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One Million Opinions on Transparency in Corporate Political Spending

Who knew corporate governance could get so many people excited? SEC petition shatters records with more than one million comments.

September 4, 2014

Who knew corpor­ate governance could get so many people excited? More than one million comments have now been filed concern­ing a peti­tion asking the Secur­it­ies and Exchange Commis­sion to require publicly traded compan­ies to disclose the money they spend to influ­ence elec­tions. That’s more than five times higher than the previ­ous record for an SEC peti­tion.

These comments come from major investors, elec­ted offi­cials, good-govern­ment groups, and concerned citizens. The Bren­nan Center weighed in early, and then again to inform the agency of factual devel­op­ments such as the ever-expand­ing support for trans­par­ency among investors. Virtu­ally all of the million comments are in favor of increased disclos­ure.

As the Bren­nan Center explained in a 2012 report, trans­par­ency is import­ant to both corpor­ate health and the func­tion­ing of our demo­cracy. Disclos­ure allows investors to know whether a company is enga­ging in risky beha­vior, since polit­ical spend­ing can damage a brand and tends to correl­ate to lower share­holder value. In Citizens United, a decision that opened the door to unlim­ited corpor­ate cash in elec­tions, the Supreme Court lauded disclos­ure require­ments because they “provide[] share­hold­ers and citizens with the inform­a­tion needed to hold corpor­a­tions and elec­ted offi­cials account­able for their posi­tions and support­ers.”

In the federal system, corpor­a­tions can’t give directly to candid­ates or parties. But Citizens United held that they can engage in inde­pend­ent spend­ing. Since that case was decided in 2010, outside spend­ing has exploded. Corpor­a­tions have taken advant­age of the weakened regu­la­tions, but a relat­ively small portion of the repor­ted spend­ing comes directly from firms. In fact, we have no idea how much corpor­a­tions really spend, because much outside money in elec­tions is “dark money,” the sources of which are hidden from the public. Bren­nan Center analyses of spend­ing in compet­it­ive U.S. House and Senate races have revealed that the major­ity of the outside money is being spent by groups that keep some or all of their donors hidden.

Dark money is a prob­lem for two basic reas­ons. First, voters need to under­stand the source of elec­tion messages to eval­u­ate whether to trust them. Was the ad attack­ing a senator who voted for regu­la­tion of some industry paid for by compan­ies from that industry, worried more about their bottom line than the public good? Second, the public needs inform­a­tion about the sources of polit­ical money to know to whom elec­ted offi­cials may feel they owe a favor.

The Bren­nan Center has advoc­ated for vari­ous solu­tions to the lack of trans­par­ency in elec­tion spend­ing, from the DISCLOSE Act to improved IRS regu­la­tions. The SEC peti­tion was submit­ted back in 2011. Now that the agency has collec­ted more than a million comments over the course of three years, it should be more than ready to begin rule­mak­ing to bring to corpor­ate polit­ical spend­ing the trans­par­ency that share­hold­ers and voters need.

(Image: Think­stock)