Sound unfair – and like a bad way to run a business? Sadly, that’s the case for shareholders – owners of the largest corporations in America – who’d like to know how their profits are being spent on political causes. Now Sens. Robert Menendez (D-N.J.) and Elizabeth Warren (D-Mass.) are holding a briefing to explain why shareholders’ need this information in their hands.
Since the 2010 Citizens United Supreme Court decision, corporations have been allowed to contribute as much so-called “dark money” as they would like to independent entities like 501(c)(4) “social welfare” nonprofits, and 501(c)(6) “trade associations” like the Chamber of Commerce. The corporations don’t have to tell their own shareholders or the American public how much dark money they’re paying or where it’s going, and the nonprofits don’t have to disclose their donors. The winners are corporate executives with a political agenda and politicians. Shareholders and the American public are the losers.
The Menendez-Warren briefing (which, due to the government shutdown, is expected later this month) will call for the SEC to move the rule forward in tandem with the Dodd-Frank rulemakings. As a part of its mission of protecting investors and maintaining efficient, transparent markets, the SEC has a responsibility to mandate disclosure of material political spending information.
By doing so, they will be right in line with current trends at public companies. Increasingly, S&P 500 companies are voluntarily disclosing at least some of the dark money they’re giving to those groups – about 12 percent of those corporations currently do so. Furthermore, a new study from the nonpartisan Center for Political Accountability and the Zicklin Center for Business Ethics Research at the University of Pennsylvania’s Wharton School found that more than three in four corporations are more transparent now than they were a year ago when it comes to political disclosure practices.
In fact, many leading American corporations are doing the right thing. Microsoft has divulged corporate contributions since 2007, Merck responded to a shareholder resolution by making their contributions public in 2004, and Aflac prioritizes being transparent to its shareholders, disclosing all contributions to outside groups. By serving as role models of industry, these corporations are leading the way toward a system of greater corporate accountability.
Still more telling, most corporate executives support the corporate disclosure trend.. Recently, the nonpartisan Committee for Economic Development found that 79 percent of Republican business executives, and almost all surveyed Democratic executives, would support a transparency rule for corporate political contributions.
It’s time for the SEC to move this rulemaking to the next phase and require disclosure. Corporations tell investors that they are spending in their best interest; if that is really the case then there is no need to hide this spending information. In fact, it is critical for a fair marketplace.
Gilbert is the director of Public Citizen's Congress Watch Division.