Frequently Asked Questions

Why are increased shareholder protections needed?

In January 2010, the Supreme Court’s decision in Citizens United v. Federal Election Commission overturned a century of laws and gave corporations free rein to spend unlimited amounts. In the 2010 elections, corporations began to take advantage of this new freedom to spend, funneling money through outside groups not required to disclose their donors and helping to make 2010 the most expensive midterm election cycle in American history.

Because of lax disclosure rules, corporations involved in the 2010 elections were not required to disclose their political activities to the public. They were also not required to disclose their political spending to their own shareholders–much less ask for shareholders’ permission before spending their money on political campaigns.

What is the Shareholder Protection Act? Are there state bills on this topic?

The Shareholder Protection Act is a simple bill moving at the federal level that would ensure that CEOs can’t spend unlimited amounts of their shareholders’ money on political causes their shareholders disagree with. The Act would require each company to propose an annual political spending budget to its shareholders, who would then vote the budget up or down, with each share receiving a vote. The Act would also require corporations to disclose all of their political contributions to shareholders, allowing shareholders who object to those contributions to decide whether to keep their stock in the company.

Similar bills in many states are moving to provide similar protections to shareholders in companies that are located in the state in question.

Wouldn’t this just affect rich people?

No. Nearly one out of every two Americans owns some stock in at least company—often as a part of a retirement package or nest egg. Often, people who own stock as a part of a larger investment package don’t know which companies their invested in—or which political campaigns their dollars are going to support. The Shareholder Protection Act would ensure that all American shareholders would have a say in the political causes that their money goes to support.

Will this legislation benefit one political party or one set of beliefs?

No. American shareholders come from across the political spectrum, and the corporations they own support candidates from both political parties. Many large corporations split their political contributions evenly among political parties. Others favor one party strongly over another. The Shareholder Protection Act and other state legislative pieces just ensure that shareholders know which political causes their money is going to support, and have a say in where their dollars are going.

A poll commissioned by People For the American Way in February 2010 found that 75 percent of Americans believe publicly traded companies should get approval from their shareholders before spending money on an election. This included 79 percent of Republicans and 74 percent of Democrats.

Do the Shareholder Protection Act and similar state bills impact people who are not shareholders?

Yes. Whenever we purchase a product, we’re helping a corporation to turn a profit. When corporations can spend unlimited amounts of those profits to influence elections, each purchase we make is also an indirect political contribution. While non-shareholding consumers can’t vote on how a company spends its money, with full disclosure of corporate political spending we can decide where we spend our money.

Corporations aren’t people, but shareholders are. While corporate political spending decisions are now made by CEOs, the Shareholder Protection Act and similar state bills would require them to get the input of all the owners of a company, thereby ensuring that there is a democratic element in the decision to spend money to influence our democracy.

Can shareholder protection be good for corporations?

Yes. Increased disclosure is a good thing for a corporate bottom line, and there are some studies that even show a negative correlation between spending in politics and profit. Happy shareholders and consumers means higher sales, and the consequences of a lack of disclosure can be dangerous. For example, last summer, the Target Corporation learned the hard way that unlimited political spending has its consequences. Target gave half a million dollars to an anti-gay Republican gubernatorial candidate, and faced backlash from both consumers and shareholders. Target has since revised its political spending policy.

Is there anything that a corporation can do internally? Can shareholders influence their actions?

Yes. Resolutions can be filed within corporations that call for increased disclosure and increased shareholder approval of political spending. As a shareholder you will have an opportunity to vote on these resolutions on your proxy statement, so vote and don’t throw it out! Also, as a shareholder you can speak out about your companies activities and decision to disclose its spending or not to the media, to the company, and to other shareholders and consumers.

What else can I do to help?

  • Write to your members of Congress and your state legislators to encourage them to vote for shareholder protection
  • Call companies that you hold stock in and ask them to voluntarily adopt policies of transparency and shareholder input for political expenditures.

 

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