Jon

**Re-posted from the Brennan Center for Justice Blog. View the original post here.***
The views expressed are the author’s own and not necessarily those of the Brennan Center for Justice.

By: Ciara Torres-Spelliscy

For those outraged by Trump, it is tempting to engage in the “dark money” politics that helped put him in the White House. But such political expediency will only damage democracy.

I attended my 20^th Harvard reunion last month. To my transplanted Florida bones, the 50-degree temperatures reminded me of shivering through my undergraduate years on the banks of the Charles. Perhaps because news was breaking that weekend about the alleged legal woes of “curious” Harvard acceptee and top White House aide Jared Kushner, there was much chatter about him, his politics, and the role of money in elections.

A Harvard reunion is hardly a representative sample of just about anything.  Suffice it to say that most people I spoke with are Democrats—though not all. A few were recent Republican defectors. Yet, nearly to a person, they were deeply troubled by the new administration, from its approach to immigration to health care to taxes to basic science to climate change. And we talked about tactics for showing resistance ranging from calling Congress, marching, suing, and getting engaged in electoral politics.

Yet there were others who simply wanted to reach into their wallets and begin doling out dark money. Dark money is certainly tempting. As I describe in my book Corporate Citizen?, dark money is becoming a feature and not a bug of modern American electoral politics. Simply put, dark money is the term for unlimited, undisclosed contributions to non-profit trade associations and social welfare groups that is spent on politics. “Why should we unilaterally disarm?,” the argument went at the reunion. “The other side uses dark money all the time.”

My response was simple: “Don’t be ‘Seduced by the Dark Side.’” Dark money may seem like a satisfying expedient response to the current political crisis, but it corrodes democracy.

Dark money is not a good way finance elections and I won’t change that belief no matter which side is winning. For example in the current Virginia governor’s race, the Washington Post has called out the irony of former top GOP campaign operative Ed Gillespie getting targeted by dark money groups after years of spearheading dark money expenditures against Democrats. But it doesn’t matter who is the target or who is footing the bill. Donors should be open about their support, and have what Justice Scalia called “civic courage, without which democracy is doomed.”

Whether dark money comes from the right, the left, the alt-right, the alt-left or the center, it is not healthy.  Voters deserve transparency about the true sources of money in politics. Today, it’s impossible to know whether any illegal foreign money is hiding among all the undisclosed funds.

So why is dark money becoming a feature and not a bug in American elections? Because it has become institutionalized through law. And Sen. Majority Leader Mitch McConnell is the Lord Darth Vader of dark money.

What? You mean you haven’t seen McConnell prowling the halls of the Capitol in a black cape and breathing mechanically? Let’s just take one case, the Securities and Exchange Commission (SEC). There has been a longstanding SEC petition asking for greater disclosure of corporate dark money.  But Vader, uh, McConnell, has consistently added riders to the federal budget blocking the SEC from adopting a dark money rule. He’s likely to try this tactic again this summer, when Congress crafts the new budget.

Don’t let him get away with it. If you live in Kentucky, show up to his town halls and let him know you don’t want dark money in our elections or riders in our budgets that prevent agencies from addressing dark money. Or call his office or tweet at him (@SenateMajLdr) to let him know that dark money shouldn’t become a normal part of our law. Tell him to turn away from the Dark Side.

But any of us who engages in politics from now on should be better than McConnell. If we don’t like dark money, we need to be consistent and condemn it across the board. Transparency should be a positive force that both Democrats and Republicans embrace.

This week, in an historic showing of support, shareholders voted in favor of a resolution at ExxonMobil calling on the company to disclose the impacts of global climate change policies on its business. The proposal received 62.3 percent of the vote with the help of some important stakeholders: mutual funds. However, that support unfortunately did not also extend to the proposal that would have required Exxon to disclose its lobbying activity.

The Washington Post has reported that BlackRock voted in favor of the climate change disclosure proposal and the Post’s sources suspect that Vanguard and State Street likely followed suit. Exxon marks the third company this proxy season to receive majority support for this type of climate impacts disclosure shareholder proposal: the proposal passed at Occidental Petroleum and the electric utility PPL Corporation in May. BlackRock confirmed that it supported the proposal at Occidental and Vanguard is believed to have also supported it.

