Will The SEC Finally Force Corporate Bribers To Disclose Political Spending?

Investors-- the owners of corporations-- have demanded for years that corporate managers disclose how they're spending corporate money politically... but to no avail. Now the Securities and Exchange Commission is working to force them to. Public Citizen is one of many good government reform groups applauding the decision.

In one of the last actions of departing SEC Chair Mary Schapiro’s term, the agency announced that it will consider a proposed rule to require that public companies provide disclosure to shareholders regarding the use of corporate resources for political activities. A petition requesting this rulemaking was filed in 2011 by a bipartisan committee of leading law professors.

... The SEC has a responsibility to protect investors by regulating the securities markets to ensure that they have the information they need to make investment decisions. Shareholders have a right to know how the companies in their investment portfolio are spending their invested money, especially where these actions are outside the scope of normal business activities, or where the interests of shareholders and management may diverge. This is particularly true with corporate political spending, where certain choices may diverge from a company’s stated values or policies, or may endanger the company’s brand by embroiling it in hot-button issues.

By putting this rule on its agenda, the SEC has responded in part to the Supreme Court’s ruling in Citizens United v. Federal Election Commission, which struck down laws restricting non-coordinated corporate spending to influence elections. In Citizens United, Justice Anthony Kennedy emphasized the importance of disclosure and accountability for corporate political spending, writing that disclosure requirements “provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.”

Unfortunately, the current public reporting regime does not actually require disclosure of all relevant sources of corporate political spending, and post-Citizens United secret corporate political spending has been on the rise. Corporate funds are frequently funneled through third-party groups such as the U.S. Chamber of Commerce, which refuse to disclose the underlying donors who provide the financial resources for their political activities. The Chamber of Commerce was the single largest outside spender in the 2010 elections, and spent more than $36 million on the 2012 elections.

Americans across the political spectrum strongly support requiring transparency and accountability in corporate political spending. A record number of public comments-- more than 322,940 and counting-- have been filed with the SEC in support of the petition requesting a rule requiring disclosure of corporate political spending. These comments have come from such diverse sources as a large group of firms managing more than $690 billion in assets, the Maryland State Retirement Agency, U.S. Rep. Gary Ackerman (D-N.Y.) and 42 other members of the House, Sen. Robert Menendez (D-N.J.) and 12 other senators, John Bogle (former CEO of the Vanguard Group), five state treasurers, US SIF: The Forum for Sustainable and Responsible Investment, the Sustainable Investments Institute, and many more.

In a recent poll, eight out of 10 Americans (81%) believe that corporations should only spend money on political campaigns if they disclose their spending immediately (including 77 percent of Republicans and 88 percent of Democrats). Eighty-six percent of Americans agree that prompt disclosure of political spending would help voters, customers, and shareholders hold companies accountable for political behavior (support ranged from 83 percent to 92 percent across all political subgroups). Eighty one percent of Americans agree that the secret flow of corporate political spending is bad for democracy, and 84 percent agree that corporate political spending drowns out the voices of average Americans. Seventy-five percent of respondents said they would sign a petition to the SEC in support of corporate disclosure.

The Chamber of Commerce, needless to say, is leading an anti-democracy coalition to oppose the measure. The L.A. Times coverage explains why the Chamber is so opposed. Their thuggish power depends on secret cash that is used to threaten candidates who fight for working families.

The new rule would provide the fullest picture yet of how much corporations have become engaged in campaigns since the 2010 Supreme Court Citizens United ruling made it legal for them to spend unlimited sums on independent political activity.

In the 2012 campaign, federal “super PACs” reported receiving $42.4 million from corporations, most of them privately held, according to a tally by the Sunlight Foundation. But tax-exempt groups, which do not have to report their contributors, spent hundreds of millions of dollars more on election-related activity. It remains a mystery exactly how much money they raised-- and from whom.

...[T]he proposed rule is sharply opposed by the Chamber of Commerce and other business groups, which argue-- among other things-- that the SEC does not have the authority to issue such a broad regulation and that information about political spending is not material to a company’s bottom line.

“This rule-making petition is being pushed by groups who do not have the best interests of investors in mind,” said chamber spokeswoman Blair Latoff Holmes. “Instead, they are pushing for a rule because they ultimately want to drive the business community out of the political and public policy arena.”

...“People are really outraged right now with the dominance, the influence that big money is having on our politics,” said Rep. John Sarbanes (D- Md.). “They are looking to push back in a number of different ways.”

In recent months, officials in states such as California and New York have put new scrutiny on politically active nonprofits.

And last week, New York’s public pension fund filed a suit against the wireless company Qualcomm seeking information about its political spending. The New York public pension fund owns $378 million of Qualcomm stock, making it the company’s biggest public pension investor. The fund has spearheaded an effort to get the companies in which it invests to disclose their political spending, striking deals with 10 corporations so far.

Meanwhile, disclosure advocates on the Hill have renewed their efforts to pass legislation requiring politically active groups disclose their major donors. Rep. Chris Van Hollen (D-Md.), who reintroduced the DISCLOSE Act last week, said he is also exploring ways to limit candidate-specific super PACs that effectively serve as extensions of official campaigns.

“The public is on our side” when it comes to requiring more transparency, Van Hollen said in an interview Monday. “The challenge is elevating this issue to the point where we’re putting political pressure on people to support it.”