Subject: File No. 4-637
From: Kenneth W. Shotts
Affiliation: Stanford Graduate School of Business

April 24, 2013

Dear SEC

I'm writing regarding File No. 4-637 "Petition to require public companies to disclose to shareholders the use of corporate resources for political activities."

This is the first time that I have petitioned the government.  But in this case I feel compelled to do so.  I should note that I have some expertise in this area.  I'm a professor at the Stanford Graduate School of Business.  My research is on elections and I teach about ethics, lobbying, regulation, and business-government relations.

I strongly support the petitioners' attempts to ensure that shareholders (and indirectly citizens) have the right to be informed about companies' political activities.

Some companies (and especially some associations that get large amounts of money from companies) will argue against this petition, claiming that disclosure is unnecessary, because boards adequately represent shareholder interests and ensure that management adheres to its fiduciary duty.  This argument is comical, because it vastly understates the amount of power and discretion held by senior executives in public companies.

Opponents will also argue that disclosure is harmful to shareholder interests because companies may be criticized for their lobbying and political activities.  As a teacher of business ethics, I find this argument morally offensive, because it assumes that executives running companies have the right to secretly influence elections and public policy.  Yes, some companies and business associations may be criticized for their activities if these activities are made public, but maybe that's because they're doing things that they should be ashamed of.  Executives who are really working for the interests of their shareholders and adhering to norms of ethical behavior should have nothing to fear from the proposed regulation.

Put differently, I'm a shareholder (indirectly, via mutual funds) in a large array of public companies.  Many rights of those companies stem from the fact that those companies are legally treated as and association of shareholders like me.  But I have essentially no influence on the boards of those companies, and I cannot even find out how they are using the money that I have invested in them.  As a shareholder and a citizen I think I have the right to know these things.

To run a public company with a diverse set of shareholders is to take on the responsibility of serving, and being accountable to, those shareholders.  

Thank you for taking my thoughts into consideration.


Kenneth W. Shotts
David S. and Ann M. Barlow Professor of Political Economy
Stanford Graduate School of Business