1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

Transparency Advocates Look to the SEC to Accomplish What Congress, The White House, and the IRS To-Date Have Not

It has been almost exactly 19 months since the Supreme Court handed down its controversial decision in Citizens United v. Federal Election Commission, but the plot continues to thicken as those favoring mandatory corporate disclosure of political activities look for a non-judicial fix to the ruling.

To date, the fields are littered with detritus of failed efforts at identifying a mechanism that compels corporations and wealthy individuals to disclose all exercise of their newly-recognized First Amendment freedoms. This blog has previously reported on failed efforts to mandate such disclosure in Congress, as well as the Obama White House’s proposed executive order circumventing both Congress and the Supreme Court.  To achieve these same goals, groups such as Democracy21 and the Campaign Legal Center have promoted changes to the Internal Revenue Code, while the American Bar Association has encouraged Congress to make pertinent amendments to the Lobbying Disclosure Act.

Our latest contestants in this Sisyphean legal drama are a united band of like-minded law school professors looking to utilize the Securities and Exchange Commission (SEC) as a vehicle to counter the perceived negative impact of Citizens United. It appears this group has concluded that the imposing moniker “Committee on Disclosure of Corporate Political Spending” (the “Committee”) sounds more authoritative than “a united band of like-minded law school professors”. I think I agree with them on that.

Under either moniker, this group has filed a petition for rulemaking with the SEC requesting draft regulations that require public companies to disclose to shareholders information regarding the use of corporate resources for political activities. The main gist of its petition – stricter SEC disclosure rules are necessary to ensure that corporate political activities are subject to the appropriate level of shareholder scrutiny in the wake of Citizen’s United. The Committee bases this conclusion on the following contentions:

First, it asserts that there is strong data indicating that public investors have become increasingly interested in receiving information about corporate political spending. To support this statement, the like-minded professors reference a 2006 Mason-Dixon poll indicating that 85% of shareholder respondents held that “there is a lack of transparency surrounding corporate political activity.” They also make note of a FactSet Research Systems analysis that indicates 50 out of 465 shareholder proposals appearing on public-company proxy statements in 2011 involved political spending issues.

Second, the Committee grounds its request in the belief that there is increasing momentum toward political spending transparency in the corporate community, as evidenced by the growing number of large public companies that have voluntarily adopted policies requiring disclosure of their political expenditures. To this point, and perhaps undercutting the urgency of their call to action, the professors highlight a study by the Center for Political Accountability indicating that nearly 60% of S&P 500 companies voluntarily provide shareholders with information regarding corporate spending on political activities.

Third and finally, the Committee bases its request on the idea that stricter SEC regulation of corporate political disclosure will lead to better corporate oversight and accountability mechanisms. At present, the professors assert, shareholders are unable to hold directors and officers accountable when they spend corporate funds on politics in a way that departs from the interests of the company. From the Committee’s point of view, this is due to the fact that public information regarding corporate political activity is out of the average shareholder’s reach (because it is either dispersed among too many regulatory bodies or not gathered at all). By requiring companies to disclose to one central entity (the SEC), it is the professors contention that there will be better information available to shareholders, and in turn, a subsequent improvement in corporate accountability.

Based upon these assertions, the Committee’s petition recommends that the SEC initiate a rulemaking project to adopt a series of regulations that mandate periodic disclosure of corporate political spending. Whether the SEC will take heed of the Committee’s request remains to be seen, but the petition itself has already begun to draw a mix of criticism and support from members of the business, legal, and academic communities.

For example, just a few days after the Committee’s petition was submitted, Keith Paul Bishop – the former California Commissioner of Corporations and an adjunct professor at the Chapman University School of Law – filed a response letter with the SEC refuting the professors’ contentions and requesting that no such rulemaking project be initiated by the Commission. In his response, Bishop contends that the Committee’s proposal will only add to the already extensive public disclosure burden faced by reporting companies and that it is unnecessary in light of the growing trend toward voluntary corporate disclosure. He also argues that it is not the role of the SEC to mandate corporate expenditure on public disclosure of political activity when statistics show that not even a third of 2011 proxy proposals on the subject enjoyed shareholder support.

In contrast, official comments filed by Mark Latham, founder of VoterMedia.org, and executives from the International Corporate Governance Network expressed strong support for the Committee’s request. Specifically, both comments revealed a common respect for the Committee’s belief that the disclosure of corporate political spending is necessary to help stave off abuse or the breach of business ethics by officers and directors.

