The Securities and Exchange Commission (SEC) has announced that it will consider making a rule to require public companies to disclose information about the money they spend on politics. This is an important first step toward bringing transparency and accountability to the shadowy world of corporate political expenditures. As the law stands today, corporations are not required to tell their shareholders anything about the political spending that corporate management decides to engage in. This leaves the company’s investors in the dark about whether political expenditures benefit or hurt the bottom line, as well as whether their money is providing support to candidates or causes that they oppose. It also leaves voters ignorant about the real source of the political advertising they are bombarded with in every election.
Corporations spend big money on politics. Chevron gave $2.5 million to a super PAC with ties to House Speaker John Boehner. Clayton Williams Energy, a public company based in Texas, gave $1 million to the conservative super PAC American Crossroads, among others. These donations are publicly known because super PACs are required to report their donors, as are candidates. But shareholders who want to track this kind of political spending have to pore over federal elections filings or hope that a journalist will do that work for them.
In addition, other political spending is not reported. Corporations may donate to politically active tax-exempt organizations or trade associations that spend prolifically on elections but do not have to report their donors. Last year, Aetna accidentally revealed $7 million in political spending that neither Aetna nor the organizations receiving the donations were required to report. In effect, no one knows how much of the hundreds of millions of dollars of “dark money” spent in the 2012 election came from corporate treasuries.
There is one investor who is keenly aware of how hard it is to get information about companies’ political spending: New York State comptroller Thomas Di Napoli, the sole trustee of the New York State pension fund. As a major shareholder in Qualcomm, the pension fund requested information about the company’s political spending through letters and shareholder resolutions, but nothing has worked. Di Napoli has now sued Qualcomm, seeking to examine the corporation’s books for contributions to politically active groups that do not report their donors. Di Napoli is obligated to protect the value of the pension fund’s investments, and he understands that investors must be informed about political contributions because of the potential risks they pose.
Americans are outraged by corporations’ attempts to influence democracy from behind a veil. A recent poll found that almost 9 out of 10 Americans think there is too much corporate money in politics. In addition, 81 percent believe that companies should only spend money on political campaigns if they disclose their spending immediately, and 77 percent support a requirement that companies publicly disclose their contributions to organizations that channel money into politics. The SEC has seen this thunderous support firsthand: A 2011 petition calling for the agency to require disclosure of corporate political spending has received a record-high number of comments in support—323,000 so far. These comments have come from ordinary Americans as well as from the Maryland State Retirement Agency, dozens of senators and members of Congress, five state treasurers, and a large group of firms managing more than $690 billion in assets.
The SEC has admirably taken the first step toward addressing the disturbing secrecy surrounding corporate political spending by beginning the rulemaking process for a disclosure rule. The Commission’s new chair, Elisse Walter, has the opportunity to promote the SEC’s core goal of giving investors the facts they need to make informed decisions by completing rulemaking this year. The agency must act to protect corporate democracy by bringing corporate political expenditures out of the shadows.