AO 2010-12: Payroll deduction from directors’ compensation for voluntary SSF contributions

Because Procter & Gamble Company (P&G) directors are compensated on a salary rather than hourly basis, they are considered part of P&G’s restricted class, and thus eligible to be solicited by the corporation’s separate segregated fund (SSF). P&G may extend its payroll deduction program to include the deduction of pre-authorized SSF contributions from board members’ quarterly retainer payments. 

Background 

P&G operates a corporate payroll deduction system for its SSF, the Procter & Gamble Company Good Government Committee (P&G PAC). Employees in P&G’s restricted class may elect to contribute to P&G PAC by pre-authorizing periodic deductions from their salary payments. P&G would like to extend the payroll deduction program to the members of its board of directors who are not full-time P&G employees, but who receive a salary of quarterly retainer payments from P&G as compensation for their board service. Under P&G’s plan, P&G PAC would send a written solicitation to the director informing him or her of the choice to have P&G automatically deduct a portion of each quarterly retainer payment as a contribution to P&G PAC. Directors wishing to participate would return a signed authorization form. 

Analysis 

The basic question asked was whether P&G, with prior authorization from a P&G board member, may deduct a contribution to P&G PAC from the board member’s quarterly retainer payments. Under the Federal Election Campaign Act (the Act) and Commission regulations, corporations are prohibited from making contributions in connection with federal elections and are generally prohibited from facilitating the making of contributions. 11 CFR 114.2(b)(1) and 114.2(f)(1). However, a corporation’s use of general treasury funds to establish and administer its SSF and to solicit contributions to the SSF from the corporation’s restricted class is not a contribution and does not facilitate the making of a contribution. 11 CFR 114.1(a)(2)(ii); 114.5(b)(1). The restricted class includes the corporation’s executive and administrative personnel, stockholders and the family members of each. 11 CFR 114.5(g)(1). The “executive and administrative personnel” are employees who are paid on a salary rather than hourly basis and who have policymaking, managerial, professional or supervisory responsibilities. 11 CFR 114.1(c). Members of a corporation’s board of directors are not automatically considered members of the corporation’s restricted class. 11 CFR 114.5(g)(1) and 114.1(c) (1)-(3); AO 2000-10. “[A] director must be paid a salary or stipend in order to be solicited (assuming the director is not otherwise solicitable as a stockholder or as an executive employee of the corporation).” AO 2000-10. 

In this case, the Commission concluded that since P&G pays the directors quarterly retainers on a salary rather than hourly basis, the directors are members of P&G’s restricted class and may be solicited by P&G PAC. 

Commission regulations provide that facilitating the making of contributions does not include “[e] nrolling members of a corporation’s . . . restricted class in a payroll deduction or check-off system which deducts contributions from dividend or payroll checks to make contributions” to the corporation’s SSF. See 11 CFR 114.2(f)(4)(i). The Commission has issued a number of advisory opinions approving corporate payroll deduction or checkoff plans. See, e.g., AOs 2001-04 and 1999-03. It has also approved other similar arrangements. See AOs 2009-31 and 1999-06. 

The Commission determined that P&G’s proposal to provide for preauthorized deductions from board members’ quarterly retainer payments is analogous to such previous proposals and is thus permissible under the Act and Commission regulations. The Commission conditioned its approval upon P&G’s compliance with the voluntariness requirements of 11 CFR 114.5(a), including the right of contributors to revoke their authorizations or to modify their contribution amounts at any time. In addition, P&G may not forward any contributions to P&G PAC until the quarterly retainer payments are paid to the contributors. This is to avoid advancing corporate funds, which is prohibited by 2 U.S.C. § 441b(a). 11 CFR 114.1(a)(1). 

AO 2010-12: Date issued: August 13, 2010; Length: 4 pages