By Paul Atkins
The campaign by political activists to require mandatory disclosure of corporate public policy expenditures should be viewed as based primarily on politics, rather than on an effort to help shareholders evaluate corporate performance or promote shareholder value.
The Securities and Exchange Commission should reject this partisan ploy.
Although federal law already requires corporations to disclose their political contributions, as well as any activity conducted by corporate political action committees, partisan activists want more, seeking to force the disclosure of expenditures for public policy and government affairs activities. Activists hope to use this information to publicly browbeat their opponents and eliminate their participation in public policy debates.
Having failed to get Congress to require these disclosures in 2010, activists are now targeting the SEC. One problem: The SEC lacks the authority to require disclosure of information that is not material.
This means that the information must be important to economic investment decision-making by a reasonable investor — not an investor with a narrow political bent or one who thinks it would be “nice to know” some relatively insignificant fact. Otherwise, disclosure of data is potentially limitless. For virtually every company, these public policy expenditures to defend the interests of their shareholders would be insignificant compared with revenue or expenses; if they were material, SEC rules already require disclosure.
Activists pushing new rules argue that despite the relative insignificance of these expenditures, this information is material merely because many people appear interested. They point to roughly 500,000 comments to the SEC. But more than 99% of these comments are manufactured by an “AstroTurf” campaign developed by fewer than a dozen unions, activist investors and partisan political groups. Many are submitted anonymously.
Real shareholders get this joke, having time and time again rejected calls for increased disclosure. In 2012, among Fortune 200 companies, 82% of shareholder votes — up from 77% in 2011 — refused to support activist proposals regarding mandatory disclosure of the amounts spent on public policy or lobbying activities.
If SEC Chairman Mary Jo White wants to make a difference during her tenure, her first order of business should be to ignore the activists’ campaign to stifle corporate political speech under the guise of transparency.
Former SEC commissioner Paul Atkins is CEO of Patomak Global Partners, a consulting firm.
His opinion was published as the Opposing View to the USA Today editorial board view, found here: