Thursday, April 23, 2015

State Treasurers Ask SEC to Bring Dark Money Spending Into the Light

By John Filar Atwood

Five state treasurers have written to the SEC asking it to adopt a rule to require all publicly traded companies to disclose their political spending. The treasurers of Oregon, North Carolina, Rhode Island, Washington and Vermont represent funds with more than $300 billion in assets under management, and believe the requested rule would help them ensure that those assets are invested responsibly.

2014 elections. In the letter, the treasurers cited statistics from the Center for Responsive Politics indicating a jump in anonymous, or dark money, spending from $135 million to $170 million between the 2010 and 2014 mid-term elections. According to the treasurers, that amount is expected to increase significantly in the 2016 election. Too many companies are able cloak donations behind anonymous 501(c)(4) groups and other intermediaries, they said, and a comprehensive system of disclosure is needed.

A petition to add political spending to the list of information available to shareholders was filed in 2011, and the SEC has received more than one million comments on it. Also underscoring the importance of the issue, they claimed, is the fact that one of the top shareholder proposals to U.S. companies over the past three years has been disclosure of political and lobbying activities.

Positive trend. The treasurers acknowledged a trend toward greater accountability in this area. In addition to successful shareholder activism, many companies have voluntarily agreed to disclose political spending, they noted. They pointed to a recent survey of the top 300 companies in the S&P 500 which found that 61 percent of companies disclose direct political spending and 43 percent disclose payments made to trade associations that engage in political spending.

The treasurers asked the SEC to recognize the shift toward greater disclosure, and to create a uniform structure for that disclosure under a new rule. In a press release, North Carolina Treasurer Janet Cowell urged the SEC to adopt the rule so that investors can hold directors accountable when they choose to spend shareholder resources for political purposes. The integrity of the financial system depends on shareholders being able to evaluate the possible risks of their investment relative to its return, she concluded.

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