SEC moves to shine a light on corporate political spending
A significant move by the Securities and Exchange Commission (SEC) takes aim at a glaring loophole in the Supreme Court’s ruling in Citizens United v. Federal Election Commission.
In response to overwhelming public pressure – including a record-breaking 322,000 comments — and efforts by the Corporate Reform Coalition the agency has added to its agenda a rule that would require all publicly traded companies to disclose political spending to their shareholders. The SEC plans to consider the rule in April 2013.
“By supporting this rule’s placement on its regulatory flexibility agenda, which in turn is now on the Office of Management and Budget’s Unified Agenda, the SEC has taken a critical step to protect investors and to address the flow of secret corporate political spending that has arisen since Citizens United,” Congress Watch Director Lisa Gilbert said at a tele-press conference on the rule.
The rule would eliminate the paths that corporations have used to hide money they spend to influence elections, like giving to “dark money” nonprofits and the U.S. Chamber of Commerce.
“It’s important to understand the CEOs across America enjoy unchecked authority to spend unlimited sums of other people’s money to influence elections,” Adam Kanzer of Domini Social Investment Funds said. “They funnel millions of dollars to a wide range of tax-exempt entities including trade associations and 527 organizations. In fact, every election cycle we’re dealing with a new provision in the tax code and new type or organization.”
The move would be a great victory for shareholders anxious to know how the money they’ve invested is being spent in politics. For many investors, including working families depending on 401(k) plans for retirement, information about how a company spends their money outside of the scope of normal business operations is an important part of knowing where to invest. Political spending disclosure is of particular significance when a company is involving itself in a controversial (and costly) issue of the day – controversy that could damage the company’s brand and, ultimately, its bottom line.
“As an institutional investor, we take a look at the decline in transparency, and it’s really scary for people who are putting money into publicly traded securities if you can’t account for how much money is being spent on politics and why,” Pennsylvania State Treasurer Rob McCord said. “As someone who has served on a variety of boards, I have seen rogue executives basically consuming with corporate dollars — using other people’s money — whether they’re consuming by flying corporate jets or using limousines, when they absolutely should not be, or they’re consuming by chasing their own politics for perverse ideological reasons.”
“As a shareholder, I’m acutely concerned,” he added.
The rule, requested in a petition to the SEC by ten leading law professors, has received an overwhelming amount of public support. More than 322,000 people have added supportive comments to the petition on the SEC’s website. Highlights from those comments include 42 members of the House of Representatives, 12 senators, five state treasurers, and Vanguard investment firm former CEO John Bogle.
Among the 42 members of Congress who support the SEC’s action is Rep. John Sarbanes (D-Md.). “One of the protests you will hear from some of those that oppose this rule is that this isn’t good for the investor community. The clamor for this is coming not just from ordinary people out there, but it’s coming from ordinary investors who want to see this kind of disclosure put in place,” he said. “This is exactly the moment that you want a regulatory agency like the SEC to step up and take action on mandatory disclosure.”
Outside of the confines of the Washington beltway support for a more open democracy and for the SEC’s rule is strong. In a recent national poll commissioned by the Corporate Reform Coalition 75 percent of respondents said they would sign the petition calling on the SEC to make corporate political spending transparent. The poll also found that eight out of ten Americans think corporations should only spend on politics if they disclose their spending immediately. Going one step further, 80 percent of those polled said corporations should only spend in politics if they receive prior approval from their shareholders.
“What I’m hearing as I move around my district is that people are really outraged right now at the dominant influence big money is having on our policy,” said Rep. Sarbanes. “It’s having a huge impact on the way we govern and on our elections.”
Treasurer McCord added, “People reverse engineer their entire campaigns to please a handful of players, who can put them in play. It’s the kind of thing that shareholders should worry about and citizens who care about the government should worry about.”
The SEC’s proposed rulemaking is a huge step toward accountability and big victory for America’s shareholders and voters. Investors, voters and elected officials alike have joined the chorus for the SEC to move quickly and decisively to shine a light on corporate political spending in elections.
To urge the SEC to require disclosure of corporate political spending, visit citizen.org/sec-disclosure-action.
Kelly Ngo is the legislative assistant for Public Citizen’s Congress Watch. For more about the Corporate Reform Coalition, follow @CorporateReform on Twitter.