House Committee Passes Important Checks on Corporate Spending on Elections; Measure Would Blunt Citizens United Ruling

Today, the House Financial Services Committee approved the
Shareholder Protection Act (H.R. 4790), sponsored by Rep. Michael
Capuano (D-Mass.) and 49 co-sponsors, clearing the way to send the
measure to the House floor. Chairman Barney Frank's (D-Mass.) strong
support for the bill was instrumental in moving it forward. Public
Citizen applauds the leadership of Reps. Capuano and Frank on this
measure and strongly encourages the full chamber to take up the measure
as soon as practical and ratify this desperately needed legislation.

Following the Supreme Court's disastrous Citizens United
decision earlier this year, corporations may now spend unlimited amounts
on elections. This new spending in politics allows corporations to tap
directly into corporate treasury funds without any accounting to
shareholders on how the spending decisions are made.

Whatever speech rights corporations have been granted by the court,
they must be the rights of its shareholders. Under current law, a
corporate CEO may simply dip into corporate funds and spend wildly on
behalf of candidates or political parties without even informing, let
alone getting the approval of, the shareholders - those who actually own
the company. Shareholders should have a say on how their money is
spent.

In response, Capuano introduced the Shareholder Protection Act,
modeled after similar corporate governance laws on the books in Great
Britain. The legislation would:

* Mandate an affirmative vote of a majority of all shareholders for
approval of an annual political expenditure budget (chosen by the
management) for a publicly held corporation;
* Require that each specific corporate political expenditure over a
certain dollar threshold be approved by the board of directors and
promptly disclosed to shareholders and the public;
* Require that institutional investors inform all persons in their
investment funds how they voted on corporate political expenditures; and
* Post on the Securities Exchange Commission website the amount each
corporation is spending on elections, and which candidates or issues
they support or oppose.

Labor unions already are subject to rules governing their political
activity. Workers may opt out of union membership and still keep the
same job, and non-union workers can get a refund on any collective
bargaining dues spent for political purposes under the Supreme Court's
1988 Beck decision. But these rights do not extend to
shareholders of corporations or to participants in funds invested in
corporations, such as investors in 401k retirement funds.

The Shareholder Protection Act is a reasoned response to restructure
some of the rules governing corporate behavior in light of the new
corporate "rights" granted by the court. Responsible corporate
governance requires the involvement of informed shareholders and
informed investors, holding management accountable and ensuring that
political spending decisions are made transparently and in pursuit of
sound business.

The Citizens United decision poses a grave threat to our democracy. We need a constitutional amendment to undo the damage done by Citizens United.
In the meantime, however, The Shareholder Protection Act constitutes an
important, if very partial, measure to blunt the effect of the Supreme
Court's decision.