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SEC Urged to Require Disclosure of Political Spending

Leading law professors called for the Securities and Exchange Commission to require publicly held companies to disclose their political spending.

  • Elizabeth Kennedy
August 5, 2011

A committee of leading law professors, including Lucian Bebchuk and Robert Jackson, the authors of the seminal article Corporate Political Speech: Who Decides?, filed a petition with the Securities and Exchange Commission calling for the agency to require publicly held companies to disclose their political spending.

Information about corporate spending on politics is important to shareholders. The petition demonstrates the increasing interest of investors in monitoring corporate spending on political activity by providing data about the recent explosion in proxy proposals to address the issue.

It also points to evolving best practices among companies that voluntarily adopt strong disclosure policies, and suggests that the SEC use these policies to devise a rule for all publicly traded companies. These policies demonstrate that disclosure of corporate political spending is entirely feasible and that a well-designed disclosure rule will not be overly burdensome.

The petition concludes:

Shareholders in public companies have increasingly expressed strong interest in receiving information about corporate political spending on politics, and such spending is likely to become even more important to public investors in the future.  Furthermore, shareholders need to receive such information for markets and the procedures of corporate democracy to ensure that such spending is in shareholders’ interest. Still, while many large public companies have begun to provide such information, no existing rule requires disclosure of this information to investors, and corporate political spending remains opaque to investors in most publicly traded companies.  The Commission should address this lack of transparency and, drawing on its expertise and experience in designing rules for disclosure of other information that is of interest to investors, should adopt rules concerning disclosure of corporate political spending.

While the petition stops short of recommending that the SEC adopt any specific new disclosure rule, it is a heartening first step. It opens a critical front in the fight to ensure corporate political spending is transparent and accountable to shareholders.