In July 2011, we co-chaired a committee of ten corporate and securities law experts that petitioned the Securities and Exchange Commission to develop rules requiring public companies to disclose their political spending. In a post eleven months ago, we noted that the petition had attracted more than 250,000 comment letters. In this post, we report that, as reflected in the SEC’s webpage for comments filed on our petition, the SEC has now received more than half a million comment letters regarding the petition. To our knowledge, the petition has attracted more comments than any other SEC rulemaking petition—or, indeed, than any other issue on which the Commission has accepted public comment—in the history of the SEC.

As in the past, it remains the case that the overwhelming majority of comment letters filed with the SEC are supportive of the petition. In November 2012, the then-Director of the SEC’s Division of Corporation Finance said that the Division was “looking at the [petition] and we have 300,000 comments on it. So in light of this interest, we’re taking a look at whether to make a recommendation to the Commission.” The comment letters submitted over the last several months reinforce the strength of interest noted by the Director.

We should note that, of the filed comments, 497,024 came from individuals who expressed their views through one of fourteen common types of letters filed with the Commission. While these comments use standard form letters, each was separately submitted by individuals who presumably were interested enough in this subject to write to the SEC. Furthermore, the petition has separately attracted 3,363 distinct comment letters, and the overwhelming majority of these letters is also supportive of the petition.

…continue reading: Rulemaking Petition on Disclosure of Political Spending Attracts Support from More Than 500,000 Comment Letters Filed with the SEC

In our first four posts in this series (collected here), we examined four objections raised by opponents of mandating disclosure of political spending and explained why these objections provide no basis for opposing such rules. In this post, we focus on a fifth objection raised by opponents of these rules: the claim that the SEC should not require disclosure in this area because shareholder proposals requesting disclosure of corporate spending on politics generally have not received the support of a majority of investors.

Several opponents of the petition have argued that the SEC should not mandate disclosure of corporate political spending because, in many cases, shareholder proposals seeking such disclosure at individual companies are supported by less than a majority of voting shares. For example, Paul Atkins, a former SEC commissioner, argued in a recent article that “majorities of shareholders routinely refuse to support mandatory disclosure” of corporate political spending—and, thus, that shareholders are simply not interested in this information.

…continue reading: Responding to Objections to Shining Light on Corporate Political Spending (5): The Claim that Shareholder Proposals Requesting Disclosure Do Not Receive Majority Support

In our first three posts in this series (available here, here and here), we examined three objections raised by opponents of mandating disclosure of political spending and explained why these objections provide no basis for opposing such rules. In this post, we focus on a fourth objection that opponents of these rules have raised: the claim that requiring disclosure of corporate political spending would create an important imbalance in the information that is provided to investors and voters about two of the most significant sources of spending on politics: corporations and labor unions.

Several opponents of the petition have argued that disclosure of corporate political spending would convey an important political advantage to labor unions—organizations that, opponents argue, may also engage in undisclosed spending on politics. For example, Senator John McCain has argued that disclosure of corporate spending on politics “forces some entities to inform the public about the origins of their financial support, while allowing others—most notably, those affiliated with organized labor—to fly below the radar.”

…continue reading: Responding to Objections to Shining Light on Corporate Political Spending (4): The Claim that Such Disclosure Would Give a Political Advantage to Unions

The SEC is expected to consider a rulemaking petition requesting that the SEC develop rules requiring that public companies disclose their spending on politics. The petition has received significant support—including nearly half a million comment letters urging the SEC to act as advocated by the petition—but has also attracted opponents. In our article Shining Light on Corporate Political Spending and in this post series, we respond to each of the objections that opponents of the petition have raised.

In our first two posts (available here and here), we explained why opponents’ claims that corporate spending on politics is immaterial to investors, and that disclosure in this area would empower special interest investors, provide no basis for opposing rules requiring public companies to disclose their political spending. In this post, we focus on a third objection that opponents of these rules have raised: the claim that political spending is good for shareholders—and that disclosure will discourage directors and executives from engaging in spending on politics that would be beneficial for investors.

…continue reading: Responding to Objections to Shining Light on Corporate Political Spending (3): The Claim that Political Spending is Good for Shareholders

The SEC is expected to consider a rulemaking petition requesting that the SEC develop rules requiring that public companies disclose their spending on politics. The petition has received significant support—including more than 490,000 comment letters urging the SEC to act as advocated by the petition—but has also attracted opponents, including prominent members of Congress. The SEC recently indicated that it plans to address the petition’s request this year. Given the SEC’s expected consideration of the petition, we have written an article, Shining Light on Corporate Political Spending, that puts forth a comprehensive case for the rulemaking advocated in the petition—and responds to each of the ten objections that opponents of the petition have raised.

