January 20, 2012
On Second Anniversary of Citizens United, Coalition Calls on SEC to Mandate Disclosure
by Robert Kropp
The Corporate Reform Coalition holds a press conference in which members express support for a
petition requesting that the Securities and Exchange Commission establish rules mandating that
public corporations disclose their political spending activities.
This week marks the second anniversary of the Supreme Court's controversial Citizens United
decision. To give an example of the impact of the decision, Tim Smith, senior vice president of Walden Asset Management, said at a press
conference yesterday, "Outside groups spent almost four times as much money to influence elections
in 2010 as they did in 2006."
The ways in which concerned investors, governance
advocates, and others have sought to limit the impact of Citizens Unites have been several.
Grassroots support for a constitutional amendment reversing the Citizens United decision is
growing. The Center For Political
Accountability (CPA) has successfully engaged with some 90 companies—including more than half
of those in the S&P 100—in an effort to convince them to publicly disclose their political
expenditures, as well as payments to trade associations such as the US Chamber of Commerce that
actively seek to influence the political process.
And this week, Trillium Asset Management and Green Century Capital Management introduced shareowner
resolutions at three companies, requesting that they refrain entirely from political spending.
But at the very least, what all concerned parties seem to agree upon is that the Securities and
Exchange Commission (SEC) should establish rules mandating that public corporations disclose their
political spending activities.
Also speaking at yesterday's press conference—held by the
Corporate Reform Coalition, a
group which include institutional investors managing $800 billion in assets, legislators,
academics, and others—Ted Wheeler, Oregon State Treasurer, said that as a result of Citizens
United, "Companies have the ability to spend heavily on political causes, and they have the right
to do so. However, companies also have the ability to obscure that spending from their
shareholders. And that's wrong. Shareholders of any company have the absolute right to know the
activities that the companies they own, particularly when those actions impact their bottom line."
The group's efforts to have the SEC mandate corporate disclosure of political spending
activities grew out of a petition filed with the Commission
last year by a group of academics calling itself the Committee on Disclosure of Political Spending.
Two of the committee's members—Lucian Bebchuk, the director of the Program on Corporate Governance
at Harvard Law School, and Robert Jackson of Columbia Law School—were present at the press
"The petition presents data that indicates that the public has become
increasingly interested in receiving information about corporate political spending," Bebchuck
said. "Indeed, during the last proxy season proposals that are related to political spending
appeared on proxy statements of companies with greater frequency than any other type of proposal."
During the 2011 proxy season, resolutions addressing political spending and disclosure
were included on the ballots of 32 companies. 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.
"Our petition also shows that
disclosure of corporate political spending is critical for corporate accountability," Bebchuck
continued. "There is a strong case that SEC rules should require that such information be
While the SEC has not yet signaled its intent on moving ahead on the issue,
shareowner activists are heartened by the fact that the Commission has consistently supported their
proposals when they have been challenged by companies.
"The SEC has for a long time paid
close attention to the interests of investors on these questions, and that is the metric they will
use to decide what to do about corporate spending on politics," Jackson said. Referring to the
political spending by trade associations and other outside groups, he added, "The current rules
don't provide any information about corporate spending on politics through intermediaries. This
type of spending may be a very considerable source of campaign finance, but almost nothing is known
Led by Domini Social
Investments, an international coalition of investment professionals representing more than $690
billion in assets under management sent a letter to the SEC in November, expressing support for the
petition filed by the academics.
Noting that Domini has been part of CPA's campaign for
disclosure for more than seven years, Adam Kanzer, the firm's managing director and general
counsel, said at the press conference, "We argue that undisclosed corporate political activity can
encourage behavior that poses legal, reputational, and operational risks to companies, as well as
systemic risks to our economy and to our political and judicial institutions."
"This is a
very simple and practical rule to craft," Kanzer continued. "We've demonstrated that it can be done
and that shareholders want this information. Corporate political disclosure and accountability has
become a best practice corporate governance standard."
"Undisclosed political spending
distorts the marketplace. We like to see companies compete and win with better products and
services, not by better access to lawmakers."
Senator Robert Menendez, Democrat from New
Jersey, also spoke at the press conference. Last year, Menendez introduced the Shareholder
Protection Act, which would require a vote by shareowners before corporate treasury funds are spent
on political campaigns.
"We need to know who is contributing billions of dollars to
influence American elections," Menendez said. "It's unconscionable that two years after Citizens
United, we still don't have rules in place to let the public know about that special interest
"I don't think Citizens United was an endorsement of free speech. It was an
endorsement of free cash."