SEC petition on political contributions gets 250,000 responses as investors maintain pressure

Investors fear reputation risk and financial damage.

The US Securities and Exchange Commission (SEC) has received more than a quarter of a million comments supporting a petition – with less than 10 believed to be against – urging it to develop rules to require public companies to disclose their political spending.
The record number of responses to an SEC petition mirrors the significant concern on the issue raised by many institutional investors in the US and overseas who have backed the transparency call following 2010’s controversial Citizens United decision. That decision by the US Supreme Court ruled that political spending is a form of protected speech and allowed companies to make unlimited, undisclosed campaign contributions in the run up to government elections. However, many investors say such corporate political spending leaves them open to reputational risk and can endanger company value. In January a group of US investment institutions filed shareholder resolutions at 40 companies for this year’s proxy season calling on them to report on their spending on direct lobbying and lobbying via trade associations. Speaking at the recent US SIF conference in Washington DC, Nell Minnow, Board Member at GMI Ratings, said in-house research showed that for every additional $10,000 a firm spent in political donations,its stock market price dropped 7.4 basis points below expectation. She said: “The people whose money is being spent are entitled to the information about what candidates and associations are being supported.” At the same conference, Charles Kolb, President, Committee for Economic Development, a business group, said many corporates were against the direction of Citizens United and said the Supreme Court had approved a “shakedown” for donations on companies by the political class. The SEC said 259,801 of the letters supporting transparency were signed by individuals using one of six pro-forma types. Many had been instigated by the Corporate Reform Coalition, a group including institutional investors and public officials.
Prominent investors backing the petition for campaign contribution transparency include John Bogle, the former chief executive and senior chairman of The Vanguard Group, and a group of mutual fund and institutional asset managers with more than $690 billion under management.
Other supportive comments include one from a group of state government officials including the State Treasurers of North Carolina, Pennsylvania, and California and 43 members of the U.S. House of Representatives.