Public companies’ duties are changing. Where once directors’ collective gaze was only trained on the bottom line, boards are now under pressure to act as moral exemplars for their employees, customers and the wider world.
To the cynic, much of this reduces to posturing. But regardless of authenticity, it can still be hard to divide moral positions from political ones when companies do what they believe is right. At a certain point, a big question arrives: should companies influence the electoral process through political donations?
The answer, one hesitatingly assumes is the social consensus, is "no". In a democratic system, political parties are meant to represent citizens over raw financial power. Converting cash flow into political influence feels like a road to ruin.
Is this fair? After all, trade unions - which represent another partisan form of economic power - are free to donate, and often see it as part of their function to give money in support of workers' interests. In the UK, these tributes have historically gone to the Labour party. Many businesses give money, too, though largely to the Conservatives.
Nonetheless, shareholders should consider their own moral stance on the matter.
English law isn’t opposed, it’s worth noting. Current legislation places no limits on the amount that UK-registered companies can donate, only that permission to do so must be authorised by company members via a resolution every four years.
Grey areas of course exist. At their recent AGM, shareholders in Arrow Global (ARW) authorised political donations even though directors have no intention to make them. The issue, the debt specialist says, is the broad drafting of legislation, which means donations to politically-connected bodies could be construed as political.
A clearer test case presents itself in City grandee Arbuthnot Banking Group (ARBB), which last year asked investors to agree to up to £250,000 in political donations over four years. For reference, consensus forecasts are for net income of £2.3m in 2021.
This followed a donation of £77,000 to the Conservatives in 2019, “in view of the significant adverse impact that a Labour government would have had on the group's clients and business”. Arbuthnot believes shareholders’ needs are best met by “the flexibility to make political donations in accordance with the Companies Act 2016 [sic], in light of prevailing political circumstances over the next few years”.
Two sidebars here. One, unless Arbuthnot is referring to Malaysian law, it probably means the 2006 Companies Act; two, this same board includes nominative determinist Nigel Boardman, the lawyer appointed to chair the inquiry into the Greensill lobbying scandal.
The bank did not put anyone forward to provide more detail on the policy, though it plainly mirrors the track record of executive chairman Sir Henry Angest, a former Conservative party treasurer and long-time personal donor. As majority shareholder, he holds a large sway over the company’s use of funds, though interestingly less than half of external investors backed the four-year resolution.
They aren’t the only ones against company political donations. This week, I asked CMC Markets (CMCX) chief executive Lord Cruddas – who personally gave £500,000 to the Tories after Boris Johnson controversially waved through his appointment to the House of Lords – whether he would ask his company to follow suit.
“I don’t think we made donations even when we were a private company,” he said. “It’s down to personal individuals, and I wouldn’t dream of asking the board to make a political donation.”
