Yesterday, Senators Jeff Merkley (D-OR), Bob Menendez (D-NJ), Chuck Schumer (D-NY), Sheldon Whitehouse (D-RI), and Tom Udall (D-NM) led 39 other colleagues in a letter to SEC Chairwoman Mary Jo White calling on the SEC to complete a rulemaking that would require public companies to disclose political spending to their shareholders. Currently, only 2.2% of public companies do so, and they do so voluntarily.
Here is the text of the letter:
Dear Chair White:
We write to express our support for the Petition for Rulemaking, File No. 4-637, Petition to Require Public Companies to Disclose to Shareholders the Use of Corporate Resources for Political Activities, dated August 3, 2011 (the “Petition”), submitted by the Committee on Disclosure of Political Spending, which the Securities and Exchange Commission (SEC) is currently considering.
If implemented, the Petition would require public companies to disclose to their shareholders how they use corporate resources for political activities, bringing much needed accountability to shareholders and transparency to corporate political spending. We believe this is consistent with the SEC’s requirement for public companies to disclose meaningful financial information to the public.
We strongly disagree with the Supreme Court’s 2010 decision in Citizens United v. FEC that allowed unlimited and unchecked corporate spending on campaign ads and various other political communications. This reversed long-standing precedent and has moved our country in a different and disturbing direction when it comes to corporate influence in politics.
Because shareholders are the true owners of a corporation, a public company should be required to disclose to its owners how their money is being spent. When it comes to spending on political activity, only roughly 2.2% of all public companies in the United States make such disclosures, and they do so voluntarily. [i]
As you know, the SEC has received more than 1 million public comments in favor of political spending disclosure, including from leading academics in the field of corporate governance, investment managers and advisors, and the investing public. A number of State Treasurers have weighed in supporting the Petition, as they have “an obligation to make sure public funds are invested responsibly and accountably.”[ii] In addition, 70 foundations wrote to the SEC in support of political spending disclosures to “know whether companies in which [they] invest are making questionable or controversial political expenditures.”[iii]
Notably, we are also joined in our support for the Petition for rulemaking by former SEC Chairmen Arthur Levitt and William Donaldson and former Commissioner Bevis Longstreth. In the letter they sent to you at the end of May, they highlight that the SEC’s failure to act “flies in the face of the primary mission of the Commission, which has since 1934 been the protection of investors.”[iv] We add our voices to the many who have expressed frustration and disappointment that the SEC decided to remove this issue from its regulatory agenda entirely.
We appreciate your willingness to strongly consider the importance of this rulemaking and reconsider the decision to remove it from the SEC’s regulatory agenda.
We ask that you to make this a top priority for the SEC in the near term, and inform us of the basis for your decision should you not plan to include it on the Commission’s agenda for the upcoming year.
[i] Calculation made using number of public companies that disclose corporate political spending divided by total number of public companies. Dan Strumpf, “U.S. Public Companies Rise Again,” The Wall Street Journal, Markets, 5 February 2015,http://www.wsj.com/...
[ii] State Treasurers Janet Cowell (NC), Seth Magaziner (RI), James McIntire (WA), Beth Pearce (VT), and Ted Wheeler (OR) letter to the SEC, https://www.sec.gov/...
[iii] Tim Devaney, “Investors urge corporate political spending disclosure,” The Hill, Regulation, 20 May 2015,http://thehill.com/....
[iv] Former SEC Chairmen William Donaldson and Arthur Levitt and former SEC Commissioner Bevis Longstreth letter to the SEC, May 27, 2015, https://www.sec.gov/...
The The Committee on Disclosure of Political Spending consists of ten law professors. You can read the original petition
here.
Here is the concluding paragraph:
Shareholders in public companies have increasingly expressed strong interest in receiving information about corporate spending on politics, and such spending is likely to become even more important to public investors in the future. Furthermore, shareholders need to receive such information for markets and the procedures of corporate democracy to ensure that such spending is in shareholders’ interest. Still, while many large public companies have begun to provide such information, no existing rule requires disclosure of this information to investors, and corporate political spending remains opaque to investors in most publicly traded companies. The Commission should address this lack of transparency and, drawing on its expertise and experience in designing rules for disclosure of other information that is of interest to investors, should adopt rules concerning disclosure of corporate political spending.
As I noted 44 out of the 46 members of the Senate Democratic caucus signed on.
Who didn't? That would be Joe Manchin (D-WV) and Joe Donnelly (D-IN). If you live in either of those states, you should give your senator a call.