April 14, 2022

Political Spending: Congress Restricts SEC Action (Again)

A year ago, there were signs that Congress might remove a funding roadblock that has prevented the SEC from regulating political spending disclosure. That generosity was fleeting, as Cydney Posner explains in the intro to a recent blog:

I have to admit I was surprised to read that, in the new $1.5 trillion budget bill, Congress has once again prohibited the SEC from using any funds for political spending disclosure regulation. But there it is—Section 633—in black and white: “None of the funds made available by this Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.”

That means that, for now anyway, private ordering—through shareholder proposals at individual companies and other forms of stakeholder pressure, including humiliation—will continue to be the pressure point for disclosure of corporate political contributions. Those proposals have grown increasingly successful in the last couple of years. And, notably, it appears that the focus of many proposals has shifted recently, with more emphasis on apparent conflicts between stated company policies and values and the beneficiaries of those political contributions.

As late as December last year, it looked like political spending disclosure regulation could well be on the horizon. In questioning by the Senate Committee on Banking, Housing and Urban Affairs in connection with his nomination as SEC Chair, Gary Gensler was asked by both sides about political spending disclosure. Gensler replied that his position on the issue would be grounded in economic analysis and the courts’ views of materiality as the information reasonable investors wanted to see as part of the total mix of information. Gensler added that he considered the 80 shareholder proposals submitted last year on the topic and the 40% vote in favor as a strong indicator. In light of that level of investor interest, political spending disclosure was something he thought the SEC should consider.

Cydney goes on to detail recent shareholder proposal activity on this topic and predicts that private ordering will continue full steam ahead. We’ve been writing about these developments on our Proxy Season Blog – if you’re a member, subscribe to that blog to stay in-the-know.

Programming Note: Since tomorrow’s Good Friday and the first night of Passover, this blog will take the day off. Happy Easter and Happy Passover to those who celebrate the holidays, and Ramadan Mubarak to those observing the holy month. Enjoy the weekend and we’ll see you back here on Monday!

Liz Dunshee