Shining Light on Corporate Political Spending

The Securities and Exchange Commission (SEC) is currently considering a rulemaking petition requesting that the SEC develop rules requiring that public companies disclose their spending on politics. The petition, which was submitted by a committee of ten corporate law professors that we co-chaired, has received unprecedented support, including comment letters from nearly half a million individuals. At the same time, the petition has also attracted opponents, including prominent members of Congress and business organizations. This Article puts forward a comprehensive, empirically grounded case for the rulemaking advocated in the petition. We present empirical evidence indicating that a substantial amount of corporate spending on politics occurs under investors’ radar screens, and that shareholders have significant interest in receiving information about such spending. We argue that disclosure of corporate political spending is necessary to ensure that such spending is consistent with shareholder interests. We discuss the emergence of voluntary disclosure practices in this area and show why voluntary disclosure is not a substitute for SEC rules. We also provide a framework for the SEC’s design of these rules. Finally, we consider and respond to ten objections that have been raised to disclosure rules of this kind. We show that all of the considered objections, both individually and collectively, provide no basis for opposing rules that would require public companies to disclose their spending on politics. We conclude that the case for such rules is strong. The SEC should develop rules requiring public companies to disclose their political spending