Support Grows for Transparency in Corporate Political Spending

A group of 43 House Democrats is urged the SEC to require public companies to disclose their political contributions. The Council of Institutional Investors also sent a comment letter on a petition (File Number 4-637) filed by prominent law professors.

Rep. Gary Ackerman (D., N.Y.) and 42 other House colleague argue the high court’s ruling in the case, Citizens United v. Federal Election Commission, was “misguided” and left shareholders “completely in the dark, unaware that their money could be funding political attack ads.”

Shareholders cannot hold corporate management accountable for decisions the shareholders never knew were made. The present system is undemocratic and untenable.

Shortly after the decision, Rep. Gary Ackerman (D-NY) introduced the Corporate Politics Transparency Act, which would require corporations to disclose their political spending to shareholders. The measure, H.R. 2728, was reintroduced in August, but has stalled in the House Financial Services Committee.

The letter comes about three months after a group of ten very prominent corporate and securities law experts submitted a formal rulemaking petition to the SEC. (House Democrats Urge SEC To Require Disclosure of Campaign Donations, WSJ, 10/20/2011)

The letter from CII included the following position statement:

The Council is not in principle opposed to corporate political spending provided it is transparent—both in terms of the amount spent and the process for board oversight of such spending. Any future rulemaking would ideally address both of these areas.

The petition presented data indicating that public investors have become increasingly interested in receiving information about corporate political spending. For example, “as early as 2006, polls indicated that 85% of shareholders held the view that there is a lack of transparency surrounding corporate political activity.”

“During the 2011 proxy season, out of the 465 shareholder proposals appearing on public-company proxy statements, 50 proposals were related to political spending, and more proposals of this type were included in proxy statements than any other type of proposal.” A large number of public companies have already voluntarily changed their disclosure practices to provide such information to shareowners, including 60% of the S&P 100.

The law professors stressed that the Supreme Court’s ruling in Citizen’s United assumed shareholders would be able to monitor the use of corporate resources on political activities.

Specifically, the decision allows companies to donate to outside political groups directly from their corporate treasuries, rather than through political action committees funded by employee contributions.

An SEC spokesman declined to comment on the proposal before the agency has a chance to respond to the letter.

The petition discusses the following specific elements:

  • First, we expect that the Commission will be required to determine whether certain de minimis corporate spending on political activity should be exempt from disclosure. We encourage the Commission to adopt such a de minimis exception. We note, however, that the symbolic significance of corporate spending on politics suggests setting an appropriately low threshold. The Commission’s existing rules, such as its rules concerning disclosure of compensation and of related-party transactions, may offer a sound starting point for the development of such an exception.
  • Second, the Commission will likely be required to determine how often public companies should be required to disclose corporate spending on politics to shareholders. Highly frequent reporting would be disruptive and costly for many companies, and the Commission should, where possible, use existing disclosure mechanisms to minimize the costs of the rule. Thus, although the exact design of the proposed rules is beyond the scope of this petition, we encourage the Commission to use the existing proxy-disclosure regime as the method for providing investors with this information.
  • Third, we expect that the Commission will determine the types of political spending subject to disclosure. In particular, the Commission may consider whether contributions that are restricted from political use will be subject to these rules. On the other hand, there are cases, such as corporate contributions to intermediaries that spend a large fraction of their funds on politics, for which inclusion within the scope of the Commission’s rules seems warranted. To address less obvious cases, the Commission may wish to adopt criteria for determining the types of spending subject to disclosure. Overall, the Commission should delineate the scope of the expenditures subject to disclosure to address potential problems of over- or under-inclusion.

Please send e-mails in support of the petition to The public is encouraged to submit comments on proposed rules. Here your options.

All submissions should refer to File Number 4-637. This file number should be included on the subject line if e-mail is used and that is the method I recommend. To avoid duplication or work at the SEC, use only one method. The Commission will post all comments on petitions on the Commission’s Internet website. Comments are also available in the Commission’s Public Reference Room, 100 F Street, NE, Washington, DC, 20549, on official business days between the hours of 10:00 am and 3:00 pm.

Your petition can say something as simple as the following:

Ms. Elizabeth M. Murphy, Secretary
Securities and Exchange Commission
100 F Street, Northeast
Washington, D.C. 20549
Re: File Number 4-637.

Dear Ms. Murphy:

I am an individual investor concerned with how the corporations I invest in are spending corporate funds on political activities. I write in support of a petition by the Committee on Disclosure of Corporate Political Spending, File Number 4-637. In Citizens United v. FEC the US Supreme Court noted that shareowners could “determine whether their corporation’s political speech advances the corporation’s interest in making profits” and could discipline directors and executives who use corporate resources inconsistently with shareowner interests.

However, unless shareowners can easily access information about a company’s political speech and expenditures we will be unable to know whether such speech “advances the corporation’s interest in making profits” and will be unable to discipline directors and executives. The rulemaking sought by the petitioners would address that issue by giving shareowners the information we need to hold the managers and directors of our companies accountable.


For more background information, see Corporate Political Spending Will be a Major Issue in 2012 ( Shareowner, 8/4/2011) Much of the effort on behalf of increased corporate transparency has been spearheaded by the Center for Political Accountability (CPA), whose model resolution formed the basis for most of the proposal and voluntary disclosures, including disclosure of payments to trade associations such as the US Chamber of Commerce. Bruce Freed, president of CPA, told,

Citizens United has made the issue of independent expenditures, either directly or indirectly, an important one for companies. We’re heavily involved in planning for the 2012 proxy season. There will be a significant number of companies engaged…

Last year, CPA and The Conference Board co-authored a Handbook on Corporate Political Activity. The Conference Board also established a committee of Fortune 500 companies “to develop a set of ‘prevailing practices’ that take into consideration the risks and opportunities of political-spending decisions,” according to a press release. In addition to submitting a report on corporate political spending, the Committee will maintain a website where resources on the issues can be accessed. Gary Larkin also put up a post offering good advice to corporate boards at Corporate Political Spending Message: Boards Should Get Handle on Process.

Additionally, see and

In an era when special interests funnel huge amounts of money into our government—driven by shifts in campaign-finance rules and brought to new levels by the Supreme Court in Citizens United v. Federal Election Commission—trust in our government has reached an all-time low. More than ever before, Americans believe that money buys results in Congress, and that business interests wield control over our legislature.

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