January 18, 2012
I am deeply concerned about the influence of corporate money on our electoral process and the erosion of shareholder rights.
In particular, I am appalled that, because of the Supreme Court's ruling in Citizens United v. Federal Election Commission, publicly traded corporations can spend investor's money on political activity in secret.
Individual citizens such as you and I are not allowed to deduct political donations as tax-deductible expenses. So too this must be linearly extended to corporate "persons", else the system is an attackable sham.
Corporate funds directed to a political cause for future return might in some way be considered an investment if visible to shareholders. Corporate funds directed to a political cause for future return without visibility smells like bribery, a crime the SEC has within its perview already. The SEC has the needed experience in painting a bright line.
Since these donations are not to be tax-deductible, political donations then are being made with shareholders profits (potential dividends). Fundamentally this is a corporate capital allocation decision in that profits can be: 1)reinvested into the business, 2) distributed to shareholders, or 3) directed to a political entity as an investment. A security analyst would want to know which elected representatives the business is investing in and what return on this investment is required for it to be considered an acceptable investment. These business accounting items need to be publicly visible.
Further, it is not sufficient that a business shareholder that disagrees with the amount, reasoning or beneficiary of a corporate political contribution have no recourse in these corporate affairs other than to tender their shares. To let shareholder dividends be directed for political purposes without a resolution and subject to shareholder approval is intolerable, effectively suppressing political discourse rather than fostering it by narrowing the decision to a select few rather than to all shareholders.
I am writing to urge the Securities and Exchange Commission to issue a well-reasoned defensible ruling stating that this is shareholder money being directed to political causes and as such:
a) Political contributions require public accounting visibility as a line item and footnoted for visibility,
b) That a shareholder resolution and shareholder approval be required prior to disbursement of political donations in lieu of corporate profits/dividends,
c) That these non-deductible political donations be reported to shareholders on form 1099 as taxable political contributions made in lieu of dividends received or reinvested,
d) That these donations be disclosed and distributed coincident with the existing corporate calendar of dividend distributions rather than as a disbursement buried in a low level accounting journal.
Both shareholders and the public must be fully informed as to how much the corporation spends on local and national politics and which candidates are being promoted or attacked. Similar to dividend announcements, disclosures should be posted promptly on the SEC's web site as these are notable public events in the marketplace rather than back-room insider activity.
Thank you for considering our comment.
George & Denise Paquin