In July 2011, a group of ten law professors filed a rulemaking petition with the Securities and Exchange Commission seeking adoption of a rule requiring disclosure of political spending by publicly traded companies. In a post last month, two of the original petitioners, Harvard Law School Professor Lucian Bebchuk and Columbia Law School Professor Robert J. Jackson, Jr., reported that their petition had received more than one million comments, most of which were in support. (I submitted the first comment letter which opposed the professors’ petition.) Given this impressive turnout, the professors argue:
The unprecedented crossing of the million-comment-letter mark highlights the significance of this issue and the breadth of support for an SEC rulemaking process. We are hopeful that, before too long, the SEC will initiate such a process, and we urge the SEC to do so.
The professors, however, fail to mention one key fact. Shareholder proposals seeking political spending disclosures simply do not pass. According to Enver Fitch and Limor Bernstock at ISS ESG Proxy Research, shareholders associated with the Center for Political Accountability submitted 47 proposals this year. The 32 that actually went to a vote only garnered an average of 28.5% of the vote. That means that on average more than two-thirds of the shareholders opposed these proposals. Since investors are the ones with actual “skin in the game”, their failure to get behind these proposals is telling.
I don’t doubt that there is a core of substantial support for political spending disclosure rules. However, supporters who are not shareholders are asking the shareholders to bear the cost. Essentially, they are saying that this is so important to us that we think you should pay for it.