11 Reasons Why We Need the Shareholder Protection Act
by Ciara Torres-Spelliscy
The Shareholder Protection Act, introduced today in the U.S. House and Senate, addresses corporate governance problems left in the wake of the Supreme Court’s 2010 decision in Citizens United v. FEC, which enables corporations to spend an unlimited amount of money on political advertising.
The bill is modeled on the U.K. Companies Act, which requires prior shareholder approval of corporate political donations. The Shareholder Protection Act would bring this requirement to publicly-traded American companies, as well as implementing quarterly reporting to investors of all corporate political expenditures.
The Shareholder Protection Act was introduced by Rep. Michael Capuano (D-Mass.) and Sens. Robert Menendez (D-N.J.) and Richard Blumenthal (D-Conn.); in total the bill has forty-two House and eight Senate co-sponsors. A broad coalition of socially responsible investors and good governance groups support the legislation.
Here are 11 reasons why we need this new bill to become the law of the land:
11. Post-Citizens United, corporate managers can spend other people's money in politics.
10. Boycotts after the fact won't get the political expenditures back for investors.
9. The “business judgment rule” shields managers from liability for buying political ads in all but the most extreme fact patterns.
8. Corporations can hide their role in politics by spending through opaque trade associations--thwarting accountability.
7. The Securities and Exchange Commission has no disclosure requirements for corporate political spending.
6. Delaware (where a majority of US corporations are incorporated) has no disclosure requirements for corporate political spending.
5. We have a presidential election in 2012 where corporate money could play a determinative yet secret role.
4. Unlike investors in U.K. companies, shareholders in U.S. companies cannot cast a binding vote to stop corporate political spending.
3. The U.S. Supreme Court ruled that disclosure of corporate political spending is fully constitutional.
2. Voters need to know who is funding elections to cast a fully informed vote.
1. Investors need to know which companies are engaged in political fights to make sound financial investments which are aligned with their deeply-held personal values.
For these eleven reasons and many more, I support the proposed federal Shareholder Protection Act to provide shareholders a chance to see past corporate political spending as well as have a say about future corporate political spending. I also support a rule-making at the SEC to require full disclosure of political spending by allpublicly-traded companies.
7/15/2011 - This article has been updated to reflect the final number of legislative co-sponsors in the House and Senate.
Ciara Torres-Spelliscy is an incoming Assistant Professor at Stetson University College of Law and co-author of "Shareholder-Authorized Corporate Political Spending in the UK".