In our post last week, we explained why opponents’ claims that corporate spending on politics is immaterial to investors provide no basis for opposing rules requiring public companies to disclose their political spending. In this post, we focus on a second objection that opponents of these rules have raised: the claim that disclosure rules on political spending will empower shareholders who have special interests, such as pension funds, at the expense of other investors.

…continue reading: Responding to Objections to Shining Light on Corporate Political Spending (2): Claims of Special Interest Influence

A committee of academics that we co-chaired has submitted a rulemaking petition urging that the SEC develop rules requiring disclosure of corporate political spending. Our petition has attracted more than 490,000 comment letters, the overwhelming majority of which support the petition. The petition has also attracted opponents, including prominent members of Congress, the Wall Street Journal editorial page, legal academics, and intermediaries that facilitate undisclosed corporate political spending such as the U.S. Chamber of Commerce. And the SEC has indicated that the agency plans to address the petition’s request for rules in this area during 2013.

Given the expected SEC consideration of the subject, we have written an article, Shining Light on Corporate Political Spending, coming out this month in the Georgetown Law Journal, that puts forward a comprehensive case for the rulemaking we advocated in the petition and responds to each of the ten objections that opponents have raised in comment letters filed with the SEC or elsewhere. We show in this article that these objections, either individually or collectively, provide no basis for opposing rules requiring public companies to disclose political spending to their investors.

…continue reading: Responding to Objections to Shining Light on Corporate Political Spending (1): The Claim of Immateriality

The Securities and Exchange Commission recently updated its entry in the Office of Management and Budget’s Unified Agenda to indicate that, by April, it plans to issue a Notice of Proposed Rulemaking on requiring public companies to disclose their spending on politics. Although the Director and Deputy Director of the Commission’s Division of Corporation Finance signaled that the SEC was considering this issue in November, this update provides a firm timetable for SEC action on disclosure of corporate political spending. Moreover, this update makes clear that the SEC’s consideration of this issue will result in a Notice of Proposed Rulemaking.

As co-chairs of the Committee of academics that petitioned the SEC to develop rules requiring public companies to disclose their spending on politics, we are pleased that the SEC has indicated that it plans to move forward on these rules, and we are optimistic that rules will soon be in place to give investors the information they need to assess how corporate funds are spent on politics. As we argued in our petition—signed by a broad group of academics with widely varying views on corporate and securities law—the case for requiring public companies to disclose their spending on politics is strong.

…continue reading: SEC to Propose Rules on Corporate Political Spending by April 2013

A hard-fought campaign is over and President Obama has been reelected. Should shareholders take notice? In brief, yes. In the paper, Corporate campaign contributions and abnormal stock returns after presidential elections, forthcoming in Public Choice, we explore the stock market performance of top corporate contributors after the elections that brought Bill Clinton and George W. Bush, respectively, to power. In both cases, the top contributors strongly outperformed the market.

We focus on campaign contributions by corporations before a presidential election and their stock market performance afterwards. From a rent-seeking perspective, companies can have an incentive to spend money for presidential candidates. And, as presidential hopefuls need to raise large sums, campaign contributions by companies and business associations are usually a welcome source of funds. After the 2010 Supreme Court ruling in Citizens United against FEC, which grants companies the same free speech rights (and thus spending in the political process) as those accorded to individuals, corporate campaign contributions are likely to become even more important in the future.

…continue reading: Corporate Campaign Contributions and Abnormal Stock Returns after Presidential Elections

In an article published today by New York Times DealBook, as part of Lucian Bebchuk’s column series, we focus on the expected SEC consideration of the rulemaking petition urging adoption of rules that would require public companies to disclose information about their political spending.

Opponents of mandatory disclosure rules can be expected to claim that the recent willingness of some large public companies to voluntarily disclose information about their political spending makes it unnecessary for the SEC to adopt such rules. This area can be left to private ordering, it might be argued, allowing each company to choose the level and type of disclosure that best suits its needs. We explain why the SEC should not accept such claims.

The decisions by some large public companies to begin disclosing voluntarily information about their political spending is a positive development. But the emergence of voluntary disclosure practices, we show, does not obviate the need for mandatory rules in this area. Requiring disclosure on corporate political spending is needed to ensure that all public companies provide clear, consistent information that enables investors to know whether, and how, their money is being spent on politics.

The column, titled “Voluntary Disclosure on Corporate Political Spending Is Not Enough,” is available here.

My most recent New York Times Dealbook column, published today, focuses on the expected SEC consideration of the rulemaking petition urging adoption of rules that would require public companies to disclose information about their political spending. As Robert Jackson and I reported in a recent post, SEC officials indicated last week that the Division of Corporate Finance is currently considering the petition and looking into whether to recommend that the SEC issue such rules.

The column argues that the case for adopting such rules is very strong. In future elections, shareholders of public companies should not be left in the dark on whether and how their money is spent on politics.

The column, titled Let Shareholders Know How Their Money Is Spent, is available here.