Shareholder Protection Act

The Story of Stuff people did a great job of creating a video about Citizens United, asking for a Constitutional Amendment limiting corporate influence…very ambitious but unlikely to provide a solution anytime soon.

The SEC ruled that shareowner proposals calling for approval of political spending must be included on the company’s proxy card and put to a shareholder vote. However, there are thousands of corporations and tackling them one at a time will also take many years.

Bills introduced last week in both the House and Senate attempt to address Citizens United more globally than one corporation at a time. The Shareholder Protection Act would mandate extensive disclosure, a role for independent directors, and shareowner approval.

  • First, the Shareholder Protection Act would require companies to disclose to shareholders each year both the amounts and recipients of the company’s spending on politics. According to Lucian A. Bebchuk and Robert J. Jackson, Jr., the SEC currently has the authority to require disclosures of this type. They urge the SEC to develop rules that would require that shareholders be given information on corporate political spending.
  • Second, the Act would require oversight of political spending by the board of directors of amounts over $50,000. Individual board member votes and the details of approved expenditures will be disclosed online within 48 hours and to shareowners and the SEC on quarterly basis. Bebchuk and Jackson also favor requiring directors to provide shareholders, in each year’s proxy statement, with a report explaining their choices and policies concerning the company’s spending on politics.
  • Third, an affirmative vote by shareowners would be required to approve the amount of any corporate spending on politics. Bebchuk and Jackson would give shareowners both a say on the overall level of spending and the power to adopt bylaws governing how this spending will be distributed. Giving shareowners veto over the budget for political spending, without any say over the targets of that spending, may unnecessarily limit choices between no spending at all or endorsing management preferences that don’t align with those of shareowners.

More information at Colbert’s Knock Knock Joke is Funny Because It’s True….Unless (The Corporate Library, 7/15/2011), The Re-Introduction of the Shareholder Protection Act, (HLSFCG&FR, 7/14/2011), 11 Reasons Why We Need the Shareholder Protection Act, Business Ethics, 7/13/2011, and Contact Congress via Public Citizens.

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