SEC Rule Sought on Corporate Political Money

     WASHINGTON, D.C. (CN) – An Aetna shareholder sued the Securities and Exchange Commission to try to force it to require publicly traded companies to disclose their political contributions.
     Shareholders have been demanding that companies disclose their political spending, Stephen M. Silberstein claims, but without an SEC policy, companies refuse to do it, or do so halfheartedly and inaccurately.
     The Supreme Court’s 2010 Citizens United v. FEC ruling allows corporations to spend unlimited amounts on politics, calling such lobbying and advocacy protected speech.
     But Silberstein claims the Supreme Court also stated that disclosing political donations would “allow shareholders to determine whether their corporation’s political speech advances the corporation’s interest in making profits,” and allow shareholders “to react to the speech of corporate entities in a proper way.”
     The SEC has no such disclosure policy, allowing corporations to spend billions on political campaigns without reporting the expenditures to shareholders.
     Silberstein, of California, says he owns 2,108 shares of Aetna stock, valued at $230,172 on May 13, when he filed the lawsuit.
     He claims that Aetna inadvertently revealed in 2012 that it had made more than $7 million in contributions to political groups. Aetna’s donations included $3.3 million to the American Action Network and more than $4 million to the U.S. Chamber of Commerce, two groups that aggressively opposed health care reform, despite Aetna’s public stance that it supported it. Those contributions were not reported to shareholders through Aetna’s voluntary disclosure policy, Silberstein said.
     Aetna shareholders proposed measures in 2012, 2013 and 2014 that would have required greater transparency in Aetna’s political contributions, but the company rejected them, claiming the spending reports on the company website were enough.
     Silberstein then filed a lawsuit against Aetna for false and misleading proxy statements. The lawsuit was dismissed.
     In 2011, the Committee on Disclosure of Corporate Political Spending petitioned the SEC to write regulations to require publicly traded companies to report to shareholders their use of corporate resources for political funding. The petition received at least 1 million comments in support, Silberstein claims. Though the SEC said in 2013 that it was considering proposing a rule on disclosure of political spending, it has not done do.
     A 2014 study of corporate spending disclosures by the nonprofit Citizens for Responsibility and Ethics revealed significant discrepancies among corporations’ voluntary disclosure practices. They omit some political donations or write confusing reports that obfuscate their actual spending, Silberstein says in his complaint.
     Silberstein and CREW filed a new petition with the SEC in 2014, asking the agency to require publicly traded companies to disclose political contributions, but the SEC has failed to respond.
     There is “nearly unprecedented public support” for an SEC rule requiring disclosure of public companies’ political donations, Silberstein said, and it is the SEC’s responsibility to develop regulations that serve the public interest and protect investors.
     The SEC’s refusal to initiate such a rulemaking procedure is arbitrary, capricious and violates the Administrative Procedure Act, Silberstein claims.
     He asked the court to order the SEC to write a disclosure rule.
     He is represented by Anne Weismann with the Campaign for Accountability.

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