Thursday, April 25, 2013

Disclosure of Corporate Donations

The New York Times reported yesterday that the Securities and Exchange Commission ("SEC") is considering proposing a rule that would require corporations to disclose their political spending. Over the past few months, the SEC has been flooded with calls for such disclosure in response to the large amount of corporate donations to tax-exempt groups that engaged in election-related activities during 2012.  Currently, neither the Federal Election Commission nor the IRS requires such groups to disclose their donors, with the result that public corporations tend to contribute to such groups in lieu of super PACs that are subject to disclosure rules. 

According to the Times, the proposal's supporters argue that "shareholders should be able to evaluate business executives' oversight of company resources and that SEC regulations already require disclosure of similar information, like executive compensation."  In contrast, opponents believe that such a regulation oversteps the SEC's authority and role, which, according to Rep. Scott Garrett, is "investor protection."  As the Times reports, the US Chamber of Commerce (which also opposes the proposal) "believes that funds expended by publicly traded companies for political and trade association engagement are immaterial to the company's bottom line." 

Views on the proposal follow party lines, with Democrats supporting it and Republicans opposing it. In fact, House Republicans have introduced legislation that would prevent the SEC from issuing such a rule.  Should the SEC move ahead, it seems a major battle looms.

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