44 Senators Submit Letter to SEC Urging Disclosure to Shareholders of Corporate Resources Used for Political Activities
In a letter addressed to SEC Chair Mary Jo White, a group of 44 senators expressed their support for a petition of rulemaking that would require public companies to disclose their political spending to shareholders pursuant to Section 14 of the Securities Exchange Act.
The letter conveyed the senators' opinion that "because shareholders are the true owners of the corporation, a public company should be required to disclose to its owners how their money is being spent." The senators observed that the SEC has received "more than 1 million public comments" supporting the petition, including comments from "leading academics," a number of State Treasurers and two former SEC Chairmen. Despite this widespread support, the senators emphasized, "roughly 2.2% of all public companies in the U.S. make such disclosures, and they do so voluntarily."
The senators requested that Chair White "reconsider the decision to remove [this rulemaking] from the SEC's regulatory agenda" and make it "a top priority for the SEC in the near term."
Commentary
As they used to say in law school, the senators' argument proves too much. If the shareholders have the right to know how their money is spent, then why shouldn't corporations be required to open all of their books to their shareholders? Why, in fact, should they keep any secrets from shareholders?
The real issue should be whether shareholders would benefit if corporations were required to make public disclosures of these expenses, including to non-shareholders who could use the information in ways that could be detrimental to companies and their shareholders. The fact that such a small percentage of companies have released such information in the past suggests that shareholders may not benefit, since such shareholders have not (to my knowledge) generally exercised their rights as shareholders, through the proxy process, to attempt to obtain the information.
If the senators' true objective is to benefit shareholders, then they might suggest that the SEC simply require companies to put the issue to a vote by their shareholders, and allow the intended beneficiaries of the senators' letter to decide what is best for themselves.