Posted by Lucian Bebchuk (Harvard Law School), Robert J. Jackson, Jr. (U.S. Securities and Exchange Commission & NYU Law), James D. Nelson (University of Houston), and Roberto Tallarita (Harvard Law School), on
Wednesday, November 14, 2018
Lucian Bebchuk is the James Barr Ames Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance, Harvard Law School; Robert J. Jackson Jr. is Commissioner of the U.S. Securities and Exchange Commission, and Professor of Law (on leave for public service) at New York University School of Law; James Nelson is Assistant Professor, the University of Houston Law Center; and Roberto Tallarita is Associate Director and Research Fellow at the Harvard Law School Program on Corporate Governance. This post is based on their recent paper.
Commissioner Jackson completed his work on this paper prior to joining the Commission in January 2018. The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any publication or statement by any of its members or employees, and the views expressed herein thus do not necessarily reflect the views of the Commissioners, the Commission or its staff.
Related research from the Program on Corporate Governance and its Research Project on Corporate Political Spending includes Corporate Political Speech: Who Decides? by Lucian Bebchuk and Robert J. Jackson, Jr. (discussed on the Forum here); Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert Jackson (discussed on the Forum here); Citizens United as Bad Corporate Law by Jonathan R. Macey and Leo E. Strine, Jr. (discussed on the Forum here); and Corporate Politics, Governance, and Value Before and after Citizens United by John C. Coates.
The 2018 midterm elections with their record spending are over, but political spending by public companies remains under investors’ radar. In a paper recently placed on SSRN, The Untenable Case for Keeping Investors in the Dark, we seek to contribute to the heated debate on the disclosure of political spending by public companies.
We show that the case for keeping political spending under the radar of investors is untenable. The case for SEC adoption of disclosure rules, we demonstrate, is compelling.
A rulemaking petition urging SEC rules requiring such disclosure has attracted over 1.2 million comments since its submission seven years ago, but the SEC has not yet made a decision on the petition. (Full disclosure: The committee of ten corporate and securities law professors that submitted the rulemaking petition was co-chaired by two of us.) The petition has sparked a debate among academics, members of the investor and issuer communities, current and former SEC commissioners, and members of Congress. In the course of this debate, opponents of mandatory disclosure have put forward a wide range of objections to such SEC mandates. Our paper provides a comprehensive and detailed analysis of these objections, and it shows that they fail to support an opposition to transparency in this area.
Among other things, we examine claims that disclosure of political spending would be counterproductive or at least unnecessary; that any beneficial provision of information would best be provided through voluntary disclosures of companies; and that the adoption of a disclosure rule by the SEC would violate the First Amendment or at least be institutionally inappropriate. We demonstrate that all of these objections do not provide, either individually or collectively, a good basis for opposing a disclosure rule.
Below is a more detailed account of the analysis in our paper:
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