Several years ago, I wrote an article asking, "Why are corporations allowed to contribute even one dollar to politicians? Have we forgotten that our government is meant to be operated by and for us -- the people?" My stance on this issue hasn't changed.
If you're a shareholder in a company, you really and truly own a chunk of it, albeit probably a small one. If it makes money, it's making money for you. If it gives away money, it's giving away your money. Remember, with the money it makes, a company can do a bunch of things: reinvest in the business, pay down debt, pay dividends to shareholders, or even buy back shares. Does giving money away to politicians seem like a better option than those others?
Until recently, I was aware of only one exception to the common practice of company bigwigs donating shareholder money -- Berkshire Hathaway. CEO Warren Buffett and partner Charlie Munger had set up a clever system whereby their shareholders got to decide which charities received contributions from the company. In his 2001 letter to shareholders, Buffett explained: "... we make no contributions except those designated by shareholders. We do not match contributions made by directors or employees, nor do we give to the favorite charities of the Buffetts or the Mungers. ... Shareholders name the charity; Berkshire writes the check. ... Last year, Berkshire made contributions of $16.7 million at the direction of 5,700 shareholders, who named 3,550 charities as recipients." This approach had always struck me as ingenious and fair. But alas, the program was discontinued in the wake of protestors threatening the livelihoods of some Berkshire employees.
Who's giving what?
So where are we now? Well, I clicked over to the eye-opening website opensecrets.org and found a list of the "top all-time donors" going back to 1989. I was a little surprised to see more associations than organizations at the top of the list. I'd known, as a former teacher, that the National Education Association was very politically active (it ranked No. 4) -- well, it turns out that the National Association of Realtors is even more active, ranking No. 2. The top 10 were all unions or other associations. Here are the top-ranking public companies, and their ranks:
11. Goldman Sachs (NYSE:GS)
13. FedEx (NYSE:FDX)
15. Altria (NYSE:MO)
19. United Parcel Service (NYSE:UPS)
21. Citigroup
22. AT&T (NYSE:T)
27. Time Warner (NYSE:TWX)
30. Microsoft
32. Verizon
33. JPMorgan Chase
Goldman Sachs' total contributions between 1989 and 2006 were $22.6 million, and JPMorgan Chase's were $14 million. In first place, the American Federation of State, County, & Municipal Employees donated $37 million. There were plenty of other well-known corporations on the list. As an example, Goldman Sachs gave, during this period, $527,549 to George W. Bush and $343,150 to John Kerry, among many other recipients.
As you might expect, energy companies such as ExxonMobil leaned to the right, heavily favoring Republicans in their giving. So did tobacco companies and the American Medical Association. Regarding the latter, I'd imagine that the medical field might be afraid that Democrats could usher in major changes in our nation's health-care system that could make life less profitable for medical workers.
What it means for us
So what does this all mean for us investors? Well, it's good to be aware of what your companies are up to, and whom they're supporting. If you get apoplectic thinking about a certain political party, you might not want to be invested in a firm that gives it millions of dollars and supports its efforts.
You might also contact the companies you hold, to voice your opinions on their giving.
Finally, though, do realize that no matter how right or wrong you think these political donations are, they usually don't amount to much from an investor's point of view. Consider that Pfizer gave $1.6 million in the 2004 election cycle, about a third of which went to Democrats and two-thirds to Republicans. Well, in fiscal 2003, its net income was $3.9 billion, and in 2004, it was $11.4 billion. So while Pfizer may be having a big impact on legislation and government, its shareholders are not being wiped out to any degree by its giving. Of course, Enron was a major donor in its time, too, and it's clear that that company probably needed every one of its dollars.
The bottom line
If this kind of information is important to you, look into your holdings' donations. And regardless, remember that for investors, the most critical concerns about companies should be factors such as their growth potential, fiscal health, competitive position, and the like.
Time Warner and FedEx are Motley Fool Stock Advisor recommendations. Microsoft and Pfizer are Motley Fool Inside Value picks, and JPMorgan Chase is a Motley Fool Income Investor selection.
Selena Maranjian o wns shares of Berkshire Hathaway, Pfizer, Time Warner, and Microsoft. For more about Selena, viewher bio and her profile. You might also be interested in these books she has written or co-written:The Motley Fool Money GuideandThe Motley Fool Investment Guide for Teens. The Motley Fool is Fools writing for Fools.
