Missing from the Security and Exchange Commission’s list of regulatory priorities for the coming year is any plan to consider whether public companies should disclose their political spending, a setback for investor advocates who rallied behind the cause.
Last year around this time, when the SEC released its 2013 to-do list, it signaled that it might consider formally proposing a rule to require the spending disclosures. But the item slipped off the 2014 agenda released this past week without any formal explanation.
The push to make corporate spending more transparent has grown since a 2010 Supreme Court decision rolled back restrictions on political spending by corporations, associations and labor unions. Last week, the Treasury Department indicated that it is considering rules that would rein in certain tax-exempt groups that have been able to spend large amounts on recent elections without revealing their donors.
For the SEC, the issue surfaced in July 2011, when 10 professors from leading law schools submitted a petition asking the agency to consider requiring the corporate spending disclosure. They said public companies should not have free rein to spend their shareholders’ money on political communication without revealing what they are doing.
A groundswell of support followed, with retail investors, union pension funds and elected officials at the state and federal levels writing to the agency in favor of such a requirement. The idea attracted more than 600,000 mostly favorable written comments from the public — a record response for the agency. And with Mary Jo White’s arrival as SEC chairman in April, the initiative’s supporters hoped for action.
“But she obviously did not really recognize the significance of this,” said Bruce Freed, president of the Center for Political Accountability, which has pioneered the push for political spending disclosures. “She is not looking at investor protection and corporate governance broadly. You do not see those as primary drivers of her agenda.”
Robert J. Jackson, one of the professors involved in crafting the petition, said he has not lost hope.
The agency’s new agenda is geared toward advancing proposals that are mandated by Congress, so it is not surprising that a non-mandatory initiative has dropped off the radar screen for now, he said. The agency is not precluded from acting on a matter, even if it’s not on the formal agenda, according to federal statute.
“I remain hopeful that the SEC will eventually take up this rule,” said Jackson, an associate professor at Columbia Law School. “I’m hopeful that when the SEC looks at the merits, they’re going to decide that a rule is necessary.”
The SEC declined to comment on the spending disclosure issue. But SEC spokesman John Nester said in a statement that the latest agenda “represents our best estimate as to what would be ready for Commission consideration by fall of 2014.”
Several other items have fallen off the agency’s agenda since last year, not just the spending issue.
Soon after joining the agency, White was pressed by some Republican lawmakers to abandon any plans to require the disclosures. At a House hearing, these lawmakers said the petition was a highly partisan one that would drag the agency into a political fray.
The petition also has been fiercely opposed by business groups, some of which argue that the information is unlikely to be material to shareholders.
White did not take a position on the issue then, but she assured lawmakers that she was an “apolitical” and “very independent” person who would defer judgment on the topic until further study by her staff.
Sen. Robert Menendez (D-N.J.) has introduced legislation that would require the political spending disclosures and that has gained the support of several members of the Senate banking committee, including Sen. Elizabeth Warren (D-Mass.), a vocal advocate of such disclosures. Going forward, investor groups plan to keep up the pressure.
Lisa Gilbert, director of Public Citizen’s Congress Watch, said the SEC should at the least hold a roundtable discussion to further examine the issue or put out research papers on the topic. “While this is disappointing, it’s not the end of the road,” Gilbert said.
Tom Hamburger contributed to this report.