Use of Shareholder Resources For Political Purposes
The pharmaceutical industry, and Merck in particular, spend significant financial and other resources to support political candidates and political entities.
Between January 1, 1991 and December 31, 2002 the Pharmaceutical Research and Manufacturers Association and its members gave $57.9 million in political contributions, including more than $35.5 million in soft money donations to the national political parties and more than $22.4 million in Political Action Committee (PAC) donations to federal candidates. (Follow the Dollar Report, July 1, 2003, Common Cause)
In 1999-2000 members of the Citizens for a Better Medicare, which included Merck and several other pharmaceutical companies, contributed $20 million to federal candidates and parties. (Lobbies Force a Bitter Pill, Vikki Kratz, Newsday, pg. B4, 4 August 2002)
In New Jersey alone pharmaceutical companies gave $1.9 million to state elected officials, candidate and political party organizations over the past four years. Merck ranked third on this list of contributors, following Scherling-Plough and Pfizer, but ahead of Johnson & Johnson. (Citizen Action report cited in Drug Makers Gave $1.9 Million to N.J. Politicians in 4 Years, Lewis Krauskopf, The Record (Bergen County, NJ., pg B3, September 24, 2003)
These political contributions are made with dollars that belong to the shareholders as a group and they are entitled to know how their funds are being spent.
Although there are various disclosure requirements for political contributions they are difficult for shareholders to access and they are not complete. For example, corporate soft money contributions are currently legal in 49 states, but the disclosure standards can vary. Also, while corporations are not allowed to make direct contributions to candidates, they are allowed to fund the administrative support for PACs to which employees make contributions. Corporations can also make unlimited contributions to “Section 527” organizations political committees formed for the purpose of influencing elections, but not supporting or opposing specific candidates. These do not have to be reported.
Our company should be using its resources to win in the marketplace through superior products and services to its customers, not because it has superior access to political leaders. Political power can change, leaving companies relying on this strategy vulnerable. In addition public backlash can harm a company’s reputation and, as a result, its longer term business prospects.
Resolved: Shareholders request that the Board of Directors adopt a policy to report annually to shareholders in a separate report on corporate resources devoted to supporting political entities or candidates on both state and federal levels. We suggest that the requested comprehensive report set forth and quantify, specifically and not in aggregate, company resources devoted to supporting political entities and candidates, to supporting third-party organizations which engage in political activity including section 527 organizations, and related expenditures of money and other resources.