Ciara Torres-Spelliscy is an Assistant Professor at Stetson University College of Law and the co-author along with economist Dr. Kathy Fogel of Shareholder-Authorized Corporate Political Spending in the United Kingdom. I am posting her views on American corporate political transparency below [FP]:
by Ciara Torres-Spelliscy
As I told my law students in a recent class, when I was in law school, no one cared a fig about corporate political spending. I did not hear about it in Constitutional Law, Corporate Law or Fed. Tax. It was a non-issue because for the most part, it was banned. It made sense that back then, the SEC would not have a corporate political spending reporting requirement. That would have been tantamount to the agency’s asking, “have you committed any federal election crimes?” Now that such political spending is legal, the SEC should respond to the growing calls for a new disclosure rule.
Much has changed in the years since I was on the business end of a Con Law exam. In particular, in 2010, the Supreme Court did away with corporate source limits on election ads altogether in the infamous Citizens United case. The upshot of this case changed not just federal law going back to 1947, but also state laws, some of which dated back to the turn of the twentieth century.
The new normal is corporations can spend an unlimited amount of their treasury funds on independent political expenditures in local, state and federal elections. This brings us back to the SEC and its utter lack of political disclosure rules. Because of this gap, publicly-traded corporations can spend in elections without ‘fessing up. This seems odd given how passionate shareholders are about transparency.
In the summer of 2011, ten corporate law professors petitioned the SEC for a new disclosure rule to rectify this situation. These professors are both conservative and progressive, yet they all agree transparency of corporate political spending is a must.
Economists have already written in support of the professors’ petition. Economist Dr. Michael Hadani of Long Island University noted that one of the reasons why shareholders should want more reporting on corporate political spending is that it can backfire. His regression analysis of over 1,100 companies over an 11 year period found political spending had a negative impact of firms’ market value.