Most comments on the January 21 US Supreme Court decision in Citizens United v. Federal Election Commission (1) have focused on the effects of direct contributions by corporations to candidates. Are such contributions invitations to corruption, or exercises of protected speech by persons associated in corporations?

But for those concerned about corporate governance or corporate accountability in any of its forms, Citizens United has a context and implications that go well beyond elections and freedom of speech. These challenge fundamentally the notion of corporate social responsibility (CSR) and socially responsible investing (SRI).

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In the aftermath of the global financial crisis, many investors have grown concerned about standards of corporate governance. In fall of 2009, the European Commission released a study of corporate governance monitoring and enforcement practices in its member states. The study was undertaken by RiskMetrics Group in collaboration with BusinessEurope, ecoDA and their affiliates, and Landwell & Associates and their affiliates.

In most EU states, national governance codes set rules with which corporations must comply, or else explain why they have not complied. The RiskMetrics study found support for “comply-or-explain” regimes, but also found “some deficiencies,” including “unsatisfactory level and quantity of information on deviations by companies and a low level of shareholder monitoring.”

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On October 2, The Motley Fool surveyed the proposed Shareholder Bill of Rights Act. For the benefit of the site’s audience of retail investors, Alex Dumortier wrote “Let’s Reform Say-on-Pay,” a helpful primer on the Act’s requirement that firms submit their executive compensation practices to a non-binding proxy vote.

Say on pay (SOP) has gained public attention through a sustained effort by some institutional investors. Major companies – including, recently, Microsoft – have accepted SOP provisions championed by Walden Asset Management and Calvert, among other firms and investor groups. These shareholders’ efforts have helped convince the Obama Administration and key Congressional leaders to include say on pay in their reform proposals.

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“Vote early, vote often,” was a cynical dictum for old-time, big-city machine politics. Unfortunately, according to a recent release from Boston Common Asset Management (BCAM), modern proxy voting is also subject to shenanigans.

A recent “say on pay” proposal at Waddell & Reed Financial received majority support, according to BCAM, but the company reported to the SEC that the proposal only received 48.5% of the vote. “This raises questions about the integrity of the proxy voting process, and the lengths a company will go to close out shareholder input,” BCAM’s Dawn Wolfe wrote to the Social Investment Forum (SIF) listserv.

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A coalition of investors and advocates has called on Congress to regulate corporate pay practices – especially at banks. In a July 31 letter, ShareOwners.org, Americans for Financial Reform (AFR) and the Social Investment Forum (SIF) expressed support for a House bill to give shareowners “a ‘say on pay’ for top executives,” and also compel financial firms to “disclose any compensation structures that include incentive-based elements.”

The groups’ focus on incentives comes from a bit of conventional wisdom on the causes of the financial crisis: Pay practices at financial firms encouraged executives to look out for themselves, rather than shareholders. ShareOwners.org conducted a poll which found that “the No. 1” threat to investors’ faith in the markets is “overpaid CEOs and/or unresponsive management and boards.”

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Executive pay practices have recently drawn scrutiny from both Congress and the Obama Administration. Last week, Nell Minow of The Corporate Library testified before the US Committee on Financial Services on “Compensation Structure and Systemic Risk.”

In her June 11 testimony, as in her previous work, Ms. Minow emphasized that boards of directors bear ultimate responsibility for corporate pay practices. While many sustainable/socially responsible investors (SRI) welcome “say-on-pay,” she spoke frankly about the limits of this and other tactical reforms:

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As noted by Robert Kropp at Social Funds, 2009 is witnessing a dramatic increase in “say on pay” shareholder resolutions. He gives some credit for this to “public outrage” over executive compensation levels during a worldwide recession. Shareholder engagement is also driven by sustainable and socially responsible investment (SRI) advocates, who help investors work together to achieve common goals.

Green America (formerly Co-op America) recently launched a “proxy education center” for shareholders. With support from Ceres, the AFL-CIO, and the Interfaith Center for Corporate Responsibility, the site offers guidance on proposed resolutions in four topic areas at 23 major companies.

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Executive compensation practices have recently drawn attention from both the public and the government. Bailed-out insurer AIG depends on taxpayers for its survival, yet it has chosen to spend millions on retention bonuses.

Why are struggling companies – including the bailed-out, and even the bankrupt – rewarding some employees? “Greed” is a popular answer, but an insufficient explanation. In a March 20 column at CNN.com, The Corporate Library’s Nell Minow argues that compensation practices are symptoms of a broader corporate governance crisis.

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The Social Investment Forum has posted a list of thoughtful answers to the “Top 10 Questions about SRI.” I especially like SIF’s responses to some skeptical questions about our industry, such as:

Is the performance of SRI funds competitive with mainstream funds and with their benchmarks?

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