Voluntary disclosure isn't working as well as it could be, so SEC could propose a new rule requiring publicly traded companies to disclose all of their political contributions

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Plan Would Force Public Companies To Reveal Political Giving
By Kara Brandeisky, April 27, 2013

The 2012 election was the most expensive in history, but there remain some gaping holes in our knowledge about who paid for what. The Securities and Exchange Commission is considering a proposal to add more transparency in future elections, but it won't happen without a fight.

The SEC proposal would require publicly traded companies to disclose all of their political contributions. And that would force companies to decide, in effect, if being linked to a candidate or partisan position is worth the impact political advocacy might have on its bottom line. Not surprisingly, the U.S. Chamber of Commerce is vowing to fight the effort to tighten disclosure rules.

SuperPACs And 'Social Welfare' Groups

The Supreme Court's 2010 Citizens United ruling allowed corporations to give unlimited contributions to superPACs, but relatively few public companies have done so, perhaps because political action committees must disclose their donors.

Watchdog groups think some public corporations have contributed to tax-exempt groups that fall under the 501(c) section of the tax code. These groups can engage in political activity — as long as they say their primary purpose is educational — and do not have to disclose their donors. Yet these "social welfare" groups include big political players, ranging from Karl Rove's Crossroads GPS to President Obama's Organizing for Action.

According to the Center for Responsive Politics, Crossroads GPS spent more than $70 million in 2012. Organizing for Action, which grew out of Obama's 2012 campaign, was formed after the election cycle. Its founders have pledged to refuse corporate contributions and disclose a list of donors.

Most corporations also belong to 501(c)(6) organizations, like trade associations and chambers of commerce, which can engage in political activity. For example, the U.S. Chamber of Commerce spent $35.7 million in 2012 — and it's now leading the charge against the SEC's petition. Altogether, the Center for Responsive Politics estimates these tax-exempt groups spent at least $300 million in the 2012 election cycle.

If the SEC does propose the new rule — an action it could take as early as next week — it would start a process that would include a comment period and public meetings. Enacting the rule also could spur legal action from opponents.

Voluntary Transparency

A study of the 2012 election cycle shows that many companies already are making at least some donations public, perhaps due to increased pressure from activists and shareholders.

The Center for Political Accountability has been tracking voluntary disclosure by corporations since 2003. For the past two years, the group has compiled a ranking called the CPA-Zicklin Index, which found that 58 percent of the top 200 companies in the S&P 500 voluntarily disclosed some information about their political spending, and 85 percent of companies studied over two years improved their scores for political disclosure and accountability.

Center for Political Accountability President Bruce Freed said that disclosure and accountability policies have become mainstream corporate governance practices. "When we did the index in 2011, we were really, frankly, quite surprised at the results — really pleasantly surprised — when we found that there were companies that were adopting disclosure and accountability policies without having been engaged by investors," Freed said. "They were doing it on their own."

However, the group also found that 59 percent of companies did not disclose any information about payments to trade associations, and 75 percent did not disclose any contributions to tax-exempt social welfare groups.

The Center for Responsive Politics has reported that some companies, including PepsiCo and Koch Industries, have lobbied against the SEC proposal during the first quarter of 2013. But Freed has found that other corporate representatives are frustrated by the varied patchwork of voluntary disclosures.

"I know from discussions with companies that there are a growing number of companies that will say privately, yes, we would like to see a rule because they see uniformity as in their self-interest," Freed said. "It means that companies would be operating on a level playing field here."
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