Companies Tread Lightly With Political Donations

Corporations May Not Be Tying Cash to Brands -- but That Doesn't Mean They're Not Giving

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CHICAGO (AdAge.com) -- When Target Corp. spent $150,000 in support of a candidate who opposes gay marriage, the backlash from its employees and liberal groups was swift and loud, eventually forcing the retailer to apologize. The lesson for other companies on how to deal with newly loosened campaign-donation rules: Act carefully. Or act quietly.

Only a handful of companies are on record donating directly from their corporate accounts to political causes as is allowed by the Supreme Court's landmark Citizens United ruling.

General Mills CEO Ken Powell last week pledged that the Minneapolis-based food giant would not engage politically. "We have not given to any of the so-called independent political-expenditure organizations, [and] we have no plans to do so," he said in response to a question at the company's annual shareholders meeting. The audience responded with approving applause.

But scores of other companies could be in the political game. They are just playing anonymously, routing money though independent groups that don't have to immediately report donors, campaign-watchdog groups say.

"We're seeing evidence of it all around," said Craig Holman of consumer-advocacy group Public Citizen. "It's all going through these third-[party] groups that aren't telling us where their money is coming from."

The Supreme Court ruling and related regulatory decisions freed corporations to spend unlimited amounts on "independent expenditures" -- money that can be used to advocate for or against a candidate as long as the advertising is not coordinated with the politician's campaign. Theoretically, companies could act alone, slapping their company's name on a political ad. But that's not happening, analysts say.

"Most corporations tend to be risk-averse, and, obviously, they have customers who are Democrats and Republicans," said Evan Tracey, president of Kantar Media's Campaign Media Analysis Group. "We just haven't seen anybody put their own brand out there."

But the federal system provides other avenues.

For instance, companies can give to third-party groups without having to immediately reveal the donations. One vehicle is a "super PAC," through which organizations can take unlimited donations from corporations or unions for advertising. More than 30 groups have been set up so far, supporting both liberal and conservative causes, according to the Center for Responsive Politics.

The groups only have to reveal donors periodically. The next date is Oct. 15.

Another way to give is to nonprofit groups, known as 501(c)(4)s, that face very few donor-disclosure requirements. Examples include Crossroads GPS, a group affiliated with GOP strategist Karl Rove, which has run ads worth more than $2 million attacking Democrats in Kentucky, Pennsylvania and California. An affiliated super PAC, called American Crossroads, in August reported $400,000 from insurance company American Financial Group.

The Target donation came to light because Minnesota, where the company is headquartered, has strict disclosure rules for state donations. A move to increase disclosure for federal races is stalled in Congress in the face of opposition from Republicans who say it violates free speech.

Target 's donation went to a pro-business group called MN Forward, which is backing GOP gubernatorial candidate Tom Emmer, who opposes gay marriage. Best Buy and 3M have also given to MN Forward, but Target is getting most of the attention.

Target at first defended the donation by citing the group's pro-business agenda, but the move was seen as a betrayal by the gay community.

"Target has prided itself on its pro-[gay] stance in the past," said Akshay R. Rao, director of the Institute for Research in Marketing at the University of Minnesota's Carlson School of Management. "That's why the backlash against Target was so severe."

Liberal groups organized boycotts and protests. Target CEO Gregg Steinhafel in August issued an apology to employees.

Timothy Baer, Target 's exec VP-general counsel, told reporters at Target 's recent media day that the retailer is reviewing its decision-making process so "we don't create the kind of situation like with Minnesota Forward, and we don't offend our team-member base."

Mr. Tracey said organizations that oppose corporate donations were ready to pounce on Target 's donation, the idea being, "If we can make an example out of Target , then who knows how much money that's going to keep on the sidelines?"

At the same time, New York City's Public Advocate, Bill de Blasio, is waging his own war against company donations. He says he's already secured pledges from Dell, Microsoft, Xerox, Colgate-Palmolive, IBM and others who say they won't spend company money on elections.

Those who have spent include Target , Best Buy, Massey Energy and International Coal, according to the office. Plenty of other firms do not have formal policies prohibiting spending company money on politics, including Verizon, McDonald's and Walmart, according to the office.

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Contributing: Natalie Zmuda

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