SEC May Require Public Companies to Disclose Political Spending

The Securities and Exchange Commission (SEC) is approaching a crucial decision on whether to require publicly traded companies to disclose their campaign spending to shareholders. This proposed rule has engendered heated debate, with the SEC receiving over 500,000 comments in support of it—the most ever for an SEC proposal. 

Supporters, led by the Coalition for Accountability in Political Spending, argue that shareholders should be given information that allows them to evaluate their company’s use of its resources and that SEC regulations already require disclosure of similar information, like executive compensation. Opponents, led by the U.S. Chamber of Commerce, contend the SEC is ill-equipped to wade into the morass of campaign finance issues, which are generally the province of the Federal Election Commission. Advocates say the proposal is about transparency in corporate political spending, while opponents say it would only serve to chill corporate speech. 

The push for this new disclosure rule finds its roots in the U.S. Supreme Court’s Citizen’s United decision in 2010, which allowed corporations to spend freely on politics. Much of that spending—at least $300 million in 2012 alone—has flowed from tax-exempt organizations that are not required to reveal their donors. Under existing SEC rules, companies generally need only apprise shareholders of expenses that exceed 3 percent of a company’s value. Nothing requires companies to inform investors about political spending. 

If enacted, new disclosure rules could have major ramifications for corporate political spending, including the potential to increase shareholder scrutiny and objections to such spending.