Tuesday, May 29, 2012

House Leaders Urge SEC to Adopt Regulations Requiring Disclosure of Corporate Spending in Elections

In a letter to the SEC, Rep. Michael Capuano (D-MA) asked the Commission to adopt regulations requiring disclosure of corporate spending in elections. Similarly, he urged the SEC to require a vote from company shareholders before that corporation may use its general treasury funds for political spending. The House Member noted that the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission changed the face of campaign finance for elections by authorizing, for the first time, unlimited  political spending by corporations, which the Supreme Court understands to fall under the definition of person. Rep. Capuano is the Ranking Member on the House Oversight and Investigations Subcommittee.

While the FEC undoubtedly has jurisdiction over election matters, he noted, the SEC has the authority to  promulgate rules regarding the  procedures through which companies spend  their treasury funds, which, after all, is shareholders' money, for political purposes,  as well  as disclosure of  that spending as material information to shareholders.  Since the Citizens United decision, said Rep. Capuano, shareholders have shown a marked interest in participating in  political spending decisions and have submitted numerous proposals to include robust political spending disclosures in proxy statements.

Rep. Capuano has introduced legislation requiring the SEC to implement through regulation a shareholder vote authorizing corporate political spending. Under the process set up in H.R. 2517, the Shareholder Protection Act, shareholders would vote annually to authorize a political spending budget, at an amount set by the corporation, by majority vote.  The corporation would then disclose to shareholders and the SEC, via existing reports and on the Internet, the amounts spent and for what purposes.  While the Shareholder Protection Act could serve as a model for the SEC, Representative Capuano is open to other approaches that would accomplish the same goals.

He emphasized that shareholders have the right to decide if their money is spent for political purposes and to be notified of its specific use. Since the SEC clearly has the authority to enforce such accountability and disclosure, he urged the Commission to act to protect shareholders by requiring a shareholder "say" on political spending and ensuring proper disclosure.

In a letter to the Commission last October, a consortium of over 40 House Members, including Rep. Carolyn Maloney (D-NY), urged the SEC to use its authority to issue rules requiring full public release of corporate political spending. Describing the present system as undemocratic and untenable, the Members said that the Citizens United ruling has left shareholders completely in the dark, unaware that their money could be funding political attack ads. In order to protect the rights of shareholders, said the Members, the SEC should adopt regulations requiring corporations to disclose their political spending to shareholders. Shareholders cannot hold corporate management accountable for decisions the shareholders never knew were made, reasoned the Members. Rep. Maloney is the Ranking Member on the House Financial Institutions Subcommittee.

Requiring disclosures of corporate political spending does not have to be overly burdensome on business, explained the Members, since the SEC can use existing mediums of shareholder communication to facilitate disclosure, including proxy statements, quarterly and annual reports, and registration statements.  Further, in order to ensure that shareholders are informed of all political spending, the disclosures should include spending on independent expenditures, electioneering communications, and donations to outside groups for political purposes, such as super-PACs.