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E-MailLucian A. Bebchuk is Professor of Law, Economics, and Finance at Harvard Law School. Robert J. Jackson, Jr. is Associate Professor of Law at Columbia Law School. This post is based on an SEC rulemaking petition available here. Bebchuk and Jackson are co-authors of Corporate Political Spending: Who Decides?, and their prior posts about the subject of corporate political spending are available here, here, and here.
A group of ten corporate and securities law experts submitted yesterday a rulemaking petition (the “Petition”) to the Securities and Exchange Commission. The Petition urges the Commission to develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.
The Committee on Disclosure of Corporate Political Spending, which we co-chair, is composed of ten academics whose teaching and research focus on corporate and securities law. In addition to the two of us, the members of the Committee include Bernard Black (Northwestern), John Coffee (Columbia), James Cox (Duke), Ronald Gilson (Stanford and Columbia), Jeffrey Gordon (Columbia), Henry Hansmann (Yale), Donald Langevoort (Georgetown), and Hillary Sale (Washington University in St. Louis).
The Petition proceeds as follows:
- First, the Petition explains that the Commission’s disclosure rules have evolved over time in response to changes in investor interests and needs as well as corporate practices.
- Second, the Petition presents data indicating that public investors have become increasingly interested in receiving information about corporate political spending.
- Third, the Petition explains that, in response to increased investor interest, many public companies have voluntarily adopted policies requiring disclosure of the company’s spending on politics, and these disclosure practices can provide a useful starting point for the SEC in designing disclosure rules in this area.
- Fourth, the Petition explains that disclosure of information on corporate political spending is important for the operation of corporate accountability mechanisms, including those that the Supreme Court has relied upon in its analysis of corporate political speech.
- Finally, the Petition explains that the design of disclosure rules concerning political spending would involve choices similar to those presented by the disclosure rules previously developed by the Commission, and thus that the Commission has ample experience and expertise to make these choices.
The Petition concludes that the Commission should promptly initiate a rulemaking project to make political spending by public companies more transparent to investors.
The full Petition is available here.
4 Comments
Wasn’t it brought to the Court’s attention during briefing or argumentation on Citizen’s United that corporate disclosure to stockholders was not required.
I disagree with the petition for the following reasons:
•The burden on reporting companies is already significant and adoption of the proposal will add to those burdens. One day, the camel’s back will be broken by the weight of the incremental burdens placed upon it.
•The petitioners make the case that there is an increasing interest in political spending disclosures. They point out that on average these proposals enjoyed 32.5% support during the most recent proxy season. This means that 2/3 of the shareholders do not support political spending disclosures. In fact, the petitioners don’t provide evidence of a single proposal that garnered majority support.
•The proposal would be tantamount to a forced subsidy by the majority of the minority. The petitioners do not explain why it is fair or equitable to require the majority to financially support the interest, however legitimate, of the minority in such disclosures.
•The petitioners fail to make the case for the need for Commission action. Some of the petitioners’ arguments actually make the case that no intervention is needed. For example, they point out that an increasing number of companies have voluntarily elected to disclose political spending. The fact that so many proposals have been presented tells me that there is no problem in getting them before the shareholders. Why not simply let private ordering occur?
You should be interested in this post, about the political activities of Devon Energy Corporation:
http://news.muckety.com/2011/12/18/sec-needs-to-require-reporting-of-political-activities/35581
What do “we the people” do?