A federal bill to make public companies more transparent when it comes to disclosing their political spending activities to their shareholders was reintroduced by Sen. Bob Menendez.
The move to attempt to pass the Shareholder Protection Act of 2021 increased with importance for Menendez after the Jan. 6 U.S. Capitol riot as it demonstrates the urgency of getting big money out of politics.
“The events of Jan. 6 taught us just how important this information is to investors and the public at large,” said the U.S. Senator in a press statement. “Now is the time to reexamine how corporate executives spend shareholder money to influence election results and support causes with wide-ranging impacts to our country, including the health of our democracy.”
The proposed law would require large corporations to receive authorization from a majority of its shareholders before managers can spend money on political activities. Menendez noted following the U.S. Capitol riot, corporate America’s decision to suspend or reevaluate further political donations was an acknowledgment that political donations can significantly affect a company’s reputation and financial health.
“Few companies today actually disclose their political spending to investors, let alone give them a say in this process,” said Sen. Menendez. “Corporations should not be allowed to use shareholder dollars as their piggy banks to support in secret whatever causes they may prefer. It’s long past time this information be made public and for shareholders to have a say.”
The Shareholder Protection Act:
- Requires shareholders to authorize, on an annual basis, a political activities budget requested by a company. The budget must receive a majority of votes representing all outstanding shares. Fiduciaries voting on behalf of their investors must disclose their vote to investors.
- Covers political spending activities affected by the Citizens United decision, including electioneering communications and independent expenditures. Dues and payments made to trade associations and other tax-exempt organizations are included if they could be used for such spending.
- Requires a company’s board of directors to vote to authorize each expenditure over $50,000 within the overall budget approved by shareholders.
- Requires public companies to disclose (online, to shareholders, and the SEC) individual board member votes and the details of each such approved expenditure.
- Requires the Government Accountability Office to periodically report to Congress on implementation and compliance.
Citizens United Counterbalance
Proponents of the bill believe the U.S. Supreme Court’s 2010 Citizens United v. FEC decision opened the floodgates for corporate executives to spend unlimited money from company treasuries to disproportionately influence election outcomes.
While the Supreme Court has ruled that companies should be treated as people for purposes of free speech in electoral campaigns, the rights of the actual people investing in these large corporations—shareholders—have been largely overlooked.
To date, no political spending disclosure standards have been established, allowing corporate executives to spend shareholder money without disclosure and approval from investors funding those contributions.
“The Shareholder Protection Act of 2021 would help close this loophole in the disastrous Citizens United v. FEC decision, which has largely excluded shareholders from how large corporations decide to spend money from company treasuries for electoral or political purposes,” added Sen. Menendez. “For more than a decade, large corporations have been allowed to influence our elections and dilute the voting power of everyday Americans in the electoral process.”
“If a violent insurrection is not reason enough to address this glaring problem, then nothing will be. For the good of our democracy, we must act now.”