Lights Out: Congress Limits SEC Action on Disclosing Political Spending by Public Companies
December 2015
IN THIS ISSUE
— Cop on the Beat With Hands Tied: Congress Hinders SEC Disclosure Rule
— What the Lack of Disclosure May Mean in 2016 and Beyond
GREETINGS!
Welcome to the December edition of our newsletter! In this issue, we’ll examine the U.S. Securities and Exchange Commission’s efforts to require disclosure of political spending by public companies, and what the push against it could mean for 2016 and beyond.
COP ON THE BEAT WITH HANDS TIED: CONGRESS HINDERS SEC DISCLOSURE RULE
As influence peddling abuses go, bribery and corruption generate far greater attention than campaign finance scandals, yet the power of the campaign finance system as a vehicle to influence decision-makers remains strong. In 2013, the commission first disclosed consideration of a rule to require public companies to disclose their political spending, but opposition delayed the measure from gaining traction.
The recent omnibus spending bill, which passed both houses of Congress and was signed into law one week before Christmas, included language preventing the SEC from issuing such a rule for another 12 months. When the consideration of the rule was first reported, public comments were submitted by advocates of disclosure and by opponents, typically large trade groups whose members would have been forced to comply. The rider added to the spending bill likely ensures that no such measure will be in place during any time in the 2016 election cycle.
WHAT THE LACK OF DISCLOSURE MAY MEAN IN 2016 AND BEYOND
The SEC has long maintained broad authority concerning information publicly traded companies must disclose to investors, and it is likely that the commission would have the authority to enforce a rule about disclosing donors if and when it was able to issue such a rule. This authority may be even more critical in the wake of the U.S. Supreme Court’s Citizens United decision, which rested in part on the notion that the “procedures of corporate democracy” would function — i.e., that companies would conclude that certain disclosures were in their long-term interest.
As it stands, the lack of a requirement creates a level of opacity that makes understanding how a company is advancing its agenda more difficult. While political spending by company political action committees, bundling by employees and lobbying of federal and state agencies can each yield useful avenues for research, adding political activity to foreign operations disclosures, legal proceedings and other material events would give researchers, and the public, another tool with which to understand a company’s intent and operations. Which, it seems, is why opposition existed in the first place.