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April 07, 2014
Sustainable Investors Mostly Quiet on McCutcheon vs. FEC
    by Robert Kropp

The most recent evisceration of campaign finance laws may not be the Supreme Court's last, emphasizing the critical need for regulation and redoubled efforts on political spending disclosure.

Last week, the US Supreme Court issued its decision on McCutcheon vs. the Federal Election Commission (FEC), ruling unconstitutional the limits on total campaign contributions that can be made by an individual.

In an brief filed with the Court in advance of its decision, the Brennan Center for Justice stated, “Striking down the aggregate limits would allow wealthy Americans to give over $3.5 million directly to politicians and parties each election cycle, inviting a torrent of funds that would undermine faith in government integrity. The undue access and influence to elected officials springing from these contributions would raise the specter of corruption at a time when faith in government is already distressingly low.”

Given that the Court gave its its controversial Citizens United ruling in 2010, last week's ruling could hardly have come as a surprise. And according to the New York Times, “there is no reason to think that the march toward deregulating election spending will stop with the ruling.” The cap on individual contributions to a single candidate may be the next political spending limit to fall, the Times surmised.

In his dissent, Justice Stephen G. Breyer wrote, ““Taken together with Citizens United, today’s decision eviscerates our nation’s campaign finance laws, leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve.”

Robert Reich, the secretary of labor under President Bill Clinton, wrote on his blog, “Almost limitless political donations coupled with America’s dramatically widening inequality create a vicious cycle in which the wealthy buy votes that lower their taxes, give them bailouts and subsidies, and deregulate their businesses – thereby making them even wealthier and capable of buying even more votes.”

“Corruption breeds more corruption,” Reich continued.

Even before the Citizens United decision, sustainable investors organized by the Center for Political Accountability (CPA) have sought to increase corporate transparency on political expenditures, and to date have reached agreements with more than 120 companies on the issue. In the absence of Securities and Exchange Commission (SEC) regulations, CPA and its allies are to be commended for their accomplishments.

Despite the fact that a petition by a group of academics calling itself the Committee on Disclosure of Political Spending attracted hundreds of thousands of comment letters to the SEC on the issue, most of them in support of transparency, the Commission has not indicated whether it will issue rules on corporate political spending disclosure. SEC Chair Mary Jo White stated in February that Commission “staff will focus on making specific recommendations for updating the rules that govern public company disclosure” this year.

Thus far, there has been little response to McCutcheon vs. FEC among sustainable investors. It may well be that, given its emphasis on individual campaign contributions, the decision is regarded by them as outside the purview of the investment community. Yet for this observer, the strength of sustainable investment comes not only from identifying long-term financial risks implicit in questionable corporate behaviors; it comes especially from the conflation of capital markets with social justice.

The Sunlight Foundation, a nonprofit that advocates for greater government transparency, stated in response to the decision, “We need now more than ever real-time transparency of political spending so the public can know whether their elected officials are representing their interests or special moneyed interests.”

“Real-time transparency can foster accountability, deter corruption and act as a bulwark against the unfettered and wholesale purchase of our elections by the wealthy,” the Foundation continued.


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