending policies. In conjunction with the Conference Board, a public-interest-oriented business association, Freed's group also will release a handbook in October outlining best practices for politically active corporations, including ramped-up board oversight, risk management and full disclosure. Corporate donations to outside groups and trade associations are not immune from controversy, Freed noted. Watchdogs say such indirect corporate spending is already escalating, in part because it can fly under the radar. But even corporate donations to 501(c)4 advocacy groups, which face virtually no legal reporting requirements, should be voluntarily disclosed, Freed argues. He noted that Goldman's pledge, for one, does not prevent it from giving political money to trade groups.

"Companies need to know what trade associations are doing," he said. "Companies need to spend much more time managing their relationships with trade associations, understanding what trade associations are doing, and what risks may follow from that."

Executives at Target and Best Buy have all but admitted they wish they'd known more about MN Forward before they forked over money to the state-based group. Target CEO Gregg Steinhafel has apologized to employees, saying Target's intent had been to promote jobs and economic growth. And Best Buy CEO Brian Dunn has blogged that employees and customers were "disappointed and confused," and that the company would review how it makes such donations.

But progressive groups and shareholders are not mollified. The Human Rights Campaign has announced that it will invest $150,000 in electing a "pro-equality" governor and legislature in Minnesota. Investors at Trillium Asset Management Corp. and two other investment companies are rounding up additional signatures for their shareholder resolutions.

"We want to know that senior executives are going to fully vet the [campaign donation] recipient, and take into account the reputation consequences of backing that recipient, and whether that person or campaign has a broader agenda that conflicts with the company's stated values," said Shelley Alpern, vice president at Boston-based Trillium. In the Internet era, she added, formerly obscure political contributions can generate "a huge backlash.... All the consequences have to be very [well] thought out. And a mistake is harder to hide."