The administration has been a veritable font of bad news as executives hostile to reasonable rules have taken the helm from the Department of Education to the Environmental Protection Agency. But there’s a little good news coming from the Securities and Exchange Commission (SEC). Provided Congress allows, it will determine the winner in the long-running battle over whether publicly traded companies should reveal their currently hidden political contributions, known as “dark money.”
Stockholders have long been agitating that the companies they own improve the transparency of their political spending. This is often done through shareholder resolutions, which are a bit like ballot questions, to require companies disclose their spending on campaigns and lobbying. In part as a result of these efforts, more than half of the S&P 500 have agreed to be open about their political activities. They now share information that would otherwise be opaque and untraceable, including money flowing through dark money trade associations and so-called social welfare organizations, such as Crossroads GPS, the conservative group founded by George W. Bush operative Karl Rove.
But the trend toward transparency is still being met with resistance. Goldman Sachs wrote to the SEC in December to block its shareholders from voting on a lobbying disclosure proposal in part because the amount of money at issue “relates to operations that account for less than five percent of the Company’s assets.” The shareholders withdrew their proposal.
Ford Motor Company also complained to the SEC that two shareholder proposals (one on lobbying and one on electoral spending) were duplicative and that the latter should be excluded from Ford’s annual proxy. Fortunately, last week the SEC rejected Ford’s argument allowing both proxy votes to move forward.
The SEC’s stance with Ford is a welcome change from last year’s alarming decision which blocked a proxy question at ExxonMobil to disclose campaign spending because there was another to reveal how much money was spent on lobbying. At least in the view of the SEC back then, the two questions were “substantially duplicative,” as if disclosing lobbying spending was the equivalent of disclosing campaign spending.
The SEC’s current approach with Ford seems correct as electoral spending and lobbying are distinct activities as a matter of constitutional law.
Another bit of good news is that one of the SEC’s new Commissioners is Robert J. Jackson Jr., who has a long record of urging the end of dark corporate political spending.
But shareholders’ power to enact changes in corporate policy through the proxy process is endangered. House Financial Services Committee Chair Jeb Hensarling (R-Tex.) has proposed legislation called the Financial CHOICE Act. At least when it comes to shareholder democracy, the legislation restricts choice rather than expands it. Under existing rules an investor who owns $2,000 worth of shares for a year can offer a shareholder proposal.
Hensarling’s plan requires shareholders to own at least 1 percent of a company to be eligible to offer a proxy proposal. In practical terms, that means that even the largest institutional investors may not meet this ridiculous threshold. At Goldman Sachs, for instance, a shareholder would need to own nearly $1 billion worth of stock to be eligible to submit a proposal. At Alphabet, the parent company of Google, the comparable figure would be $3.7 billion.
While shareholders have been successful waging a company-by-company struggle for disclosure, a blanket political transparency rule would be far better. In 2011, several legal scholars, including Jackson, requested such a rule from the SEC. But for years Congress has run interference for corporations hostile to the idea by adding a rider to the annual federal budget prohibiting the SEC from adopting an anti-dark money rule.
As Congress is about debate Trump’s budget, another round of horse trading on spending and directives will commence. The anti-disclosure rider should be stripped from the budget. Stockholders have been clear and consistent: they want to know the details of the political largesse of the companies they own. And Congress should stop standing in the way of the SEC’s mission, which is to provide transparency to the markets.
The views expressed are the author’s own and not necessarily those of the Brennan Center for Justice.