SEC Gives Shareholders a Voice on Corporate Campaign Spending

March 31, 2011

The SEC has just issued an important post-Citizens United no-action letter that will enhance the ability of shareholders to have more of a voice when publicly-traded corporations spend money on politics. In doing so, the SEC recognized that shareholder accountability over corporate political spending is a significant policy issue that can’t be barred from a proxy statement under the ordinary business exclusion.

The no-action letter came after Home Depot tried to keep a shareholder resolution on corporate political spending off of this year’s proxy statement. The SEC said the shareholders would get a chance to vote on the matter. This action provides shareholders with greater protections when corporations spend their money, in the form of general corporate funds, on politics.

The substance of the Home Depot proposal, submitted by NorthStar Asset Management Funded Pension Plan, is the following:

Shareholders recommend that the Board of Directors adopt a policy under which the proxy statement for each annual meeting will contain a proposal describing:

  • the company's policies on electioneering contributions,
  • any specific expenditures for electioneering communications known to be anticipated during the forthcoming fiscal year, 
  • the total amount of such anticipated expenditures,
  • a list of electioneering expenditures made in the prior fiscal year, and 
  • providing an advisory shareholder vote on those policies and future plans.

NorthStar’s supporting statement requested that management provide an analysis as to whether Home Depot’s political spending was in line with its values and policies, and any risks it might pose to the company’s reputation, brand, or shareholder value. 

This shareholder proposal was based in part on draft legislation written by the Brennan Center last year which became the Shareholder Protection Act in the 111th Congress. 

The SEC rejected all of Home Depot’s objections to the inclusion of this shareholder proposal on the 2011 proxy statement.

This SEC no-action letter means shareholders can assert self-help on a company-by-company basis, not just on transparency of political spending, but also on an advisory shareholder vote on such spending.  This is a big step in the right direction for giving shareholders more protections after Citizens United allowed corporations the ability to spend other people’s money in politics.