Since the U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission, politically active nonprofit groups and trade associations have offered vastly expanded conduits for political giving, and as a result corporations are under more pressure than ever to spend to influence our elections. Corporate political spending has flourished in the shadows, aside from those companies that choose to share the information voluntarily.
For investors who wish to assess the kinds of risk associated with their companies' political spending, Citizens United made corporate accountability and transparency even more essential. To that end, 44 U.S. senators, 70 investing endowed foundations, the founder of the largest mutual fund in the country, a bipartisan group of former chairs and members of the U.S. Securities and Exchange Commission (SEC), five state treasurers, pension funds, securities lawyers and 1.2 million members of the public have all asked the SEC to shine a light on unlimited corporate political spending by requiring disclosure. And they think it should happen now.
This issue has taken on unstoppable momentum. As one more sign of that, today, the future Democratic leader of the Senate - U.S. Sen. Charles Schumer of New York - along with Sen. Jeff Merkley of Oregon and other members of the U.S. Senate Banking Committee will be joined by a Republican former SEC chair, Bill Donaldson, to urge the new nominees for SEC commissioner, Lisa Fairfax and Hester Pierce, to support a rule that requires public companies to disclose their political spending.
The request that the transparency rule be used as a gauge for what makes a good SEC commissioner underscores the importance of this rule to the senators and the former head of the SEC, as well as its broad appeal to shareholders.
There's been much discussion of late concerning the need for financial regulators to be disconnected from the Wall Street banks and the corporate interests they regulate. At the SEC, where the agency is charged with protecting investors above all else, the idea that a commissioner might come into office and work to protect the secrecy of corporate political spending (while investors are demanding its transparency) could be a clear indication that such a conflict of interest exists.
By sending the letter, the Democratic Banking Committee senators aim to ensure that these nominees place the protection of Main Street and the markets above any allegiance to industry. A disclosure rule is a perfect marker, as support of it will demonstrate an awareness of the risk inherent in political spending that can threaten a company's bottom line by embroiling it in hot-bottom political issues.
Wall Street spends its money liberally in the pursuit of less regulation of its industry, and so it wouldn't be surprising to see a nominee who is closely tied to the big banks opposing disclosure of the way they spend their money in politics. By supporting this rulemaking, these nominees will be publicly aligning themselves with those the agency purports to protect: investors.
In the pursuit of good corporate governance and a new commissioner who puts Main Street first, we heartily agree with the case made by the Banking Committee senators in their letter to the new nominees. Support for a rule requiring disclosure of corporate political spending should serve as a metric for a qualified nominee, and the outcry for this rule by investors must no longer be ignored.