November 9, 2011
Ms. Elizabeth M. Murphy, Secretary
Securities and Exchange Commission
100 F Street, Northeast
Washington, D.C. 20549
By email: rule-comments@sec.gov
Re: File No. 4-637, Petition to Require Public Companies to Disclose to Shareholders the Use of Corporate Resources for Political Activities
Dear Ms. Murphy,
I am writing today to voice my strong support for the petition referenced above seeking a rulemaking requiring corporate political transparency. Currently, 88 corporations voluntarily disclose political spending policies and their direct political payments, including more than half of the companies represented in the S & P 100 Stock Index.
While I believe that the SEC is the appropriate agency to require regular disclosure of corporate political contributions, it is of great importance to keep in mind that such disclosure is even more necessary and important when coupled with the need for uniform corporate disclosure of lobbying expenses at the federal, state and local government levels, which will accurately reflect the extent to which large corporations dominate not only our country's economy, but the United States' overall political system.
Currently, corporate filers are not required to file political contributions disclosure statements with the SEC and the national and state regulatory framework is insufficient in uniformly providing principals as shareholders or owners adequate transparency. As principals with no knowledge of agents' political spending activities, there is no way of determining whether or not principals' interests are being represented or financial and other interests safeguarded or put at risk. This is especially the case since corporate management effectively hides not only direct political spending, but bundled funding which is camouflaged within other corporate contributions funded by multiple corporate donors through such organizations as Business Roundtable and the Chamber of Commerce.
Financial conduits such as those mentioned above also fund extensive political lobbying at all levels of government, and coupled with political slush funds, make it difficult for shareholders to determine whose interests are served in such opaque influence peddling. Is the corporate directors' personal interests served, or the owners? Is the CEO's interests served, or the shareholders?
Undisclosed corporate political contributions raise the specter of smoke-filled backroom deal-making between politicians, government officials and regulators and corporate officers and CEOs. It also raises possible direct conflicts of interest and violations of fiduciary duty when it comes to the duties of care and loyalty. Should all political expenditures by fiduciaries rely on the business judgment rule? How can shareholders presume that these are "business decisions" made by disinterested and independent directors on an informed basis and with a good faith belief that these political decisions will serve the best interests of the corporation?
How can shareholders be certain that they will not be "harmed" by the literally hundreds, if not thousands, of separate measures legislators elected with corporate money will vote on every legislative session. How can corporate management discern that every decision made by a "bought" politician will be in the interest of shareholders? Will all shareholders be equally represented and their interests served by the elected or re-elected politician? Will all of the stakeholders be served, including bond and note holders, employees, vendors and civil society?
I am sure the SEC realizes that full and proper disclosure of the kind many of us are advocating will have a stifling impact on corporate spending for political favors; and well it should. With or without proper uniform SEC disclosure provisions relative to reporting of corporate campaign contributions, I believe numerous lawsuits will be filed by shareholders for violation of corporate directors and officers' fiduciary duties. There is no way that the duty of care and loyalty has not, and will not be breached, by continuing to allow corporations to give unlimited and undisclosed political contributions to curry favor or perceived favor for corporate, corporate CEO, or corporate directors' private political and/or financial interests.
Inevitably, corporations must be prohibited from buying government and regulatory agencies, and indeed, our democracy. It is my hope that you will take the first necessary step in enacting uniform regulations for full corporate political expenditure reporting and disclosure.
Sincerely,
John Harrington
Harrington Investments, Inc.
1001 2nd Street Suite 325
Napa, CA 94559
T 800.788.0154
F 707.257.7923
www.harringtoninvestments.com