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Should There Be Uniform Disclosure Requirements Regarding Political Contributions?

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Two years ago, in its landmark Citizens United v. FEC decision, the U.S. Supreme Court ruled that government imposed restrictions on corporate political speech–prohibiting corporations and other associations from using treasury funds to make independent political expenditures–were a violation of the First Amendment.

Following Citizens United there was a tremendous uptick in election spending and a great deal of debate around what kind of disclosure corporations should make about political expenditures.

In April 2010 Congressman Chris Van Hollen introduced the DISCLOSE Act in the House of Representatives. It was later introduced in the Senate in July 2010.  The DISCLOSE Act sought to amend the Federal Election Campaign Act of 1971 to require, among other things, that corporations, unions and other associations make certain disclosures regarding political expenditures. The bill passed in the House, but not in the Senate.

Earlier this month Congressman Van Hollen again introduced legislation to amend the Federal Election Campaign Act to require additional disclosure regarding political expenditures, though the text of this latest bill is not yet available.

Taking a different route, in August 2011, the Committee on Disclosure of Corporate Political Spending (the “Committee on Disclosure”), a group made up of ten prominent securities law professors, petitioned the Securities and Exchange Commission to develop uniform disclosure rules for corporate political spending. That petition remains pending.

This past Friday Commissioner Aguilar, in his remarks before PLI’s SEC Speaks in 2012 program, also called for the Commission to enact uniform disclosure rules related to corporate political spending, noting the large number of comment letters received in support of the Committee on Disclosure’s petition for rulemaking (64,790 in total as of this writing; 42,439 of which the Commission has characterized as a variant on the form of Letter A and 22,118 as a variant on the form of Letter B).

However, according to Reuters, at the same PLI program Chairman Shapiro told reporters that while the Commission will address the rule-making petitions that it receives “at some point” shareholders already have a means of requiring more disclosure. “Companies that receive a shareholder proposal asking them for disclosure about political contributions have been required to put those shareholder proposals in the proxy, so there is a mechanism for shareholders to directly represent to the companies they own to have that issue put forward for a shareholder vote.”

In his remarks Commissioner Aguilar noted that, according to the Committee on Disclosure’s rulemaking petition, out of a total of 465 shareholder proposals that made it into company proxy statements in 2011, 50 addressed disclosure of political expenditures (10.7% of all proposals). A quick search on the outcome of those proposal shows that at least 10 (of the 10 I looked at) failed to garner a sufficient vote to pass.

The success rate of shareholder proposals notwithstanding, there are a number of companies that are making voluntary disclosures about direct and, to a lesser extent, indirect political expenditures on their websites (e.g., Time Warner Inc. and Merck & Co Inc.).

In October 2011, the Center for Political Accountability released an index of corporate political accountability and disclosure policies in S&P 100 companies. The index will be updated annually and expanded to include S&P 500 companies in 2012.

While it doesn’t appear that uniform disclosure rules regarding corporate political expenditures will be a priority, unless Congress suddenly decides to allocate enough funds for the Commission to get through its Dodd-Frank rulemaking and still have something left, the number of companies making voluntary disclosures, at least in the S&P 100, is encouraging. Though the disclosure is sometimes difficult to find and certainly not uniform.

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