The following editorial appeared this week in The New York Times:
It’s almost Election Day. Shareholders: Do you know how the cash from companies you invest in is being spent to influence the outcomes?
Unless you invest in companies that voluntarily disclose their political spending, the answer is no. Worse, the Securities and Exchange Commission — the presumed guardian of investors’ right to know how corporate executives spend shareholder money — will not lift a finger to help you find out.
The sums in question are not insignificant. Election spending has mushroomed since 2010, when the Supreme Court’s decision in the Citizens United case opened the floodgates to special interest money in politics.
The latest tally by the Center for Responsive Politics, a watchdog group, projects that nearly $700 million will be spent this year by groups other than parties and candidates. Of that total, roughly one-third, at least, will be spent by tax-exempt groups, including trade associations and “social welfare” groups that are set up for the purpose of raising money from anonymous donors.
Supporters of both political parties use these vehicles, though Republican-backed groups far outstrip Democratic-backed ones in secret fundraising.
The SEC has a role to play, because a disclosure requirement is the only way for shareholders to know for sure whether and how much the companies they own are donating and whether such spending helps the bottom line. As things stand now, evidence indicates that much of the money flowing to tax-exempt groups comes from companies that give anonymously in order to avoid alienating shareholders, customers or legislators they aim to unseat.
Starting in 2011, securities experts, institutional and individual investors, investor advocates and many Democratic lawmakers joined forces in a broad effort to get the SEC to require public companies to disclose their political spending. In late 2012, the issue was placed on the SEC agenda.
But nothing happened, and, in May 2013, the newly confirmed SEC chairwoman, Mary Jo White, assured Republican legislators who opposed disclosure that the SEC was not working on a rule. In late 2013, the issue was removed from the agency’s agenda. White explained that the SEC had to focus on a host of overdue rulemakings required by congressional legislation passed in earlier years.
That claim may not have been credible then and is certainly not now. Over the past year, progress has remained slow on overdue rules, while other issues have been added to the agenda.
It seems clear that the SEC is not putting off consideration of a political disclosure rule because it is too busy with other things. Rather, the delay is part and parcel of its longstanding reluctance to issue strong rules on investor rights and protections, especially in the face of Republican resistance.
Basic investor protection requires that shareholders know how corporate money is spent. Good corporate governance requires executives to be transparent about their use of company cash.
Ignoring the need for disclosure political spending won’t make the need go away. It only makes the SEC complicit in the corrupting system of unlimited campaign donations from unnamed donors.