Thursday, April 25, 2013

Picking Your Battles: Investors Seek Rule to Require Campaign Disclosure


Picking Your Battles: Investors Seek Rule to Require Campaign Disclosure

A group of investors has petitioned the SEC to issue rules to require public companies to disclose their political contributions to tax-exempt groups and trade associations.[1]  The petition has stirred up a blizzard of favorable comments from public employee and union pension plans as well as individual investors.  Businesses and major lobbying groups, such as the US Chamber of Commerce, are bombarding the SEC with negative comments.  As you might expect, Democrats in Congress are urging the SEC to issue rules requiring corporate disclosure, while Republicans are opposed.  In fact, House Republicans have introduced a bill to prohibit the SEC from considering any such disclosure rule.
Pending Matters (1999)

While I’d to know where public companies are making campaign contributions, I’m not sure this is a battle worth undertaking.  If the SEC decides to propose and eventually enact a rule, we’re going to witness a huge battle before the SEC and then in the courts.

Even if the proponents of disclosure ultimately prevail, it won’t make any difference.  Companies are going to continue donating money to trade organizations and issue groups, whether there is disclosure or not.  Would they prefer to keep their giving secret?  Absolutely.  I doubt they want to have to defend their practices.  However, there’s little evidence that making companies reveal potentially embarrassing information, such as salaries, stock options, or perks, has an effect on corporate behavior.  So why should campaign contributions be any different?  Moreover, any rule would only apply to public companies, as the SEC doesn’t have any jurisdiction of private entities.

In my view, active investors would be better served by focusing their attention on matters of corporate governance.  Rather than opening up another front in their battle with public companies, investors should be pressing to get better access to the proxy process, greater say in the nomination of directors, and more effective policies for curbing executive pay.  Using the SEC to force the disclosure of campaign contributions is a battle that’s just not worth waging.


[1] Under Federal law, donations to PACs and Super PACs are already disclosed, and corporations are not permitted to make direct contributions to candidates.  So this debate is over funds given to various issues oriented organizations that don’t required disclosure of their donors under Federal election laws.

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