The campaign to lift the veil on secret corporate campaign donations hit a milestone on Thursday. More than 1 million comments have been submitted to the US Securities and Exchange Commission calling for a requirement that corporations disclose political spending to their shareholders—ten times more than for any other rule-making petition to the SEC, according to the Corporate Reform Coalition.
“Investors want to know how their money is being spent,” Tim Smith, director of shareholder engagement at the firm Walden Asset Management, said at a press conference outside the SEC in Washington. A sign over his right shoulder read, “Your money is being invested in secret. Why is the SEC doing nothing?”
Campaign finance reformers have long been pushing for the rule, which the SEC was slated to consider in 2013. But Mary Jo White, who took over as head of the agency that year, removed the proposal from the SEC’s agenda. The agency claims to be swamped with other regulations related to the 2010 Dodd-Frank Wall Street Reform Act and other legislation. But shelving the corporate disclosure rule was a win for business groups like the Chamber of Commerce and Republicans, who’d strongly opposed it.
“At a minimum, the SEC should closely consider a rule like this—rather than turning its back on investors’ interests because of Republican objections,” said Robert Jackson, a Columbia University law professor who was one of the initial petitioners for the rule in 2011. “The SEC is an independent agency. They are charged with protecting investors, not politicians.”
The agency is expected to issue a new regulatory agenda this fall. Supporters of the disclosure rule hope the SEC will revisit it in light of what they called “unprecedented” public support.
The point of requiring corporations to disclose their political donations is twofold. First, it’s intended to protect investors, which is the SEC’s responsibility. Shareholders “understand that they have a right to know if the company they invest in is spending money on controversial political causes,” said Lisa Gilbert, the director of Public Citizen’s Congress Watch Project.
Secondly, reformers hope that disclosure will help stanch the flow of secret money in elections, which has increased dramatically since the Supreme Court’s ruling in Citizens United. A critical assumption in the majority’s ruling was that “prompt disclosure of expenditures” would allow shareholders to “determine whether their corporation’s political speech advances the corporation’s interest in making profits.” But without a mechanism to ensure that companies are truly transparent about their political spending, the Court’s faith in “the procedures of corporate democracy” is just wishful thinking.
Even without much transparency there are still examples that illustrate how a company’s political spending can run counter to its shareholders’ best interests. In 2010, Target caused an uproar by donating $150,000 to an anti-gay gubernatorial candidate in Minneapolis. In the following days, its shares declined by more than 3 percent, while those of its competitors rose.
The renewed push for transparency in corporate political spending comes at an appropriate time: according to a Huffington Post analysis, dark-money groups have already spent $142 million on candidate ads in the past twenty months. Unlike Super PACs, these “social welfare” or 501(c)(4) nonprofits are not required to disclose their donors. And unlike labor unions, corporations in most states are not required to report the money they spend in elections. The result is that in many cases shareholders and the public have no way to know which corporations are donating, to whom and how much.
“This rule is squarely within the authority and the responsibility of SEC,” said Demos counsel Liz Kennedy, pushing back on a claim made by the rule’s opponents, who argue that campaign finance regulations are solely the provenance of the Federal Elections Commission. “They have clear statutory authority to regulate in the protection of not just investors but also in the public interest, as well as to require the kind of corporate disclosure that shareholders would need to make informed decisions.”
Fifteen senators, including Elizabeth Warren and Robert Menendez, along with seventy members of the House of Representatives, contributed to the 1 million comments.