Secret donors poured hundreds of millions of dollars into the federal elections last fall, mainly in support of business interests. The backlash from that has prompted the federal Securities and Exchange Commission to consider a proposal that would require publicly traded corporations to disclose such political donations to their shareholders, which would essentially make them public knowledge. Such a rule should be adopted by the SEC for the benefit of the public interest, but proponents of political secrecy defiantly promise a brutal battle over the issue.
Disclosure is correctly advocated by petitions from a range of groups — Democrats, shareholders in corporations, and large pension and mutual funds that represent the public’s right to know how their investments are being managed, and what political interests are secretly being supported by the corporations in which they are investing.
“Shareholders have been demanding this information for some time,” Robert Jackson, a Columbia University professor of law told New York Times reporter Nicholas Confessore. “It’s a basic precept of American securities law that shareholders should be given the information they need to evaluate their companies.”
Advocates of disclosure have recently swamped the SEC with nearly half-a-million comments on the agency’s proposed rule, mostly in support of it. The most political noise against the rule is, predictably, coming from Republicans in Congress, who work hand-in-glove with the tax-exempt groups and trade organizations that are the chief beneficiaries of such secret donations.
The tax-exempt groups are generally the so-called social welfare 501(c)(4) groups, and trade associations operating under 501(c)(6) charters. Under IRS rules, both categories are not required to publicly disclose donors for their spending on public education — a loose definition that was commonly abused in the 2012 elections by largely political advertising campaigns.
That glaring abuse was clearly handy for the nation’s three most politically influential trade groups last fall: the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers. They plowed millions of dollars in secret gifts in not-too-overt support of Republican candidates and their business propaganda. Among other trade associations in opposition to disclosure are the National Retail Association, National Mining Association and the American Gaming Association.
The Center for Responsive Politics found that 151 so-called social welfare entities spent $254 million in the 2012 elections, and that 15 trade associations operating under 501(c)(6) charters spent $55 million. With that sort of political spending sponsored largely by Republican-oriented businesses and corporations that are allowed to remain anonymous, it’s no wonder that the phony-baloney “social welfare” entities and the big trade associations and their GOP beneficiaries are screaming their opposition to the proposed SEC rule.
They contend the SEC doesn’t have the authority to require transparency for shareholders with regard to corporate political spending, and that disclosure would inhibit companies’ “free speech rights”— as if political spending should be cloaked in secrecy. A Chamber spokeswoman had the chutzpah to tell Confessore that “funds expended by publicly traded companies for political and trade association engagement are immaterial to the company’s bottom line.” She said disclosure is only sought by public-interest advocates to “intimidate” and suppress corporate political spending.
One has to wonder how defenders of secret spending can so glibly distort the true meaning of free-and-open political speech under the First Amendment, which honors individual Americans’ right to express their political views — not sneaky corporate interests by backdoor financing.
House Republicans, to be sure, are rallying in behalf of their paymasters to protect the secret spending. They recently proposed legislation to make it illegal for the SEC to adopt a rule requiring publicly traded companies to disclose their political spending. Such a showy initiative is unlikely to make it through the Senate, but it serves the purpose of showing ordinary voters Republicans’ priorities vis-à-vis fair elections.
The U.S. Supreme Court ruling in Citizens’ United in 2010 gave companies and rich individuals the right to spend as much as they want on political issues, as long as such spending is not coordinated with specific campaigns. But that doesn’t negate the rights of shareholders to know how public companies in which they investing are spending their money. Even the 5-4 Citizens’ United ruling doesn’t endow secret political speech.
The SEC shouldn’t hesitate to adopt the disclosure rule. And Americans must hope that the high court will someday make it clear that all political spending should come under current rules for transparency.