Subject: Comment on File Number 4-637

April 11, 2012

To SEC Commissioners and Staff:

Please consider these comments in support of Rulemaking Petition [File No. 4-637]: Petition to require public companies to disclose to shareholders the use of corporate resources for political activities. These comments should be considered submitted by me personally based on my experience in campaign finance law, and do not constitute any official statement by my current employer, Colorado Ethics Watch.

I have been working in the field of campaign finance law since 2004 when I joined the FEC as a policy attorney. Although the landscape of federal campaign finance law has changed dramatically since that time due to court rulings like Citizens United v. FEC (U.S. Supreme Court) and SpeechNow v. FEC (U.S. Court of Appeals for the D.C. Circuit), one thing has remained constant - disclosure of political spending may be required even when money or source limits cannot be imposed on that spending.

Under the current federal law, corporations - including for-profit corporations which are publicly traded and regulated by the SEC - may spend significant amounts of corporate treasury funds on political advocacy in federal candidate campaigns. This includes funding public communications that explicitly support or oppose candidates for federal office. There are number of routes such spending may take, however, and there are different amounts of disclosures depending on the route chosen. For example, if corporate treasury funds were donated to a "Super PAC" registered at the FEC, then such contributions would be disclosed on that Super PAC's regularly scheduled reports. If the corporation were to directly spend on political expenditures, the corporation would be required (under certain circumstances) to file an independent expenditure or electioneering communications report with the FEC. If the corporation were to donate funds to a nonprofit organization that does NOT register and report to the FEC, such as a 501(c)(4) social welfare organization or a 501(c)(6) trade association, there is very little public disclosure of these donations. If a corporation donates funds to a nonprofit 527 political organization that does not register to the FEC, limited contribution disclosure is made through annual reports to the IRS.

The SEC should exercise its regulatory authority to require disclosure of political spending from corporate treasury funds. First, shareholders have a right to know how the corporation is spending their invested money. Although the Supreme Court has decided that a "corporation" has a right to spend to advocate "its" political position, shareholders have a right to not fund political speech that they disagree with. If a shareholder does not know what political spending is happening, they are forced to subsidize political speech without agreeing to the position. Disclosure would allow shareholders to move their investments to corporations that only conduct political speech in line with the shareholder's own views. In addition, shareholders must have the information in order to voice their opinion about whether ANY political spending is a proper use of corporate treasury funds.

Second, consumers of the products and services offered by publicly-traded corporations should be given information about corporate political spending so that they may make informed consumer choices. As discussed above, political spending disclosure is currently a patchwork of different reporting provisions based on the method of political spending. Consumers do not have a reliable source of information on corporate political spending under this system with which to guide their purchasing decisions. If corporations are going to spend corporate funds on political activity, it should be with the risk of consumer approval or disapproval as shown through purchasing. Otherwise, there is little accountability.

I hope that you seriously consider this rulemaking petition and at least conduct a rulemaking process on this issue so that you may consider a number of proposals and comments before making a final decision. Time is also of the essence in this presidential election year.


Peg Perl
Staff Counsel
Colorado Ethics Watch