SEC Should Require Disclosure of Corporate Contributions

sec-should-require-disclosure-of-corporate-contributions

We all know shareholders are the primary stakeholders when it comes to publicly traded companies. So why is it that investors do not get information, let alone a say, as to where their companies are making political contributions? Is it a lack of public support? Lack of regulatory authority by the Securities and Exchange Commission (SEC)?

Unfortunately, it appears the culprit is a lack of political will.

In the wake of Citizens United v. FEC, there has been massive growth in the amount of corporate contributions to political parties, PAC’s, and candidates on both sides of the aisle from publicly traded companies with no mandated disclosure mechanism to the shareholders. While there are many organizations that are working to increase the transparency of political contributions, most of the focus has been on individual contributors with far less attention being paid to corporate contributions and the intentions behind making those contributions.

While it remains unlikely that congressional action will be taken to address corporate contributions, the SEC can independently take meaningful action that would require the disclosure of corporate contributions and thus protect the interests of individuals who invest in publicly traded companies.

There are numerous reasons why to establish rules for transparency of corporate contributions, including:

  • Disclosure ensures shareholders have the information they need to make informed investment choices. The political spending by a company may not align with individual shareholders ideology or may not even be made to candidates who would benefit the companies bottom line, thus being a frivolous expense that investors would not be interested in making.
  • Gambling with a corporate brand through political spending is a high-stakes game for companies and their shareholders. There can be serious ramifications for a company’s bottom line if its political spending suddenly becomes public and their issues or candidates of choice don’t sit well with their consumers. The public relations battle required to regain a sullied reputation can be incredibly costly endeavor, one which investors may not support. (see: AetnaChick-Fil-AWellPoint)
  • The public wants corporations to ensure that shareholders’ know how companies are spending their money. In the United States, we know that when businesses are held accountable by their investors, they will be less likely to engage in behavior that would be considered unethical. A recent New York Times / CBS poll shows that 84% of adults already believe that there is too much money in our political system. For shareholders, sunshine can serve as the best disinfectant.

The Supreme Court explicitly expressed desire for corporate accountability in the Citizens United opinion, writing that disclosure provides “shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.”

SEC Chairwoman Mary Jo White could take action immediately to establish rules that would require corporate disclosure of political contributions. Dozens of organizations have called upon her to act and a record breaking 1,000,000 comments have been left on the SEC website urging full disclosure by publicly traded companies.

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