Print
E-MailLucian Bebchuk is Professor of Law, Economics, and Finance at Harvard Law School. Robert J. Jackson, Jr. is Associate Professor of Law, Milton Handler Fellow, and Co-Director of the Millstein Center at Columbia Law School. Bebchuk and Jackson served as co-chairs of the Committee on Disclosure of Corporate Political Spending, which filed a rulemaking petition requesting that the SEC require public companies to disclose their political spending, discussed on the Forum here. Bebchuk and Jackson are also co-authors of Shining Light on Corporate Political Spending, published last month in the Georgetown Law Journal. This post is the sixth in a series of posts, based on the Shining Light article, in which Bebchuk and Jackson respond to objections to an SEC rule requiring disclosure of corporate political spending; the full series of posts is available here.
The Securities and Exchange Commission is currently considering a rulemaking petition that we filed along with eight other corporate and securities law professors asking the Commission to develop rules requiring that public companies disclose their spending on politics. In our first five posts in this series (collected here), we examined five objections raised by opponents of such rules and explained why these objections provide no basis for opposing rules requiring public companies to disclose their political spending. In this post, we consider a sixth objection: the claim that the Constitution prohibits the SEC from requiring companies to disclose their spending on politics.
Several opponents of the petition have argued that requiring such disclosure would violate the First Amendment. For example, John Boehner, the Speaker of the U.S. House of Representatives, has argued that laws requiring disclosure of corporate political spending would “shred our Constitution.” The Chamber of Commerce has also claimed that such rules would be unconstitutional in a public letter, and a group of law professors opposing the petition have argued to the SEC that the “Constitution forbids” the Commission from adopting rules requiring public companies to disclose their spending on politics.
It is clear, however, that the Constitution leaves ample room for disclosure rules of this kind. For one thing, in its recent decision in Citizens United v. FEC, the Supreme Court upheld the disclosure rules challenged in that case by an 8-1 vote. That result is consistent with the Court’s longstanding approach to rules requiring disclosure of information to investors. The Court’s approach to interpretation of the First Amendment has long given the SEC considerable deference in the development of rules that give investors the information necessary to facilitate the functioning of securities markets.
Moreover, the Court in Citizens United expressly relied on investors as a mechanism for accountability for corporate spending on politics, holding that “prompt disclosure of expenditures can provide shareholders . . . with the information necessary to hold corporations . . . accountable” for politics spending, because “[s]hareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits.” Having concluded that disclosure can help ensure accountability for corporate spending on politics, the Court is unlikely to strike down disclosure rules in this area. Rather than suggesting that the Court would hold SEC rules requiring disclosure of political spending unconstitutional, these cases indicate that such rules would not run afoul of the First Amendment.
Nothing in the Constitution prohibits the Commission from developing rules requiring public companies to disclose their spending on politics. Claims to the contrary provide no adequate basis for opposing such rules.
