SEC Can Still Work on a Corporate Political Disclosure Rule
By Lisa Gilbert, Public Citizen
Last week’s budget deal was mostly good. It lifted the unsustainable sequestration funding caps and kept the majority of poison-pill policy riders at bay.
Despite the best efforts of many lawmakers and nearly 200 groups, though, some policy riders slipped in. These extraneous provisions, which have nothing to do with funding our government, lift the crude oil export ban, prevent Puerto Rico from filing for bankruptcy and attempt to block efforts to enhance disclosure of secret election spending.
But a closer examination reveals that one of the riders doesn’t really do what it purports to. And that is good news for everyone who cares about democracy.
The rider in question was designed to prevent the Securities and Exchange Commission (SEC) from forging ahead with a rule requiring public corporations to disclose political spending. But the rider won’t really halt work on the rule.
Here’s why: The budget package’s policy rider prohibits the SEC from using fiscal year 2016 funds to finalize the rule, but the SEC retains the authority to take important steps to prepare for a rule-making on this issue. In fact, the prohibition on finalizing the rule lasts only through the end of the fiscal year. September 2016 is a mere nine months away.
In the meantime, the provision in the omnibus does nothing to stop the SEC from discussing, planning, revising, investigating or developing plans or possible draft proposals for a rule relating to the disclosure of corporate political contributions.
Today, a large grouping of senators and Members of Congress led by Sens. Chuck Schumer (D-N.Y.), Bob Menendez (D-N.J.), Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.) and Reps. Michael Capuano (D-Mass.) and Chris Van Hollen (D-Md.) sent a bicameral letter to the SEC to make sure that the agency understands that it can develop such a rule. In a related development, Public Citizen posted legal opinion written this week by Harvard professor John Coates, which explains that the agency can begin developing a rule despite the language in the omnibus.
The need for a rule is clear. Since the U.S. Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling, corporate political spending has exploded — and much of it has been channeled through dark money conduits like nonprofits and trade associations.
The fact that corporate executives can spend company resources for political purposes without shareholders’ knowledge raises significant investor protection and corporate governance concerns. Investors should not be left in the dark as to whether executives are spending funds on political causes that may run counter to shareholders’ interests.
An increasing number of companies have agreed to voluntarily disclose their political spending, which shows how easy it is to share this information. But far too many companies continue to hide their political spending from shareholders, who have a clear right to know how their investments are being used.
To date, more than 1.2 million Americans, along with securities experts and institutional and individual investors, have pressed the SEC for a rule requiring publicly traded companies to disclose their political spending.
And in May, a bipartisan group of three former SEC chairs and commissioners urged the commission to take action, noting that a rule on corporate political spending disclosure fits squarely within the primary mission of the SEC: to protect investors.
SEC Chair Mary Jo White should acknowledge the strong demand for a rule on disclosure of corporate political spending, and her agency should work on the issue, as is allowed by the omnibus deal.