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December 20, 2012


DiNapoli Leads Coalition Demanding Aetna Disclose Political Spending

Action Follows Accidental Disclosure of Millions Given in Political Donations

Citing reputational risks and a need for greater transparency in how shareholder dollars are being spent, New York State Comptroller Thomas P. DiNapoli announced that he has filed a shareholder resolution with Aetna Incorporated to adopt a policy to publicly disclose all of its direct and indirect political expenditures. The Comptroller’s resolution was co-filed by global asset manager F&C Management Ltd. In a related effort, a group of institutional investors led by the Unitarian Universalist Association (UUA) filed a separate resolution urging the company to seek greater board involvement and oversight over political spending.

“It is past time for Aetna to fully disclose its political and lobbying donations,” DiNapoli said. “The company has engaged in controversial political giving that has harmed its reputation and potentially hurt shareholder value. Full disclosure of Aetna’s political donations made with shareholder money is the only rational way for shareholders to assess the risks that funding partisan political donations poses to the bottom line.”

The resolutions filed earlier this month by DiNapoli and the coalition are the first filed at Aetna since the company inadvertently disclosed $7 million in donations to the American Action Network (AAN) and the U.S. Chamber of Commerce, both tax-exempt non-profit organizations. The accidental release of the supposedly confidential information on the company’s 2011 lobbying activities to the National Association of Insurance Commissioners (NAIC) attracted intense criticism from shareholders and campaign finance watchdogs, despite the company’s efforts to quickly amend the filing to exclude the payments.

The AAN, headed by former Minnesota Senator Norm Coleman, conducts high profile public advocacy campaigns in support of, and in opposition to, candidates for political office. The apparent magnitude of AAN’s political activities has prompted formal complaints to the Internal Revenue Service and the Federal Election Commission challenging the organization’s tax-exempt status and citing the organization’s alleged failure to disclose the political nature of its advocacy.

While excluding the AAN payment, Aetna did report in August a $4 million gift to the U.S. Chamber of Commerce earmarked for the business group’s voter education initiatives, although it remains unclear what types of activities would qualify as “voter education.”

Prior to the company’s August report, DiNapoli and a larger coalition of institutional investors wrote to Aetna’s board audit committee to urge the company to expand its public disclosure of political and lobbying payments, including all payments made indirectly through trade associations and other tax-exempt organizations such as the AAN and the U.S. Chamber.

Despite a public plea and a dialogue with the company that continued through the fall, Aetna still will not commit to making the disclosures requested by the coalition.

“We publicly called on Aetna in August to clarify how its contributions to the U.S. Chamber for ‘voter education’ further the long-term business interests of the company, its shareholders and its customers, and the company has yet to do so. We know even less about the AAN contribution,” said Tim Brennan, Treasurer and Chief Financial Officer of the Unitarian Universalist Association. “The lack of transparency around these payments further underscores that political and lobbying activities are a minefield of reputational risk for companies and must be monitored closely by the board of directors. Shareholders need to know how our Aetna directors are overseeing these risks.”

The New York State Common Retirement Fund’s (Fund’s) shareholder resolution asks the board of directors to amend Aetna’s political contributions policy to disclose all direct and indirect payments made to tax-exempt organizations it believes were used for a political purpose. This includes lobbying at any level of government, participation in a political campaign to influence the general public, directing communications to the public to influence legislation, or drafting and endorsing model legislation.

The UUA-led investor group’s resolution is co-sponsored by the UAW Retiree Medical Benefits Trust, the Illinois State Board of Investment, Marco Consulting Group Trust I and Mercy Investment Services. It seeks to tighten board oversight of Aetna’s political expenditures and how the company discloses those expenditures. It also asks the board audit committee, which is currently responsible for overseeing political and lobbying expenditures, to analyze and report on the risks associated with Aetna’s political activities. Lastly, it asks the board to establish criteria for analyzing whether payments to politically active intermediaries such as trade associations and so-called social welfare organizations are used for political purposes, and if so, to report on the business rationale for each payment.

DiNapoli’s filing is the first of several shareholder resolutions that the Fund will sponsor in the coming year on the topic of disclosure of political spending. In 2012, the Fund reached agreement with seven companies to disclose political spending: CSX Corporation, PG&E Corporation, R.R Donnelly and Sons, Reynolds American Incorporated, Sempra Energy, Safeway Incorporated, and Kroger Corporation. The Fund also brought nine political spending resolutions to a vote, receiving record levels of support on several.

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