Mary Jo White, the new chairwoman for the Securities and Exchange Commission (SEC), is being put to the test with a petition, from a coalition of Democratic lawmakers and activist shareholders, demanding publicly-traded corporations be mandated to disclose political contributions.
In the last presidential election cycle, hundreds of millions of donations were made on behalf of corporations to political parties and political action committees (PACs) without any transparency for voters or shareholders.
Now, those who have a stake in the companies — the shareholders — are claiming they have a right to know what candidates and causes corporations support financially, and they’re being backed by Democratic lawmakers who support their cause.
A petition to the SEC regarding the proposed regulations has been submitted, attracting more than 1 million comments. For a commission accustomed to a fair share of submitted petitions, that’s a record.
The SEC has insinuated it could issue a proposal in line with the petition, indicating it’s considering making changes that would allow for more transparency, according to the New York Times.
Impacting the political game
While corporations typically do not directly fund specific candidates, they are heavy givers to industry trade associations and social welfare organizations, including American Crossroads, owned by Karl Rove. While technically considered an organization dedicated to educating citizens on issues of social welfare, it has emerged as a leader in campaign advertising, and therefore isn’t mandated to disclose information relating to funding and donations.
Corporations’ disclosure of political donations to these organizations and industries could prove problematic.
The move is being challenged by trade organizations and the industries they represent, which claim the proposal would represent an overreach by the SEC and a regulation that steps on the rights of corporations. The most vocal trade organizations include the most powerful in the nation, like the National Mining Association, the American Gaming Association and the U.S. Chamber of Commerce.
Yet shareholders say they have a right to know where politically-specific payments are being made.
“In the context of [the U.S. Supreme Court ruling on Citizens United v. Federal Election Commission], at least requiring corporations that are publicly traded to have to go ahead and let their shareholders know what contributions are being made is an appropriate protection for the shareholder to have a voice in that process and generally for the public to know what companies are funding what,” New Jersey Democratic Sen. Robert Menendez told Politico in January.
Politics behind politics?
Preparing for the battle, Republicans are going on the offensive. Last week they introduced a bill in the House that would make it illegal for the SEC to implement any rules relating to campaign disclosure. Republican Congressman Scott Garnett of New Jersey is its co-sponsor.
Daniel Gallagher, a Republican member of the SEC, has accused those behind the petition of taking on an issue that is “politically charged,” while ironically protecting the industry from disclosing its role in the political system.
The U.S. Chamber of Commerce, considered one of the nation’s most powerful trade agencies, has thrown itself into the ring, too, going so far as to claim that any implementation of the petition request would be a violation of corporations’ free speech rights.
“The Chamber believes that the funds expended by publicly-traded companies for political and trade association engagement are immaterial to the company’s bottom line,” Chamber of Commerce Spokeswoman Blair Holmes told the New York Times.
The calls against the proposal are also carried by so-called “Super PACs,” which emerged as major players in the U.S. campaign cycle. During the 2012 election campaign season, more than 220 Super PACs spent a combined total of $546 million. According to an LA Times analysis, 78 percent of all funds spent were directly aimed at the defeat of a candidate.
Thanks to the Citizens United decision, the contributors to those Super PACs, whose funds were directly aimed at the manipulation of the presidential election, are kept secret.
The move by shareholders and Democratic lawmakers to poke a hole through that protection by mandating publicly-shared companies disclose where their money is going is upsetting the nation’s most influential Super PACs, including that of Charles and David Koch, co-owners of Americans for Prosperity, a leading conservative Super PAC.
Steve Lonegan, who represents Americans for Prosperity, told the New York Times the organization was “keeping an eye” on White, claiming the SEC will likely back down due to threats by industry leaders to fight any change to SEC regulations.
“My feeling is they are not going to want to deal with this,” Lonegan told the Times. “The SEC has to deal with its own problems, and with what they’re actually authorized to be doing.”
The SEC has indicated that if it decides to make a move, it will do so by the end of April. Last year, SEC staff filed a notice indicating they were considering the proposal.