While the
commissioners disagreed on many issues they spoke unanimously on one major
issue where securities law and election law overlap: political-spending disclosure.
No one spoke in favor of pressuring the Commission into a rulemaking requiring disclosure
of public-company political spending.
The issue has
bedeviled the Commission for years. Shortly after the Supreme Court decided Citizens United v. FEC, the Senate
considered a bill requiring this disclosure but it failed to garner requisite
support. More recently Senators Charles Schumer, Elizabeth Warren, Robert
Menendez, and Jeff Merkeley threatened to scuttle Commissioner nominees Lisa
Fairfax and Hester Pierce because they refused to declare ex ante they would support a political-spending rulemaking.
Senator
Schumer responded to this heresy with trademark vapidity:
“If one feels that undisclosed special interest money cascading into our
politics is one of the worst problems American faces, then this approach is
very logical.” Apparently fighting ISIS, trillions in debt, and stagnant job growth
take a backseat to learning whether corporation X supported its trade association.
SEC chairwoman Mary Jo White disagrees with Schumer’s priority assessment and has
thus far deflected attempts by politicos and agitprops to force her hand.
Paul Atkins has
long opposed this potential rulemaking, laying out his rationale in a 2013 law
review article, MATERIALITY: A BEDROCK PRINCIPLE PROTECTING LEGITIMATE SHAREHOLDER INTERESTS AGAINST DISGUISED POLITICAL AGENDAS. In it, he
articulated three reasons why this disclosure is deleterious: (i.) materiality
is lacking, (ii.) cost/benefit analysis is off balance, and (iii.) it is
antithetical to the Commission's mission and a low priority compared to 2008
crisis-related issues.
Atkins
revived his reasoning at the panel. The SEC’s mission is to maintain fair, orderly,
and efficient markets, facilitate capital formation, and to protect investors by
ensuring that market participants have accurate material information about
SEC-registered securities. Whether corporations support 501(c)(4)s or (c)(6)s
that advocate certain policies or support certain candidates is immaterial to
that mission. In fact, the groups pushing companies to reveal their political
spending do not represent average investors but entities that usually take
positions adversarial to corporate objectives. Thus they have incentives to
force business perspectives from the political marketplace. These include state
and union pension funds (unions coincidentally aren’t affected).
In fact, more than
75% of the corporate public policy spending proposals in 2012 were proposed by
a coalition of special-interest investors coordinated by the Center for
Political Accountability, Walden Asset Management, and the American Federation
of State, County and Municipal Employees. These groups ‘name and shame’ resisting
corporations to bring unwanted publicity so they retreat from important policy
battles.
Paredes
agreed that the Commission should carefully analyze the cost/benefit to disclosure
requirements not directly related to the touchstone “materiality” requirement. So
did Democrat Commissioner Annette Nazareth who praised Chairwoman White for not
bowing to outside pressure and suggested the SEC was ill-suited for this responsibility
with all the other issues facing the Commission.
In his paper
discussing this issue, Atkins wrote, “Efforts to force mandatory disclosure of
corporate spending on political and other advocacy activities should be viewed
as primarily political rather than economic and, as such, would not serve to
help shareholders evaluate corporate performance or promote shareholder value.”
Commissioners nominated on both sides of the aisle realize the political nature
of these disclosure efforts and deserve praise for saying so.
By Paul Jossey
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