Advocates for more transparency in the political system were dealt another blow this week as the Securities and Exchange Commission dropped a potential rule on the disclosure of corporate campaign contributions from its 2014 agenda.
The regulatory agency, which is mandated to protect investors, is required by law to submit its agenda for the next year to the Office of Management and Budget. A conspicuous absence this time was consideration of a rule that would require publicly traded companies to disclose the specifics of their political spending to shareholders — an item that was included in the SEC’s 2013 agenda but was never acted upon.
Individuals, interest groups, and corporations can write to the SEC to show they are in favor or opposed to proposed regulations. This particular provision garnered more than 600,000 public comments, more than any other rule in the SEC’s history, mostly written in favor of more disclosure. That fact alone makes the SEC’s decision all the more disappointing to those agitating for reform.
“It is an uphill battle to get disclosure in dark money. We saw an opening with the SEC and that door seemed to have been open reasonably wide,” said Lisa Rosenberg, government affairs consultant to the Sunlight Foundation, a nonprofit transparency organization. “Now it’s closed a little bit, and it’s very disappointing because there’s so much resistance to disclosure in general that is coming from a small number of donors.”
The landmark 2010 Supreme Court decision, Citizens United vs. the Federal Election Commission, opened the floodgates for unlimited campaign contributions by corporations. Those corporations often funnel the money through intermediaries, like the U.S. Chamber of Commerce, or other groups many experts say are formed explicitly to hide the source of the donations. Since then, efforts to shed more light on political spending have largely flopped, with legislation requiring disclosure of donors contributing more than $100,000 failing to garner a filibuster-proof majority in the Senate in 2012.
SEC officials said that not being included on the official agenda does not prevent a regulation from being ultimately considered, although observers indicated that the omission signaled that the rule was not an imminent priority for the agency.
"The list represents our best estimate as to what would be ready for Commission consideration by fall of 2014," SEC spokesman John Nester said in a statement.
Although a disclosure rule garnered support from public pension funds, state and local elected officials, shareholder activists and campaign finance advocates, the measure was opposed by three of the most powerful lobbying groups in Washington — the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable, who wrote to business leaders across the country in April 2013 to urge companies to resist such efforts.
“It was obvious that the proponents of this proposal were seeking to infringe upon significant First Amendment interests by trying to convince the SEC to pursue the narrow, partisan political goal of singling out for special requirements the entities that they perceive as opponents in political and policy debates,” Chamber spokesperson Blair Latoff said in a statement to Al Jazeera. “We are pleased that the SEC saw this proposal for what it was. Campaign finance reform is not, has never been, and should never be a function of the SEC.”
House Republicans have also opposed the measure, warning SEC chairwoman Mary Jo White during her confirmation hearing before the Financial Services Committee in April to not wade into partisan waters and also saying such a rule would be outside of the agency’s purview.
Observers said that although it is difficult to pinpoint the agency’s motivations, it is within the realm of possibility that the SEC made a political calculation.
“Given the toxic partisan divide in Washington and the fact that the SEC is reliant on Congress for its budget, they have to take congressman’s opinions about this very seriously,” said Ciara Torres-Spelliscy, an assistant law professor at Stetson University and an expert in corporate campaign spending. “There are many fights that the SEC has to pick and it’s possible they decided they did not want to expend their political capital on this one.”
Robert Jackson, a law professor at Columbia University who helped write the original petition asking the SEC to consider a disclosure rule, said he believes it is more likely the agency is overwhelmed with the regulation-writing obligations mandated by Dodd-Frank, the massive 2010 financial regulation bill still in the throes of implementation and by the JOBS Act, passed earlier this year to ease regulations on small businesses.
Jackson said he believes the SEC will ultimately have to bend to the will of shareholders. He added that the rule is fundamentally about what is best for shareholders, who should have the right to know how a corporation’s resources are being shepherded, just as they demanded the SEC to enforce transparency around executive compensation.
“Right now, there is no way for shareholders to know of the political spending that is happening and if it’s in their own interest,” Jackson said. “The way we envisioned the rule, every year the company would say this is how much we spent on politics this year, and here’s why we think it’s justified.”
Companies have faced backlash in the recent past when the details of their political spending became public. Super-retailer Target faced boycotts when it was found to be supporting a candidate for governor in Minnesota in 2010 who was opposed to gay marriage, resulting in boycotts of the super retailer and a dip in stock prices.
Torres-Spelliscy added that there is a history of the SEC intervening in political and money issues, including regulating foreign campaign contributions, a legacy of the Watergate scandal, where it was revealed that publicly traded companies were bribing foreign officials. Moreover, there is an appetite for greater transparency, said Rosenberg.
“There’s a pushback against the 'corporations are people' mentality and ordinary citizens are very concerned about that,” she said.