The U.S. Securities and Exchange Commission (SEC) will consider a rule to require disclosure of political spending by publicly traded corporations in April. By putting this rule making on its agenda, the SEC is responding to the Supreme Court’s decision in Citizens United, which ended restrictions on independent corporate spending for public communications that influence elections.
The 2012 election cycle was the most expensive political campaign in U.S. history. Many investors are concerned that political spending by corporations is on the rise. Last year, shareholders filed a record number of proposals seeking disclosure by corporations of their political spending. A growing number of companies already have begun disclosing such information to investors.
A petition requesting the SEC rule making was filed in 2011 by a bipartisan committee of law professors chaired by Lucian Bebchuk of Harvard Law School and Robert Jackson of Columbia Law School. The SEC has received more than 300,000 public comments in favor of requiring disclosure of corporate political spending, including the AFL-CIO’s comment letter seeking such disclosure.
Undisclosed corporate political spending is a risk factor for investors—including the retirement savings of working families who are invested in company stock. According to a report by the Conference Board, unmonitored political spending by corporations can create reputational and legal risks, and these expenditures may not be aligned with company values and policy positions.
Without transparency, there is a danger that corporate executives may spend company funds on their pet political causes that are not in the best interests of shareholders. For this reason, the AFL-CIO and other unions have joined with a coalition of investors and public interest groups to urge disclosure.
Current disclosure requirements for corporate political spending pale in comparison to those that have long applied to union political spending. All union political spending above a low annual threshold is subject to itemization on public reports filed by unions themselves, but there is no comparable reporting requirement for business corporations.
Corporate political spending is either not disclosed at all, or it must be pieced together from reports filed by the recipients of corporate spending with disparate federal and state bodies at different times and varying accessibility. An SEC disclosure requirement at least could provide some parity by requiring corporations themselves to report their spending in one place, which would be an important first step for business political transparency.