In 2010, in the case of Citizens United v. Federal Election Commission, the Supreme Court ruled that “prohibition on corporate independent expenditures is an outright ban on speech,” according to this syllabus from Cornell University's Legal Information Institute. As a result, companies have been able to contribute to political campaigns. Yesterday, several legislators introduced a law that would require shareholder authorization before public companies could make certain political expenditures.
Representative Michael Capuano (D-Mass.), along with Senator Robert Menendez (D-N.J.) and Senator Richard Blumenthal (D-Conn.) introduced The Shareholder Protection Act. “A corporation's money really belongs to the shareholders, not the executives, and those shareholders deserve a voice if their money is going to be spent on politics,” said Senator Menendez in a release. Political activities covered under the bill include spending affected by the Citizens United decision, such as electioneering communications and independent expenditures, the release stated. H.R. 2517, which has 42 sponsors, was referred to the House Committee on Financial Services.
The Shareholder Protection Act would establish a legal structure with three types of disclosure rules that would apply when public companies want to use corporate resources for political activity, according to the Harvard Law School Forum on Corporate Governance and Financial Regulation. First, it would require companies to disclose to shareholders each year both the amounts and recipients of the company's political spending. The bill also would require oversight of political spending by the board of directors. Finally, it would require a shareholder vote to approve the amount of any corporate spending on politics. As proposed, the bill would make all three of these rules mandatory for all public companies.
Several dozen organizations drafted a letter to Congress in support of the Act. “In corporate governance, there are no rules or procedures established in the United States to ensure that shareholders—those who actually own the wealth of corporations—are informed of, or have the right to approve, decisions on spending their money on politics,” the letter stated. Many of the signatories were non-profit groups, such as Common Cause and the Sunlight Foundation. A handful of investment firms, including NorthStar Asset Management and Zevin Asset Management also signed on.
This isn't the first go-round for the Shareholder Protection Act. Rep. Capuano introduced the same bill last year, although it failed to advance outside the House Financial Services Committee, govtrack reports.