WASHINGTON -- The number of public comments submitted to the Securities and Exchange Commission (SEC) on a rulemaking petition to require corporations to disclose political spending to shareholders has now topped 500,000, according to the Corporate Reform Coalition.
The half-million threshold was announced on a Tuesday conference call organized by the coalition and featuring Rep. Michael Capuano (D-Mass.), New York State Comptroller Thomas DiNapoli and Campaign Legal Center founder Trevor Potter. The coalition, a group of good-government watchdogs, labor unions and institutional investors, is calling for the SEC to mandate disclosure of corporate political spending.
"It's impossible for the SEC to ignore the recordbreaking outpouring of investor concern and support for the disclosure rule," said Liz Kennedy, counsel for the liberal public policy and advocacy group Demos.
"The SEC has the simplest thing to do, which is to reaffirm what most Americans already believe -- and I think the law is pretty clear -- shareholders own the corporation. Executives work for those shareholders and will do what the shareholders tell them to do," Rep. Capuano said.
Capuano is the chief sponsor of legislation in Congress that, like the proposed rule, would require corporations to disclose political spending.
The impetus for a disclosure rule is the Supreme Court's 2010 Citizens United decision, which allowed corporations, unions and, after a subsequent court ruling, individuals to spend unlimited sums of money on political activities so long as that spending remained independent from candidates and political parties.
Potter, a former Federal Election Commission (FEC) chairman, said the Citizens United decision held that unlimited spending was less of concern today because through the Internet, citizens can be informed about who is funding political expenses in a timely manner. But numerous loopholes in campaign finance and tax laws allow money to be donated to political activities without any disclosure, timely or otherwise -- more than $400 million in such "dark money" was spent in the 2012 election.
"We need to deal with this issue of disclosure with regard to political spending by corporations," said DiNapoli. The New York comptroller has a significant professional interest in what corporations are doing with their money because he runs the New York state employees' pension fund, with investments topping $150 billion.
Despite companies' post-Citizens United freedom, few large corporate donations have been reported to the FEC, the agency in charge of enforcing campaign finance laws. Many campaign observers believe that corporations are giving to politically active groups that, unlike candidate campaigns or super PACs, are not required to name their donors -- groups such as trade associations like the U.S. Chamber of Commerce or social welfare nonprofits like Crossroads GPS, American Action Network or Citizens for Strength & Security. An inadvertent disclosure by the health insurer Aetna revealed that the company had donated $4.05 million to the Chamber of Commerce and $3 million to the conservative American Action Network in 2011.
For their part, business groups like the Chamber, the Business Roundtable and the National Association of Manufacturers and conservative nonprofits like the 60 Plus Association have vigorously opposed any new disclosure mandate that would require the naming of the donors to their political efforts. These four groups -- and nearly a dozen more trade associations and nonprofits -- argued in a Jan. 3 letter to the SEC that a disclosure rule would not improve shareholder value, would impede the First Amendment rights of corporations and would open companies to public attacks for their political spending.
"Some companies will conclude that the need to protect their brands against relentless, albeit unjustified, attacks necessitates a reduction in or elimination of political activities, even if that could lead to government policy actions harmful to shareholder value," the letter states.
Kennedy, of Demos, argued otherwise on the call. "Holding corporations accountable for spending money on politics is not harassment," she said.
DiNapoli also commented on his recent lawsuit against Qualcomm, which ended with the telecommunications company agreeing to disclose its contributions to trade groups and social welfare nonprofits. Those donations turned out to be fairly low and relatively benign, leading some to speculate that few companies are really making major contributions to fund partisan political activity.
"I just think that it's a good corporate practice," DiNapoli said of disclosure. "And as we see more disclosures, if they end up being run of the mill and nothing controversial, there's nothing wrong with that, but it still makes the point that we're entitled to know what's going on."
Prior to leaving the SEC in December, then-Chairwoman Mary Schapiro placed the issue of political spending disclosure on the agency's long-term agenda and said a rule-making could come as early as April 2013. The Corporate Reform Coalition hopes that newly appointed Chairwoman Mary Jo White will hold hearings on the issue.
"It would be a great first effort on the part of the new SEC chair," DiNapoli said.