By Mark S. Nelson, J.D.
The Supreme Court’s Citizens United opinion has resulted a in persistent effort to require corporate disclosures of political spending although, so far, those efforts have not produced enacted legislation or SEC rules. Representative Salud Carbajal (D-Cal) is the author of the latest attempt to bring transparency to how companies spend company funds on political activities with his reintroduction of the Corporate Political Disclosure Act of 2019 (H.R. 1053).
Uniformity in reporting. “For years, Congressional Republicans have blocked the SEC from shining a light on the political contributions that shareholder funds are supporting. That must change,” said Rep. Carbajal. “The voices of Central Coast residents and small businesses shouldn’t be drowned out by billions of dollars in secret political advertising backed by corporations that place making a profit above the public interest.”
The text of the reintroduced bill was unavailable as of publication, but the prior version of the bill introduced in the 115th Congress (H.R. 5670) would require the SEC to adopt rules to mandate disclosure of a company’s political activities during the previous year in its annual report and on its Internet website, which must be accessible to shareholders and the public. According to Rep. Carbajal, the goal of the bill is to establish a “uniform reporting requirement.” The representative also cited a study indicating that more than half of the S&P 500 companies have already made some political spending disclosures in response to shareholders’ concerns.
Other legislation. Currently, the SEC is barred from mandating public company disclosures about political spending under provisions that have been part of appropriations bills, including recent efforts to reopen the federal government. However, Sen. Elizabeth Warren’s (D-Mass) Accountable Capitalism Act from the 115th Congress would have required super majority approval of political donations by boards and shareholders. The signature government ethics bill introduced by the Democratic majority in the House in the 116th Congress (Rep. Carbajal is one of 227 co-sponsors, all Democrats) would lift the ban on SEC rules for public company political donations although, as drafted, the removal of the ban would apply only for FY 2019. Lawmakers are now working on a larger appropriations package to keep the federal government open for the remainder of FY 2019 after temporary funding expires in Mid-February and it remains to be seen if a similar provision banning SEC rules on political spending disclosures will be retained.
More recently, questions about companies’ political spending and institutional investors have arisen. These concerns, for example, have been taking up by Rep. Jamie Raskin (D-Md), who recently introduced the Shareholders United Act of 2019 (H.R. 936), and by Delaware Chief Justice Leo Strine, who recently expressed his views in a paper.
Within in the SEC, Commissioner Robert Jackson has been the most outspoken in favor of additional disclosures, especially before joining the Commission. Disclosure of companies’ political spending habits has been a controversial topic at both the SEC and in past Senate confirmation hearings for SEC nominees because of the Commission’s lack of action (partly due to Congressional appropriations measures limiting the agency’s ability to issue rules) despite millions of public comments received on several rulemaking petitions. Jackson, for example, signed a petition in 2011 urging the Commission to issue political disclosure rules.