Today, the House Financial Services Committee approved the Shareholder Protection Act (H.R. 4790), sponsored by Rep. Michael Capuano (D-Mass.) and 49 co-sponsors, clearing the way to send the measure to the House floor. Chairman Barney Frank’s (D-Mass.) strong support for the bill was instrumental in moving it forward. Public Citizen applauds the leadership of Reps. Capuano and Frank on this measure and strongly encourages the full chamber to take up the measure as soon as practical and ratify this desperately needed legislation.
Following the Supreme Court’s disastrous Citizens United decision earlier this year, corporations may now spend unlimited amounts on elections. This new spending in politics allows corporations to tap directly into corporate treasury funds without any accounting to shareholders on how the spending decisions are made.
Whatever speech rights corporations have been granted by the court, they must be the rights of its shareholders. Under current law, a corporate CEO may simply dip into corporate funds and spend wildly on behalf of candidates or political parties without even informing, let alone getting the approval of, the shareholders – those who actually own the company. Shareholders should have a say on how their money is spent.
In response, Capuano introduced the Shareholder Protection Act, modeled after similar corporate governance laws on the books in Great Britain. The legislation would:
- Mandate an affirmative vote of a majority of all shareholders for approval of an annual political expenditure budget (chosen by the management) for a publicly held corporation;
- Require that each specific corporate political expenditure over a certain dollar threshold be approved by the board of directors and promptly disclosed to shareholders and the public;
- Require that institutional investors inform all persons in their investment funds how they voted on corporate political expenditures; and
- Post on the Securities Exchange Commission website the amount each corporation is spending on elections, and which candidates or issues they support or oppose.
Labor unions already are subject to rules governing their political activity. Workers may opt out of union membership and still keep the same job, and non-union workers can get a refund on any collective bargaining dues spent for political purposes under the Supreme Court’s 1988 Beck decision. But these rights do not extend to shareholders of corporations or to participants in funds invested in corporations, such as investors in 401k retirement funds.
The Shareholder Protection Act is a reasoned response to restructure some of the rules governing corporate behavior in light of the new corporate “rights” granted by the court. Responsible corporate governance requires the involvement of informed shareholders and informed investors, holding management accountable and ensuring that political spending decisions are made transparently and in pursuit of sound business.
The Citizens United decision poses a grave threat to our democracy. We need a constitutional amendment to undo the damage done by Citizens United. In the meantime, however, The Shareholder Protection Act constitutes an important, if very partial, measure to blunt the effect of the Supreme Court’s decision.
Craig Holman is the government affairs lobbyist for Public Citizen.