Securities Law & Corporate Counsel Blog

The Securities and Exchange Commission (“SEC”) recently indicated that by April of 2013, it plans to issue a Notice of Proposed Rulemaking on requiring public companies to disclose their political spending.  This rule could have broad sweeping effects as it’s estimated that numerous large companies, including almost half of the S&P 100 index, do not currently disclose their political contributions.

This move is in response to alarm raised by several firms, “watch-groups”, and individuals following the 2012 election which saw at least $400 million in “dark money” (political spending funded by undisclosed donors) spent on political candidates.  These proponents claim that following the Supreme Court’s 2010 “Citizens United” ruling – whereby corporations may spend freely from their treasuries on political activities – a corporate political transparency rule is needed to protect and inform investors as to where their money is being spent.

While the push for a new rule by the SEC has gained strong support, there are others who oppose such measures.  These opponents argue that such rules would harm shareholders because the rules would give unions, which would not be subject to them, an advantage over corporations with respect to political spending; and that political spending is beneficial for shareholders.  Furthermore, some argue that the SEC lacks the expertise, as well as the necessary statutory and constitutional authority, to promulgate such rules.

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