Testimony in Support of S.213
Legislation to Ensure Corporate Accountability to Shareholders in Political Expenditures
Pamela H. Wilmot, Executive Director Common Cause Massachusetts
Joint Committee on Election Laws
April 13, 2016
In 2010 the Supreme Court ruled in Citizens United that corporate political spending is covered under the First Amendment and cannot by limited by the government. However, many people have forgotten that the ruling affirmed the value of disclosure and transparency, to quote the ruling: “prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.”
S.213 requires something rather simple: that the owners of a corporation, the stockholders, be allowed to decide when the corporation spend money intended to alter the outcome of an election, and then be informed when it does so. To achieve this, the bill requires that the shareholders authorize recipients and amounts of the entire year’s political expenditures in advance, and then within 48 hours of making such expenditures, the corporation must disclose online, and to it’s shareholders the amount, recipient and purpose of the expenditure. To enforce this, the bill makes corporate officials who violate them personally liable to the company for the money, as well as allows the secretary of the commonwealth to revoke the charters of corporations that violate these provisions.
In 2011, The Committee on Disclosure of Corporate Political Spending, a group of ten academics from law schools around the country “whose teaching and research focus on corporate and securities law” petitioned the SEC to require disclosure of corporate political spending. Their petition garnered more than a million letters of support and was placed on the SEC’s regulatory agenda, only to be removed after pressure from large corporate lobby groups.
Shareholders are beginning to put increasing pressure on their companies to disclose political expenditures. Large shareholders such as the New York State Common Retirement Fund have been able to convince numerous companies like Comcast, Harley-Davidson, and Southwest Airlines to provide full disclosure, but the fight is not over. Still too many companies leave their shareholders in the dark as to their activities, spending corporate money on causes that the stockholders don’t have a say in and don’t even know about.
A paper from the Emory Corporate Governance and Accountability Review found that, “there is empirical evidence that politically connected, yet secretive firms have lower value, show worse financial performance, and are more likely to need government bailouts. One study examined almost a thousand S&P 1500 firms for ten years and found a negative correlation between political spending and both market and accounting performance. William S. Laufer, a professor at the Wharton School and director of its Zicklin Center for Business Ethics Research found that ‘corporate political disclosure and accountability . . . [are] powerful proxies of good governance and . . . competitive advantage.’”
The Brennan Center for Justice at New York University suggests in their report, “Corporate Campaign Spending: Giving Shareholders A Voice”, that exactly these measures are the best way to hold corporations responsible and reduce corporate political spending.
S.213 follows a strong precedent: in Britain corporations are required to have stockholder approval and knowledge of all political expenditures, which significantly reduced corporate spending in elections. Additionally, state legislators in Maine, Maryland, New York and New Jersey have introduced bills that demand that a majority of shareholders approve corporate gifts to political committees or candidates.
Please send a strong message of support for transparency by giving S.213 a favorable report.
 The petition as presented to the SEC: http://www.sec.gov/rules/petitions/2011/petn4-637.pdf
 The comments: http://www.sec.gov/comments/4-637/4-637.shtml
A summarizing article from the Harvard Law School Forum on Corporate Governance and Financial Regulation: http://corpgov.law.harvard.edu/2014/09/04/the-million-comment-letter-petition-the-rulemaking-petition-on-disclosure-of-political-spending-attracts-more-than-1000000-sec-comment-letters/