Caroline Crenshaw is a Commissioner at the U.S. Securities and Exchange Commission; and Michael E. Porter is the Bishop William Lawrence University Professor at Harvard Business School. The views of Commissioner Crenshaw expressed in this post do not necessarily reflect the views of the Securities and Exchange Commission, its staff, or other commissioners.
Related research from the Program on Corporate Governance includes 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); Shining Light on Corporate Political Spending by Lucian Bebchuk and Robert J. Jackson Jr., (discussed on the Forum here); and Corporate Politics, Governance, and Value Before and After Citizens United, by John C. Coates, IV.
In the wake of January’s attack on our democracy, business leaders across America are rightly reconsidering whether, and how, public companies should participate in politics. Household names ranging from Coca-Cola to Facebook are halting campaign contributions to certain elected officials after the Capitol siege. These leaders now understand that the longstanding system for corporate participation in politics—giving shareholder money to dark intermediaries that indirectly fund campaigns—is broken. In its place, a new playbook for corporate political participation is emerging—one that focuses on solving the Nation’s problems rather than funding partisan gridlock. We know that if we truly want American companies to change their role in politics, we must first require transparency on how shareholder money is spent on politics, and for what.
For years, public companies have used money from American investors to finance secretive social welfare, trade associations, and third parties in Washington. Investors have repeatedly requested information on political spending—last year, shareholders voted in favor of greater disclosure 80% of the time that question was on a corporate ballot. Yet, the U.S. Securities and Exchange Commission is not able under current rules to require transparency for all public companies. The reason is that Congress, reinforced by party partisanship, has conditioned the SEC’s funding on not finalizing a rule that requires disclosure of corporate political spending. With our nation’s financial watchdog sidelined, American investors have no way to determine whether and how their money is spent on corporations’ preferred political causes.
