The Corporate Reform Coalition is deeply disappointed by and demands an explanation for the removal from its agenda of the most widely supported rulemaking in the Securities and Exchange Commission’s history. The agency chose to put the political spending disclosure rule on their docket for consideration based on its strong support from investors and the potential risks to companies from secret political spending. The decision to drop this rule and others from the Commission’s agenda is a step back from the SEC’s proactive agenda to protect investors.
There is an urgent need for a new disclosure rule to address political spending since the U.S. Supreme Court’s Citizens United decision allowed companies to directly spend their money in politics. Citizens United also affirmed the constitutionality of disclosure requirements and, in fact, assumed that new corporate political spending would be transparent to shareholders. Justice Kennedy said in the opinion that “shareholder objections raised through the procedures of corporate democracy” would provide accountability for the new political spending. Without a mandatory disclosure rule shareholders do not have the ability to raise those objections.
Resolutions calling for company disclosure of political spending have topped the shareholder agenda for the last five years, and this year will be no exception. For the 2014 proxy season, this will remain a priority as more investors will be urging companies to disclose their political spending. Shareholders and other securities experts see an SEC rule as critical to achieving uniform political disclosure.
More than 100 leading companies have taken the initiative to publicly disclose their political spending. This demonstrates the ease with which these disclosures can be accomplished. It also demonstrates the acceptance of disclosure by many prominent and large corporations. Unfortunately, however, other companies keep their shareholders in the dark, unaware if their money is funding political campaigns and even political attack ads.
The SEC has received nearly 700,000 comments – a record-breaking number – urging disclosure of political spending. In addition, surveys commissioned by the Committee for Economic Development and the Center for Political Accountability found a strong majority of business leaders endorsing corporate disclosure of direct and indirect political spending. The SEC had taken the public and investor demand for greater disclosure into account and was considering a rulemaking in response to this demonstrated need.
The context has not changed. This rule is still necessary. We look forward to an explanation from SEC chairman Mary Jo White as to why the investor demand for this updated regulation is being rebuffed. We urge that this decision be reversed and that the rulemaking returned to the SEC’s agenda. In the meantime, the agency should publicly explain the questions it needs answered in order to move forward with the rulemaking in a concept release. The rights of shareholders must be protected, and the SEC has the means and the mandate to do so. The commission must renew its political disclosure rulemaking. This is critical both for democracy and the rights of investors in the marketplace. The agency owes investors – and the public – nothing less.