The debate over who has the better side of the argument will rage on in the coming months as the SEC weighs the proposal and determines whether to take any action. One would have to expect the Obama Administration to lend its support to the Committee’s cause in it’s typical “no fingerprints here, I don’t know what you’re talking about” approach. The response from the corporate community will undoubtedly be more mixed and more direct, but it will be interesting to see what reaction emerges from groups such as the U.S. Chamber of Commerce and The Conference Board’s newly formed Committee on Corporate Political Spending (to which, BIAS ALERT, I am an advisor). Stay tuned….

, , , , , , ,

Transparency Advocates Look to the SEC to Accomplish What Congress, The White House, and the IRS To-Date Have Not

EVENT: Political Law Compliance after Citizens United – 5/6/10

Campaign Finance, Government Contracting, Tax, Lobbying & Ethics Rules

This comprehensive one-day training seminar brings you up-to-date on Congressional and White House responses to Citizens United and other key developments involving lobbying, ethics and tax rules at this annual conference.

Citizens United reinforced the First Amendment rights of corporations and labor unions to participate in the political process by advocating the election or defeat of clearly identified candidates. After this landmark event, how can groups most effectively, and legally, participate in the political and public affairs process?

Hear from FEC Chairman Petersen; Mike Duncan, former Republican National Committee Chairman; and Michael Boos, Citizens United Vice President and General Counsel.

Thursday, May 6, 2010
8:00 a.m. – 6:00 p.m.
The Offices of McKenna Long & Aldridge LLP, Washington, DC

Program Highlights:

  • Practical developments and new areas of concern in federal campaign finance law
  • A discussion from both sides of the political aisle regarding political party and interest group activity after Citizens United
  • Experience the Supreme Court journey with Michael Boos, Vice President & General Counsel of Citizens United
  • Insights into current DOJ FCPA prosecutions, public-corruption investigations and enforcement priorities
  • Issues affecting nonprofit organizations and donors providing financial support for political activities

Registration Fee:

Register today and Save 50% off the BNA Subscriber rate of $595. Enter discount code “MLA10” at online checkout.

CLE credit will be available.

For more information or to register by phone, call 800-952-2477.

EVENT: Political Law Compliance after Citizens United – 5/6/10

MLA Government Contracts Advisory: President Obama’s Executive Orders Regarding Labor Relations in Government Contracting

MLA Government Contracts Advisory: President Obama’s Executive Orders Regarding Labor Relations in Government Contracting

What Is EFCA?

The “Employee Free Choice Act” (EFCA) is a bill intended to lower substantially the bar for labor unions to organize private sector workplaces. EFCA aims to amend the National Labor Relations Act in three significant ways:

Certification of Union by Card-Check: The bill replaces the secret-ballot election as the primary vehicle for employees to decide upon union representation. It will instead require an employer to recognize a union as soon as the National Labor Relations Board finds that a majority of employees in an appropriate unit has signed union authorization cards.

Mandatory Interest Arbitration for First Contracts: EFCA provides if an employer and union are unable to settle upon a first collective-bargaining agreement within ninety (90) days, it must be submitted to mediation by the Federal Mediation and Conciliation Service (FMCS). If after thirty (30) days, mediation does not result in an agreement, the dispute is to be submitted to a panel of arbitrators who will impose the terms of a two-year contract binding upon the parties.

Increased Legal and Economic Penalties Against Employers for Violations During Organizing Drives or First Contract Negotiations: The bill would change the National Labor Relations Act’s remedial provisions to impose greater penalties during any period while employees are attempting to organize a union or negotiate a first contract:

a. Mandatory Injunctions: It would require the National Labor Relations Board to seek a federal court injunction against an employer whenever there is reasonable cause to believe that the employer has discharged or discriminated against employees, threatened to discharge or discriminate against employees, or engaged in conduct that significantly interferes with employee rights.

b. Treble Backpay: It would require an employer to pay three times back-pay to any employee who is discharged or discriminated against during an organizing campaign or first contract drive.

c. Civil Penalties: It would provide for civil fines of up to $20,000 per violation against employers found to have willfully or repeatedly violated the law.

The full text of EFCA, as introduced in the 110th Congress, is located here. The MLA white paper, analyzing EFCA in greater detail and exploring its prospects in the 111th Congress is available here.

EFCA Report tracks developments, compiles resources and discusses management perspectives related to the Employee Free Choice Act.

What Is EFCA?