Senate Democrats are pushing ahead with their sweeping election reform measure, S. 1., the For the People Act, which contains a key provision lifting a long-standing ban on an SEC corporate political spending disclosure rulemaking. But lack of Republican support for the bill threatens to leave the roadblock in place as the commission charts a new course on environmental, social, and governance (ESG) disclosures.
Democrats, who hold a razor-thin majority in the Senate, are increasingly facing pressure from the left to do away with the filibuster in order to advance the legislation, which passed the House earlier this month on a 220-210 vote. Senate Majority Leader Chuck Schumer, in a March 17, 2021, news conference, said “everything is on the table” to pass the bill, adding that the caucus would “come together and decide the appropriate action to take” if Republicans will not support the measure.
The SEC has for years been blocked from launching the rulemaking through a rider in the Financial Services and General Government budget measure that funds the commission. Acting SEC Chair Allison Herren Lee, in a March 15 speech at a virtual event hosted by the Center for American Progress, framed corporate political spending disclosure as a significant ESG issue that deserves the commission’s attention but bemoaned the budget language preventing the SEC from acting.
“Political spending disclosure is key to any discussion of sustainability,” she said. (See SEC Likely to Take Up Political Spending Disclosure Rulemaking in the March 17, 2021, edition of Accounting & Compliance Alert.)
Gary Gensler, President Joe Biden’s nominee for SEC chairman, has also signaled support for launching a corporate political spending disclosure rulemaking. At his March 2 confirmation hearing before the Senate Banking Committee, Gensler cited the 2011 petition to the SEC from a group of academics, including former Commissioner Robert Jackson, asking for the disclosure rule, which has since garnered some 1.2 million public comments.
Gensler is expected to be confirmed by the full Senate soon.
Academics, activist groups, and Democratic lawmakers have sought the rule for years. As they see it, investors have a right to know how companies use corporate funds on political activities. They say the disclosure is especially critical following the Supreme Court’s 5-4, 2010 decision in Citizens United v. Federal Election Commission, which lifted restrictions on independent political expenditures by corporations and unions.
Former Justice Anthony Kennedy, who wrote the majority opinion in Citizens United, wrote that “with the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters.”
Critics say those disclosures have not consistently manifested across public companies, depriving investors of information on how corporate funds are being spent.
This article originally appeared in the March 22, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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