Some of Canada's biggest corporations are making sizable political contributions in the United States through their American subsidiaries, wading into a fierce debate about corporate money flooding into the U.S. electoral process.
As a result of a 2010 U.S. Supreme Court decision, corporations are free to spend lavishly on U.S. elections, and Canadian companies have joined that effort, with several maintaining their own political action committees, or PACs, to funnel contributions from employees directly to candidates or political parties.
Companies such as TransCanada Corp., Encana Corp., Barrick Gold Corp., the Royal Bank of Canada and Power Corp. of Canada are actively engaged in political financing and lobbying at the federal and state level, records show.
That Canadian participation in the U.S. political process raises some troubling questions about transparency and the appropriate role for corporations in a democratic system, says a report to be released Wednesday by Shareholder Association for Research & Education (SHARE), a Toronto-based group that works with institutional investors.
"Without knowing the extent of political spending authorized by managers – including spending on lobbying and contributions to third-party organizations that engage in political advocacy – shareholders have no way of evaluating the risks or returns from that spending," said the report by Kevin Thomas, SHARE's director of shareholder engagement.
Under U.S. law, companies can form PACs to raise money for political parties and candidates, but all contributions to the PAC must come from individuals and there are limits on donations and spending. Since 2010, companies can also set up so-called SuperPACS to raise money to fund advocacy for the election or defeat of a candidate. SuperPACs have no limits on spending and no requirement that only individuals donate.
It's impossible to know how much Canadian companies are spending in total on U.S. political activity because there are several avenues where financing goes unreported. Contributions from political action committees controlled by American subsidiaries of 21 large Canadian companies totalled $1.2-million (U.S.) in the first eight months of 2014, a number that is expected to have risen substantially as November's midterm elections approached.
In the first nine months of this year, 25 Canadian firms spent $15-million on direct lobbying in Washington, according to the SHARE report. And that does not include contributions to trade organizations that lobby on their behalf, or the use of unregistered experts who skirt the formal lobbying requirements.
In an interview, Mr. Thomas said his group is not taking a position on the legitimacy of that political activity, only that shareholders have a right to be informed about it. In the U.S. this year, shareholders have filed proposals calling for political spending disclosure at 135 corporations, obtaining an average vote of 30 per cent. SHARE is hoping to spark similar demands in Canada.
But companies – especially foreign ones – need to be wary about appearing to support unpopular causes, said Michael Kang, an expert in electoral law at Atlanta's Emory University.
"All companies are concerned about reputation risk, but for foreign companies the stakes are greater," Mr. Kang said. "There's a great sensitivity among Americans about foreign influence."
Canadian-owned firms participate in U.S. politics in a number of ways: through direct lobbying; through membership in trade associations such as the American Petroleum Institute or the U.S. Chamber of Commerce; through their own political action committees, SuperPACs and other non-profit groups, which can conceal the identity of donors.
A Barrick Gold spokesman said the gold miner has had a PAC since 1996, and follows all laws and regulations. He noted the PAC – which contributed $106,300 to campaigns in the first eight months of this year – is financed by employee contributions, not shareholder money.
Canadian National Railway Co.-owned Grand Trunk West-Illinois Central also has a PAC, and a CNR spokesman said employee contributions are voluntary and only U.S. citizens can participate in decision-making.TransCanada – which is battling to win approval for its proposed Keystone XL pipeline – has spent more than $1-million in direct lobbying in Washington, while CNR – which is facing new regulations on crude-carrying tanker cars – allocated $2.9-million. And that is just on the direct lobbying effort that must be reported.
TransCanada has also faced criticism for its support of the American Legislative Exchange Council (ALEC), which works with state legislators to promote market-friendly policies, including attacks on President Barack Obama's climate and environmental policies.
A spokesman said TransCanada's American subsidiaries participate in the political process like any U.S. corporation.
"No single political party has a monopoly on an idea, which is why we support hundreds of organizations across North America, including those that work with both Democratic and Republican elected officials," TransCanada's Mark Cooper said in an e-mailed statement. "We are happy to speak to groups on both sides of the energy debate and we do. It's important to have a thorough understanding of issues so that good policies and decisions can benefit North Americans."
Mr. Cooper said TransCanada sponsored ALEC events where lawmakers were present but it is not a member. The company works "with people on both sides of the political aisle," he said.