William Nelson has posted this draft on SSRN (forthcoming, Albany Government Law Review). Here is the abstract:
The Supreme Court erred by not revisiting its holding in Citizens United v. Federal Election Commission (FEC). I made this argument in a previous article. The Supreme Court’s decision “removed the prohibition on corporate independent political expenditures, and allows corporations to spend unlimited sums from corporate treasuries to expressly advocate the election or defeat of a political candidate.” Unfortunately, my pleas to the high court went unanswered. However, the Securities Exchange Commission (SEC) has a chance to shine light on this issue by requiring public corporations to disclose to shareholders the use of corporate resources for political activities.
Disclosure of corporate political spending would ensure that directors adhere to their duties of full and fair disclosure to shareholders. Additionally, disclosure of corporate political spending would diminish monitoring costs by informing shareholders of harmful political spending and will provide potential investors with key information for making informed, rational investment decisions. Due to the misguided decision in Citizens United, it is legal for corporations to spend an unlimited amount of money on political issues; however, this Article submits that shareholders need to know about those expenditures and that if corporations truly believe their political spending benefits their bottom lines, they should not oppose disclosure of that spending.
The Article begins by discussing the original and amended petitions for rulemaking, including the reasoning behind them and the response received from shareholders and the community at large. The Article then transitions into an analysis of why the rule is both constitutional and within SEC’s jurisdiction; responds to opposition arguments alleging that a rule is not necessary; discusses the recent lawsuit filed to compel the SEC to promulgate a rule; and researches possible benefits and costs imposed by a mandatory disclosure obligation. The Article concludes by providing shareholders with options under the current regulatory regime to investigate corporations’ political spending, provides a model structure for SEC if and when they decide to initiate a rulemaking on this issue and provides a model for firms to establish programs to supervise corporate political spending.