WASHINGTON, D.C. – Forty-four U.S. Senators today pressed the Securities and Exchange Commission (SEC) to complete a rulemaking that would require public companies to disclose political spending to their shareholders, bringing increased transparency to the U.S. political process in the wake of the Supreme Court’s 2010 Citizens United decision.
The Citizens United decision unleashed unlimited corporate spending into American elections. Without requirements for disclosure, that spending can become “dark money” that influences elections without voters being able to see the source of the money or take into account what special interests may be behind it.
When corporations participate in the political arena, they are using their shareholders’ resources and, in effect, exerting their shareholders’ influence. Shareholders have a right to know the amount and intended impact of political spending being made on their behalf.
In a letter sent today to SEC Chairwoman Mary Jo White, the Senators, led by Oregon’s Senator Jeff Merkley (D-OR), Sen. Bob Menendez (D-NJ), Sen. Charles Schumer (D-NY), Sen. Sheldon Whitehouse (D-RI), and Sen. Tom Udall (D-NM), wrote that requiring public corporations to disclose their political spending to shareholders would bring “much needed accountability to shareholders and transparency to corporate political spending.” They added, “We believe this is consistent with the SEC’s requirement for public companies to disclose meaningful financial information to the public.”
The Senators noted strong support for such a rule from leading academics in the field of corporate governance, investment managers and advisers, former SEC commissioners, and the public at large.
Currently, only roughly 2.2% of public companies in the United States make such disclosures, and they do so voluntarily.
After a record number of people signed a petition asking for an SEC rulemaking to address shareholder disclosure of political spending, the SEC added the item to its rulemaking agenda for 2013. The rule was never completed, however, and in 2014, it was pulled from the SEC’s docket with little explanation.
In today’s letter, the Senators wrote, “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 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.”
In addition to Merkley, Menendez, Schumer, Whitehouse and Udall, the letter was signed by Senators Ron Wyden (D-OR), Patrick Leahy (D-VT), Mazie Hirono (D-HI), Kirsten Gillibrand (D-NY), Jack Reed (D-RI), Bernie Sanders (I-VT), Patty Murray (D-WA), Tammy Baldwin (D-WI), Dick Durbin (D-IL), Al Franken (D-MN), Debbie Stabenow (D-MI), Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Maria Cantwell (D-WA), Sherrod Brown (D-OH), Martin Heinrich (D-NM), Dianne Feinstein (D-CA), Edward J. Markey (D-MA), Jeanne Shaheen (D-NH), Chris Coons (D-DE), Angus King (I-ME), Amy Klobuchar (D-MN), Gary Peters (D-MI), Michael Bennet (D-CO), Brian Schatz (D-HI), Bob Casey (D-PA), Cory Booker (D-NJ), Chris Murphy (D-CT), Bill Nelson (D-FL), Ben Cardin (D-MD), Tim Kaine (D-VA), Barbara Boxer (D-CA), Barbara Mikulski (D-MD), Jon Tester (D-MT), Tom Carper (D-DE), Mark Warner (D-VA), Claire McCaskill (D-MO), Harry Reid (D-NV), and Heidi Heitkamp (D-ND).
The full text of the letter follows below. For a PDF copy of the letter, click here.
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/articles/SB10001424052702304851104579363272107177430
[iii] Tim Devaney, “Investors urge corporate political spending disclosure,” The Hill, Regulation, 20 May 2015,http://thehill.com/regulation/business/242655-investors-push-sec-to-disclose-dark-money-in-politics.