U.S. Chamber of Commerce Comment Letter on the Shareholder Political Transparency Act & Workforce Investment Disclosure Act

Neil Bradley is Executive Vice President and Chief Policy Officer at the U.S. Chamber of Commerce. This post is based on a comment letter submitted by the U.S. Chamber of Commerce to the House Committee on Financial Services. Related research from the Program on Corporate Governance includes Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert J. Jackson Jr., (discussed on the Forum here); The Untenable Case for Keeping Investors in the Dark by Lucian Bebchuk, Robert J. Jackson Jr., James David Nelson, and Roberto Tallarita (discussed on the Forum here); and The Politics of CEOs by Alma Cohen, Moshe Hazan, Roberto Tallarita, and David Weiss (discussed on the Forum here).

The U.S. Chamber of Commerce opposes the following bills that the Committee is expected to mark up on February 27.

H.R. 5930, the Workforce Investment Disclosure Act (Rep. Cynthia Axne)

The Workforce Investment Disclosure Act would require specific line-item disclosures in Securities and Exchange Commission (“SEC”) mandated reports on information that in many cases is not material to a reasonable investor, and would preempt the SEC’s flexible, principles-based approach on human capital disclosures.

There has been increasing pressure on public companies to incorporate Environmental, Social and Governance (ESG) information into Securities and Exchange Commission (“SEC”) mandated reports—including data points on human capital management. Many businesses already voluntarily disclose ESG information, with 86% of companies in the S&P 500 publishing such reports. Human capital management, one of the more prevalent ESG issues, is a term that is still debated as to its definition and scope. Last year, the SEC included a human capital component in its proposal to modernize Reg S-K by encouraging companies to take a flexible, principles-based approach to disclose certain measures that management focuses on and that it deems material to understanding a registrant’s business. [1] The Chamber is supportive of the SEC’s approach. Instead of building on this workable solution by the SEC, this bill would mandate disclosure.

H.R. 5929, the Shareholder Political Transparency Act of 2020 (Rep. Bill Foster) 

The Shareholder Political Transparency Act would require public companies to disclose their political spending activity.  There is an ongoing effort by activists to silence the business community’s voice in political and public policy debates by using the federal securities laws to compel disclosure of activity, not for the purposes of investor protection, but instead to glean information to advance other interests through name-and-shame tactics.

Companies are already required to disclose political contributions. Further, for other political activity and lobbying disclosures, the shareholder proposal process through SEC Rule 14a-8 exists as a way for shareholders to seek information or to influence the companies they own. Over the years, shareholder proposals requiring political and lobbying disclosures have consistently been rejected by shareholders. From 2010 to 2019, of the 510 political and lobbying spending disclosure proposals submitted to Fortune 250 companies, only two have ultimately received majority support (0.3%). Additionally, in 2019, support for these proposals only averaged around 32%.

It is increasingly clear that a super-majority of shareholders, when given the opportunity, reject the disclosure of this information as not material.

Endnotes

1https://www.sec.gov/news/press-release/2019-148(go back)

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