Fulfilling Kennedy’s Promise

Why the SEC Should Mandate Disclosure of Corporate Political Activity

By Taylor Lincoln

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The Supreme Court’s decision in Citizens United v. FEC to permit corporations to spend unlimited sums to influence federal elections was based in large part on the rationale that corporations would disclose their political expenditures and that shareholders would police the wisdom of such spending.

But no effective disclosure requirement was in place at the time of the decision, and subsequent efforts to close the gap through legislation have been rebuffed. Meanwhile, to the extent that shareholders might even learn of their corporation’s political spending, the law currently gives them only limited ability to compel changes.

Now, the best chance to fulfill the Supreme Court’s promises of disclosure and shareholder participation might rest with the Securities and Exchange Commission (SEC). The SEC could require full disclosure of corporate political spending by publicly traded companies, and could facilitate action by shareholders to sign off on such spending.

The twist, we suggest, is that such an action by the SEC might prove to be a favor to the owners of the affected corporations. Despite reflexive opposition to compulsory disclosure of political spending from many self-appointed advocates of the business community, preliminary data suggest that such a requirement might benefit corporate valuations or, at the least, pose no threat of a detrimental effect.