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November 30, 2012

Growing Pressure on SEC to Regulate Corporate Political Spending
    by Robert Kropp

After a petition calling for rules mandating disclosure attracts unprecedented support, officials at the Securities and Exchange Commission acknowledge they are considering the issue. -- After the most expensive election cycle in American history finally ended, Bruce Freed of the Center for Political Accountability (CPA) wrote, "The new campaign finance paradigm has claimed accountability as a casualty. Corporate donors to third-party groups often don't know where their political dollars will end up, what elected official they may end up alienating, or how a political donation might backfire and mar a corporate reputation."

For the past decade, CPA has led an investor initiative to improve corporate disclosure of political expenditures and increase board oversight of such activities. More shareowner resolutions addressing corporate political spending were filed in 2012 than ever before.

In 2011, a group of academics calling itself the Committee on Disclosure of Political Spending filed a petition with the Securities and Exchange Commission (SEC), calling for the establishment of regulations mandating that public corporations disclose their political spending activities. The Commission has received an unprecedented 300,000 comment letters on the issue, most of them in support of disclosure.

Support for disclosure "was further evidence that shareholders' demands for corporate political disclosure were beginning to resonate at the SEC," CPA stated.

It now appears that the SEC may be ready to take action. At a recent conference hosted by the Practising Law Institute, Paula Dubberly, a Deputy Director of the Division of Corporation Finance at the SEC, noted the volume of comment letters and said the Commission is considering a rule requiring that "public companies provide disclosure to shareholders regarding the uses of corporate resources for political activities."

At the same conference, Meredith Cross, the Director of Corporation Finance, said, "It's obviously an issue that's extremely important to many. In light of the large number of comments and strong interest, we thought we should at least note this is something we are thinking about."

Harvard law professor Lucien Bebchuck, who is co-chair of the Committee on Disclosure of Political Spending, recently w rote in The New York Times, "For the procedures of corporate democracy to work, investors must have information about a company's political spending. Without transparency, shareholders cannot hold directors and executives accountable when they make political expenditures that depart from investors' interests."

"In future elections, individuals holding shares in public companies should not be left in the dark about whether and how their money is spent on politics," Bebchuck concluded.

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