The U.S. Chamber of
Commerce and allies have closed out 2014 with
another round of attacks on the Center for
Political Accountability and other advocates of
corporate political disclosure.
Bruce Freed, CPA president, said the latest attacks actually serve to spotlight the increasing strength of the corporate political disclosure movement.
“Advocates of ‘dark money’ spending, concerned that they are losing ground, are falsely representing themselves as the voice of mainstream business, hoping to sway major companies away from their better instincts,” Freed said. “Far from wanting to return to the pre-Watergate days, American businesses increasingly are showing that they want to conduct political activity in the open sunlight, where stockholders, directors and managers all can assess the risks and benefits of a company's campaign spending.”
The attacks came at a Dec. 3 conference sponsored by the U.S. Chamber of Commerce Foundation. Chamber President Thomas J. Donahue and other speakers, according to BNA Bloomberg, “voiced a message that efforts to secure greater disclosure for corporate money spent on elections and lobbying are not motivated by a concern for transparency, but a desire to silence the legitimate expression of business interests in American politics.”
“The Chamber is particularly concerned about the efforts of … the Center for Political Accountability (CPA), which tracks corporate policies on disclosure and has created a ranking system to show which of the top U.S. corporations are more or less transparent,” Bloomberg reported.
Since 2011, CPA has compiled an annual benchmarking study of corporate political disclosure and accountability with the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania. The2014 Index showed a majority of almost 200 publicly held companies that were examined in both 2013 and 2014 received higher overall scores this year.
Chamber spokeswoman Blair Latoff Holmes labeled the survey “preposterous,” according to Bloomberg, and a tool for activists to remove business from the political and policy-making process. Speakers as the U.S. Chamber Foundation conference condemned campaign finance reform efforts such as the DISCLOSE Act in Congress, as well as shareholder resolutions for greater transparency.
“You have to view this as a war,” said Bradley A. Smith of the Center for Competitive Politics, a former FEC commissioner. “It’s [the reform movement] about trying to drive companies out.”
An academic paper by Securities and
Exchange Commissioner Daniel Gallagher and
former Commissioner Joseph Grundfest suggests
that Harvard University may have violated
federal securities law with resolutions filed
by its Shareholder Rights Project. More
broadly, it offers a legal interpretation that
if adopted would have a “chilling effect” for
shareholder engagement of companies.
That’s the opinion of Jonathan R. Macey, who teaches Corporate Law, Corporate Finance & Securities Law at Yale Law School. Macey’s warning ought to give shareholders a real concern.
In the paper, Gallagher and Grundfest warn that Harvard University could be vulnerable if legal action were taken by the SEC or investors over the Shareholder Rights Project at Harvard Law School. They contend that shareholder proposals backed by the Project, seeking annual elections of corporate directors, are incomplete and can be misleading.
The project’s director is Lucian Bebchuk, a Harvard law professor. The project’s work is “entirely consistent with SEC rules and not false or misleading in any way,” Bebchuk told the Wall Street Journal, asserting that the project does not violate securities laws. He is supported by Yale’s Macey in a post at the blog of the Harvard Law School Forum on Corporate Governance and Financial Regulation.
“[Gallagher and Grundfest] accuse the … SRP of violating the anti-fraud provisions of the securities laws. The alleged fraud occurred when institutional investors represented by the SRP proposed shareholder resolutions encouraging shareholders in U.S. public companies to vote to de-stagger their companies’ board,” Macey writes.
He concludes “that the SRP proposals were not fraudulent or misleading and that the aggressive application of the anti-fraud provisions of the securities laws advanced by the authors … would be inconsistent with the law and, by the authors’ own admission, inconsistent with the current policy and practice of the staff of the [SEC].”
Macey warns, “Adoption of the position being advocated by Gallagher and Grundfest would, in my view, have a major chilling effect on the ability of any shareholder to make a shareholder proposal without fear that such shareholder and its advisers will become the target of an SEC enforcement action and a defendant in private lawsuits of the kind that Gallagher and Grundfest claim could be taken against SRP.”
Macey’s entire analysis is well worth reading, as is that of Matt Levine at Bloomberg View. Levine calls the Gallagher and Grundfest paper “utterly loony.”
The paper fits in with the campaign to stifle shareholder engagement of companies. If successful, it would have serious consequences not just for shareholders but also for companies that are addressing a range of important governance, business and competitiveness issues including political disclosure, climate change and diversity as a result of shareholder resolutions.