Silenced No More, A Champion of Transparency Speaks Out

By Rachel Curley

“We should consider giving investors much more transparency into how public companies spend their money on politics,” declared Robert Jackson of the Securities and Exchange Commission (SEC) in front of the House Financial Services in September. This was the first time in four years a sitting Commissioner raised this issue in front of Congress.

Before joining the Commission, Jackson joined a bipartisan group of securities law experts in filing a petition for a rulemaking calling on the SEC to require public corporations to disclose their political spending to their shareholders. This petition was prompted by the Supreme Court’s 2010 decision in Citizens United v. FEC, which opened the flood gates for corporations to spend unlimited amounts of money to influence American politics through intermediaries and secret election activity. It was clear to this group of scholars that not only did secret election influence threaten our democracy, but it posed significant risk to shareholders whose money could be used to fund political goals without their knowledge.

Since joining the Commission almost two years ago, Commissioner Jackson has been hamstrung on this critical investor issue because Conservatives in Congress snuck language into the federal Appropriations bill that bars the SEC from finalizing a rule requiring corporations to disclose their political spending. The Appropriations rider, which was added to the bill behind closed doors, has had the intended effect, chilling work at the SEC on the rule and keeping investors and the public is the dark about how corporations are engaging in our political process. While opponents of disclosure will go to great lengths to make sure that corporations are not required to be transparent, a renewed focus by House Democrats to tackle the influence of money in politics and protect investors has given Commissioner Jackson an opening to speak out.

In his majority opinion in Citizens United, Justice Kennedy assumed that with this new paradigm of spending, there would at least be robust disclosure so that shareholders could assess whether the political activity of their companies presented significant risk. This robust disclosure regime did not exist then and it doesn’t exist now. In this increasingly politicized environment, shareholders are exposed to significant reputational risk if the public finds out their company is spending in politics in a way that is antithetical to their company’s values.

For example, in 2018 it was reported in the press that Florida- based grocery chain Publix and its leadership donated at least $670,000 to Gubernatorial candidate Adam Putnam who publicly declared himself a “proud NRA sellout.” Publix’s support of this pro- National Rifle Association candidate caused a public uproar as the revelation came only months after the massacre at Marjorie Stoneman Douglas High School in Parkland, Florida. The students protested the company’s support of Putnam by staging “die- ins” at two stores, which led to the company suspending its political contributions.

As Commissioner Jackson has made clear, this is a critical investor issue. Corporate executives can spend shareholder money in ways that benefit insiders and not the business as a whole. “When it comes to politics, [corporate] insiders’ interests may diverge from those of investors,” Jackson elaborated in his House appearance. “Political spending has consequences that goes beyond the company’s performance- like advancing insiders’ preferred political views- and executives’ decisions may be influenced by those preferences.”

Investors want more information about how their corporations engage in politics. More than 1.2 million comments have come in to the SEC on Jackson’s original rulemaking petition- the most in the agency’s history. It’s time for the SEC to get to work on this critical rulemaking and for Congress to remove the harmful Appropriations rider so that the rule can be finalized.