U.S. Chamber Opposes Proposed SEC Disclosure Rule for Political Contributions

Sue Reisinger

Corporate Counsel

01-15-2013

The fight over whether public companies should be forced to reveal their political contributions made through third parties continues to roil on several fronts, with a coalition of 30 business associations opposing the idea of the Securities and Exchange Commission considering a new disclosure rule.

In a 30-page letter to the SEC [PDF], the business coalition—led by the U.S. Chamber of Commerce—laid out several arguments against disclosure on January 3.

Meanwhile, co-chairs of the coalition of law professors who initiated a 2011 petition seeking the rule have written a new law review article, “Shining a Light on Corporate Political Spending.” It claims to offer empirical evidence of why the rule is needed and disputes the business coalition’s arguments against it.

Speaking for the opposing business group, attorney Andrew Pincus told CorpCounsel.com, “There is no policy justification for this [proposed rule]. The theory of proponents is that the management and board can’t be trusted to ensure that the company’s political expenditures are consistent with the corporation’s interests. There is absolutely no basis, no evidence, for that theory.”

Pincus, a partner in the Washington D.C. office of Mayer Brown, said such disclosure could actually hurt the value of a company because certain shareholders who don’t like the policies being supported could use the disclosure to “beat up on the company,” and thereby “damaging the brand and trying to stop the company from doing things that are in the long-term best interests of the company.”

Pincus served as the general counsel of the U.S. Department of Commerce, and previously was general counsel of Andersen Worldwide Société Coopérative, the Swiss-based entity that managed the global offices of the now-defunct accounting firm.

He argued that proponents of the rule would use “their shareholder status not to further the interests of all shareholders but to further their own special interests.”
There’s a small subset of shareholders, Pincus said, who want to stop political contributions “because they have different policy views. That’s wholly inappropriate.”

The business coalition’s stance doesn’t surprise Robert Jackson Jr., an associate professor at Columbia Law School and one of the authors of the original petition [PDF].

Speaking personally and not for his coalition, Jackson said business associations like the Chamber are the intermediaries that corporations use to make political contributions. “So it’s not surprising that the target of the rule is opposed to it.”

As for the opponents’ arguments in the letter, Jackson saw nothing new. “The arguments have already been made by others, and I think the SEC has not found those arguments persuasive over the past year,” he said.

For example, Jackson notes that the letter suggests a rule would violate the First Amendment right to free speech. “How extreme and meritless,” he told CorpCounsel.com. “In the Citizens United case, the U.S. Supreme Court expressly rejected an argument like this, 8 to 1.”

Jackson noted that opponents say disclosure is bad while contributions are in the best interests of the corporation. “If that’s true, then why wouldn’t you tell shareholders about this [contributions]?” Jackson asked. “It’s a puzzle.”

In the “Shining a Light” article co-authored by Jackson and Harvard Law professor Lucian Bebchuk, who also co-chairs the petition coalition, a chart shows that over the last five years, more than $1.5 billion of shareholder money has been funneled through intermediaries like the U.S. Chamber to political campaigns.

The article, scheduled to be published in April, goes on to dissect the objections to disclosure and concludes that they “provide no basis” for not passing a rule.

While letters continue pouring in to the SEC on both sides of the issue, disclosure advocates are making strides on other fronts. Congress is considering new disclosure legislation introduced earlier this month.

And a suit is pending by the New York State comptroller, Thomas DiNapoli, against Qualcomm Incorporated, demanding to view internal records of political expenditures by the company.

DiNapoli serves as trustee of the New York State pension fund, a major shareholder in California-based Qualcomm, which is incorporated in Delaware. That state’s law allows shareholders to see a company’s internal records if it’s for “a proper purpose.”

The New York Times called DiNapoli’s January 3 suit “a novel and potentially significant tactic in the running battle over corporate political spending.”

Qualcomm opposes the suit. Donald Rosenberg, the company’s general counsel, told the Times that Qualcomm already complies with all laws governing political activity and disclosure, “and the lawsuit does not suggest otherwise.”

So far, DiNapoli has reached agreement with 10 other companies over disclosure of their political contributions. He also has written a letter to the SEC [PDF] in support of a disclosure rule.

See also: “Congress and SEC Mulling New Rules for Corporate Campaign Donations,” CorpCounsel, January 2013.