Policy Corner | November 24, 2021

Congress must keep path clear for SEC to require corporate political spending disclosure

Rachel Curley
Guest Author

Rachel Curley

ImpactAlpha, November 24 – In these challenging times, we must celebrate the wins where we can. After years of conservative obstruction in Congress, the Senate finally removed harmful language from the federal budget bill stopping the Securities and Exchange Commission from finalizing a rule requiring corporations to disclose their political activity.

Now, Democrats in the House and Senate must fight to fund the government before the money runs out on Dec. 3, and keep this harmful language from returning to any final budget deal. Call your members of Congress today and tell them to pass a clean budget, free of this pernicious provision.

Poison pills

The bill rider that stops the SEC from requiring corporate political spending disclosure was secretly attached to the annual spending legislation several years ago and has remained in effect ever since. This and other “poison pill” riders are generally inserted into the budget process because they are unpopular and would not pass through regular Congressional lawmaking. By sneaking this provision around the SEC into the Financial Services and General Government appropriations bill, opponents of transparency hoped it would get buried in the lengthy, difficult- to- read piece of legislation.

When Democrats won control of the House in 2018, they removed this poison pill rider from the House version of the bill. But it wasn’t until this fall that Senate removed the provision as well.

As both chambers of Congress work out how to fund the government for the next year, leadership should ensure that the language does not make its way back into the final package.

Dark money

The Supreme Court’s decision in Citizens United v. FEC to give corporations the right under the First Amendment to spend unlimited funds from their corporate treasuries to support or attack political candidates has led to a wave of undisclosed cash flowing into U.S. elections. Since Citizens United, outside spending – or money coming from entities not directly affiliated with a candidate – has averaged $1 billion per election cycle. In 2020, super political action committees, or PACs, and “dark money” groups broke a new record by spending $3.2 billion.

Without direction from the SEC, there are no rules or procedures established in the U.S. to ensure that shareholders – those who actually own the wealth of corporations – are informed of decisions around spending their money in politics.

Investors want more disclosure in order to make sound investment decisions. That is why 1.2 million comments – the most in the agency’s history – have come into the SEC in support of the political spending disclosure rulemaking petition from diverse stakeholders including the founder of Vanguard, John Bogle; five state treasurers; a bi- partisan group of former SEC chairs and commissioners; and investment professionals representing $690 billion in assets. Additionally, a significant number of comments that called for corporate political activity disclosure were submitted to the SEC’s recent request for public input on climate and environmental, social, and governance (ESG) disclosure.

Disclosure demand

A company’s political activity – both its election spending and lobbying – is relevant to its shareholders because it can present significant reputational risk if not disclosed and managed properly. Many customers and the purchasing public are paying close attention to whether a company’s political activity lines up with its corporate values. If there is a disconnect, companies can face bad press, boycotts, or targeted social media campaigns.

Following the attack on the U.S. Capitol on January 6, 2021, many large corporations made the decision to suspend donations from PACs. The Conference Board surveyed corporations to learn more about their responses to the insurrection. Of the 84 firms that responded, “46% cited the belief that a stable democracy is necessary for a stable business environment,” and 45% cited concerns about the company’s reputation.

Corporate political activity remains a top priority for investors. According to the Proxy Preview report for 2021, “concern about undue corporate political influence remains the biggest single issue of concern for shareholder proponents, even though total filings are down from their 2014 apex. Proponents have filed more than 1,000 proposals over the last 10 years.” In a record shattering year, 14 political activity shareholder proposals received majority support as of June 24, 2021.

Have your say

With so many priorities on the docket for this Congress, it is critical that investors and the public tell their representatives and senators how important it is to ensure that any budget deal to fund the government going forward does not stop the SEC from requiring corporations to be honest about their political activity. Negotiations are underway with less than a month until the current government funding runs out.

Now is the critical time for Congress to hear from stakeholders about the importance of removing this poison pill policy rider and passing a clean budget.

Rachel Curley is a democracy advocate for Public Citizen’s Congress Watch division.