The SEC's Teeth
Like lots of Americans, I don’t really think of myself as an investor, but I am.
I’m an investor because I have a 401(k)-type retirement account. Which means that some significant part of my financial future depends, for better or for worse, on corporate profits, stock performance, and other creatures of the market.
Because I’m an investor, it’s the job of the Securities and Exchange Commission (SEC) to look out for my interests, whether or not I am aware of it. About 50 percent of U.S. households are investors of some kind or another. Some are the day-trading aficionados who follow the market as tenaciously as my father-in-law tracks his fantasy football team. Some are like me – we’re investors because that’s the kind of retirement account we were offered for our jobs.
Either way, the SEC is the agency that’s supposed to prevent corporate malefactors from abusing the money we shareholders invest in them. By law, that basically means that these corporations are required to spend shareholder money in ways that will increase profits – profits that are supposed to, among other things, boost my retirement account, since that’s where the money came from. The good folks from Occupy the SEC have a good primer on what it does, from an activist perspective.
Then, about two years ago, the Supreme Court’s ruling in Citizens United v. Federal Election Commission happened – and a brave new world of ways to spend investor money to influence elections was opened up.
The fact that the SEC looks out for shareholder interests is actually a big part of why Citizens United came down the way it did. Consider the words of Justice Anthony Kennedy in his majority opinion in that ruling:
With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions. […] Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are in the pocket of so-called moneyed interests.
But Justice Kennedy was wrong. Congress has failed so far to pass laws requiring corporations to disclose their political spending or to require shareholder approval of corporate political activity. The Internet, instead of providing a wealth of information to hold politically active corporations accountable, is increasingly where we see political ads funded by anonymous corporate interests.
Because of Citizens United, my family’s nest egg has become a political weapon for the corporate agenda. I have no way of knowing whether my money is being used to make attack ads for the U.S. Chamber of Commerce or Karl Rove’s American Crossroads GPS.
Here’s where the SEC has the authority to step in.
Analysis by Public Citizen’s Taylor Lincoln and Harvard Law School’s John Coates, Ph.D., found that companies that disclose their electioneering activities tend to bring higher returns on investments to shareholders than companies that do note disclose their political activities. For shareholders who are exclusively interested in protecting their investments, this correlation suggests that requiring corporations to be transparent about their political activities would not harm these investments.
The SEC also should empower shareholders to have a say whether and how corporations spend their money in elections. If a majority of shareholders do not support corporate political spending, then that company should not spend its money in politics.
Getting the SEC to step in and police corporate political activity would be a tremendous victory, but the agency isn’t going to act without pressure. Already, legal scholars and other experts have started weighing in with the SEC on how it could do this work. We at Public Citizen have convened the Corporate Reform Coalition, a diverse group of more than 70 different organizations working together to compel the SEC to act. Soon, we’ll need help from activists all over the country to help us convince the SEC that, because of Citizens United, cracking down on corporate political activity is now part of its job.
We’re also fighting for constitutional amendment to fully upend the Supreme Court’s perverse Citizens United ruling. Combating corporate influence in elections promises to be a long, arduous campaign over the next several years, and we’re committed to doing everything it takes to end corporate domination and put people back in charge of our government.
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