sec_us-securities-and-exchange-commissionThe Securities and Exchange Commission has recently received a petition with close to 500,000 signatures asking it to pass new regulations that would require corporate donors to disclose all contributions made to political organizations. Though it seems obvious that the democratic process should require all major donations to politicians and political organizations to be done in a transparent fashion, Congress has failed to address this problem with legislation. The lack of transparency, however, escalated to a more serious threat to democracy only recently. This occurred with the Citizens United decision by the Supreme Court in 2010 that allowed unlimited contributions by corporations to various tax-exempt groups that are not required to release the names of their donors to the public. This is in contrast to the SuperPACs that can accept unlimited sums of money from donors, but must be transparent in terms of who their donors are.

Many of these tax-exempt organizations and trade associations use these secret contributions to support particular politicians whose views coincide with their own, or for or against issues that are important to them. These are blatantly political in content, but to date the organizations behind them have not had to reveal the names of their donors. Attempts to have the I.R.S. force these groups to pay taxes have so far gone nowhere. But it is hoped that the S.E.C. will be willing to take up this issue and either block secret contributions from corporations to these groups, or more likely mandate that corporations reveal all donations to “non-profit” groups or political organizations.

The groups that receive corporate support include trade organizations such as the National Mining Association, the American Gaming Association, the National Retail Federation, the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable. More politically oriented tax-exempt organizations include Karl Rove’s Crossroads Grassroots Policy
Strategies and Americans for Prosperity, founded by the Koch brothers. Though some liberal groups have pursued similar strategies to raise money, the lions’ share of spending during the 2012 elections went to support Republicans and Republican issues.

It is interesting that public companies rarely back political candidates directly or contribute to SuperPACs that are under the aegis of the Federal Election Commission and demand strict disclosure. This is in spite of the Citizens United ruling that permitted unlimited contributions by corporate entities or individuals to SuperPACs as long as it was done in a transparent fashion. Any new S.E.C. regulation that required disclosure by public companies to trade association or non-profit groups would not impact private companies or individuals. Since one of the functions of the S.E.C. is to provide protection for investors and stockholders of public companies, it would certainly be within their jurisdiction to issue new rules that would require disclosure of all contributions by these companies. Stockholders have a right to know how their company’s money is being spent.

With non-transparency of donations by public companies, democracy is undermined in two ways. First of all, corporate money that remains concealed can be used to influence elections and get candidates into office who favor corporate-friendly legislation. Secondly, the supposed democracy of corporate governance, where stockholders have ultimate control of policy and spending, is negated by allowing clandestine contributions by corporate executives. While no one expects daily scrutiny of corporate outlays or micro-management of corporations by stockholders, as owners they should certainly have a say in any political spending by the corporation. This is reinforced by the Citizens United decision written by Justice Kennedy and quoted in a recent article in the New York Times. ( Kennedy wrote that “shareholder objections raised through the procedures of corporate democracy” would make political spending by corporations accountable. It has not happened yet and it remains to be seen whether the new S.E.C. Chairperson, Mary Jo White, and the three to two Democratic majority on the commission will change the ground rules and make corporate donations transparent. There are numerous lobbyists, business groups, and special interests fighting against it.

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  • dduck

    Memo: Oh good, I would like a law like that. Let the big contributors disclose where they are dispensing the cheese. I think 90% of Americans would also want that.
    Oh, and can we get the same bosses and handlers in the Senate that handled the Background Check bill to work this one.
    Signed- Fat Cats.

  • zephyr

    Good post Robert. Now, let’s see, which currently practicing political ideology has been most supportive of and stands to benefit the most from non-transparency? And which benefits the most from an informationally deprived citizenry? And which shows the least concern about the need for acountability? And which political party has installed champions of this dynamic on the US Supreme Court? People need to actually start thinking about these very. simple. things.

  • This will probably pass because money’s involved.

    There’s no profit to be made or saved through open disclosure of campaign contributions. There’s no profit to be made by open government in general. There’s no profit to be made in the various forms of gun control. There’s no profit to be made by reigning in drone attacks. There’s no profit to be made by strengthening personal privacy or preventing travesties like CISPA.

    But this law is about protecting shareholders and their investments. This will pass.

    (And now I sit back and wait patiently for the universe to prove me wrong).

  • zephyr

    So just how patient can you be Barky? 😉