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November 02, 2011
Democrats Seek to Limit Corporate Political Spending
    by Robert Kropp

A group of Senators introduces a constitutional amendment that would authorize Congress to regulate political spending and allow states to do so. First of a two-part series.

Yesterday, a group of Democratic Senators introduced a con stitutional amendment that, if passed by three-quarters of states within seven years, would give Congress the power to regulate political spending by corporations and other entities.

The proposed amendment, submitted by Senators Tom Udall (D-NM) and Michael Bennet (D-CO), along with Tom Harkin (D-IA), Dick Durbin (D-IL), Chuck Schumer (D-NY), Sheldon Whitehouse (D-RI), Jeff Merkley (D-OR), and Mark Begich (D-AK), would effectively reverse the 2010 Citizens United decision by the Supreme Court. The amendment:
• Authorizes Congress to regulate and limit the raising and spending of money for federal political campaigns and allow states to regulate such spending at their level;
• Includes the authority to regulate and limit independent expenditures, such as those from Super PACs, made in support of or opposition to candidates;
• Would not dictate any specific policies or regulations, but instead would allow Congress to pass campaign finance reform legislation that withstands constitutional challenges.

"As we head into another election year, we are about to see unprecedented amounts of money spent on efforts to influence the outcome of our elections," Senator Udall said. "With the Supreme Court striking down the sensible regulations Congress has passed, the only way to address the root cause of this problem is to give Congress clear authority to regulate the campaign finance system."

The Supreme Court's Citizens United decision allowing unlimited political spending by corporations has galvanized shareowners seeking to limit the potential risks associated with the practice. While the decision came too late for the 2010 proxy season, in 2011 88 resolutions addressing political spending and disclosure were submitted, and 32 were included on proxy ballots. Vote totals for eight of the resolutions exceeded 40%, and an additional 14 resolutions gained more than 30% of shareowner support. At Sprint Nextel, a majority of shareowners approved the resolution.

Thus far, largely through the investor-driven efforts of the Center for Political Accountability (CPA), 88 companies have agreed to disclose their policies on political spending, including 57 listed on the S&P 100 index of the nation's largest companies.

But, as Lisa Woll of US SIF: The Forum for Sustainable and Responsible Investment stated recently, shareowner activists could spend the next 40 years persuading individual companies to change their behaviors, "Or we could get a bill that addresses it."

However, legislation seeking to address corporate political spending, such as the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, have gone nowhere in a Republican-dominated House of Representatives. And the US Chamber of Commerce, which exploited Citizens United to amass a $75 million war chest for last year's midterm elections, described the purpose of the Act as "irretrievably to upend First Amendment protections of political speech."

Shortly after the Supreme Court decision, Adam Kanzer, Managing Director and General Counsel of Domini Social Investments, told, "It’s hard to think of anything short of a constitutional amendment that would really fix the problem."

However, Kanzer continued, passage of a constitutional amendment would be "onerous," suggesting that regulatory action by the Securities and Exchange Commission (SEC) could be a more effective route.

"Political accountability is a corporate governance issue that should be adopted by every company," Kanzer said at the time. "I think we've reached the point where going from company to company should give way to standards of disclosure to be adopted by every company."

Yesterday, a coalition of institutional investors representing more than $690 billion in assets under management wrote to the SEC, expressing support for a rulemaking petition submitted in August by the Committee on Disclosure of Corporate Political Spending, a group of academics.

The Committee specifically addressed part of the Citizens United ruling which upheld the right of shareowners to request corporate disclosure of political spending. "Shareholders," the Court stated, could "determine whether their corporation's political speech advances the corporation's interest in making profits."

"Prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters," the Court wrote.

"For this mechanism to work, however, shareholders must have information about the company’s political speech," the Committee wrote in its petition.

In its letter, the investor coalition wrote, "We strongly believe that corporate political spending transparency is in the best interests of investors, companies and the general public, and that the Securities and Exchange Commission is the most appropriate agency to require such disclosure. We believe the time has come for a clear rule requiring all public companies to disclose this information, and that such a rule would be simple to draft and to implement, as some of the largest U.S. companies have clearly demonstrated."

Other influential investor organizations have written to the SEC in favor of the Committee's petition as well. In October, the Council of Institutional Investors (CII) stated in a letter, "Shareowners have a right to know whether and how their company uses its resources for political purposes." Given the variance in transparency of companies, CII continued, the substance of the petition would provide investors with "the advantage…of having complete, uniform disclosure requirements."

Tomorrow: talks with Adam Kanzer about yesterday's letter from investors to the SEC.


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