Regulatory: Limiting corporate political activity

Shareholder proposals, SEC rules and disclosure requirements

In the wake of Citizens United and other deregulatory court cases, corporations and unions are now permitted to spend their own funds on “express advocacy” or “electioneering communications.” Since Citizens United was decided, critics of the decision have tried to restrict how corporations may be involved in the political process in several ways, many of which are outside of the usual campaign finance framework.

  1. They have tried to impose additional disclosure obligations on donors and recipients through legislation and regulation.
  2. Advocacy groups have tried to compel corporations to adopt policies to limit their political activity and to disclose political spending.
  3. Shareholders have launched similar efforts through the proxy process.

Congressional Efforts

Corporate Governance: Another piece of pending legislation would require:

  • Public companies to include a description of their political activities planned for the fiscal year in their proxy statements
  • An affirmative vote of a majority of the shareholders to approve the political spending
  • The SEC to issue rules requiring a board vote on any political expenditures of $50,000 or any expenditure resulting in the total amount spent by the company for a particular election to exceed $50,000
  • Regular reporting of political activity by publicly traded companies.

It is unlikely that this bill will pass during this Congress.

Third Party Efforts

Advocacy Organizations: In addition to legislative and regulatory efforts, advocacy groups, led by the Center for Political Accountability (CPA), have pursued campaigns to encourage corporations to increase disclosure and oversight of their political spending. In the fall of 2011, the CPA released a report ranking 99 companies based on their political disclosure and accountability.

Contributing Author

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Ronald Jacobs

Ronald M. Jacobs is a Washington-based partner in Venable’s regulatory group. He co-chairs the political law practice at Venable LLP, and counsels clients on all...

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Contributing Author

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Alexandra Megaris

Alexandra Megaris is an associate in Venable’s regulatory practice group. She assists clients with ongoing compliance with all aspects of state and federal political law,...

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