The historic showing of support for the climate change impacts disclosure proposal indicates a seismic proxy voting shift for these mutual fund giants who have not supported this type of resolution in the past, and this policy shift should be celebrated. However, their converse lack of support for the lobbying disclosure proposal at Exxon identifies a blatant inconsistency in their voting habits. If these funds believe that climate risks should be disclosed to shareholders, then shouldn’t they also support the companion issue regarding disclosure of lobbying on climate issues?

The lobbying disclosure proposal at Exxon that would have required the company to disclose all of its federal and state lobbying, including its funding of lobbying through trade associations, received 27.6 percent support. While that number is the highest total vote the lobby disclosure proposal has ever received at Exxon, the discrepancy between the total percentage of votes in support for the lobbying disclosure proposal as compared to the climate change disclosure proposal indicates the mutual funds in all likelihood opposed lobbying disclosure at Exxon.

The issues of climate change and lobbying are intrinsically linked at Exxon. Exxon is facing investigations into whether it organized a misinformation campaign of think tanks and lobbyists to mislead the public about climate change. The investigations alone present financial and reputational risks for Exxon shareholders, and its undisclosed lobbying through trade associations is an integral part of these risks.

Exxon has publicly stated its support for the Paris Climate Agreement, yet remains a member of trade associations that actively lobby against it, like the Chamber of Commerce. Exxon does not disclose its memberships in the American Petroleum Institute, the Business Roundtable, the Western States Petroleum Association, and the National Association of Manufacturers, all of which spend millions of dollars a year lobbying lawmakers. Furthermore, both the American Petroleum Institute and the Western States Petroleum Association have actively sought to mislead the American public on the very real danger presented by climate change.

So the largest mutual funds support disclosure of climate risk at Exxon but, by all indications, do not support disclosure of how Exxon influences climate policy through its lobbying. If Vanguard and BlackRock are ready to acknowledge that a company like Exxon should disclose to shareholders the risks that changing climate policy present to the business, then it would be logically consistent for them to insist that the company also disclose its lobbying, including all undisclosed payments to trade associations that lobby against efforts to address climate change.

Tell Vanguard to change its proxy voting guidelines to support political spending and lobbying disclosure at all of the companies where it invests its clients’ money.

We know that mutual funds could cause political spending proposals to pass. But what about large public pension funds?

Pensions and Investments ¹ highlighted the number of large pension funds which are voting in favor of a climate change risk disclosure proposal at ExxonMobil’s annual meeting tomorrow. The proposal, filed by the New York State Common Retirement Fund, calls for the oil and gas company to evaluate and disclose the viability of its portfolio under the 2-degrees scenario, the concept of limiting the average global temperature increase to 2 degrees Celsius.

The California State Teachers’ Retirement System (CalSTRS), the Canada Pension Plan Investment Board, the Florida State Board of Administration, the Texas Teacher Retirement System and the Ontario Teachers’ Pension Plan are all voting in favor of the climate proposal, according to their proxy-voting disclosures.

So we checked to see whether these funds are also supporting the lobbying disclosure shareholder proposal, which is seeking information about how ExxonMobil influences public policy, including its payments to trade associations that are used to lobby, often on climate issues. The two (climate change and lobbying) would seem interrelated, and one would think all the funds would also support lobbying disclosure. All of these major public pension funds are also supporting the lobbying disclosure proposal at Exxon, with the exception of the California State Teachers’ Retirement System. CalSTRS has announced it will be voting against the proposal.

CalSTRS corporate governance principles state that “disclosure should include the annual contributions, both monetary and non-monetary, made to trade associations and/or other tax-exempt organizations involved in political activities.” Yet Exxon does not publicly disclose its trade association memberships, payments or the amounts of it trade association payments used for lobbying. So why doesn’t CalSTRS support lobbying disclosure transparency at Exxon?

1. Meaghan Kilroy, “Pension funds line up in favor of climate change disclosure proposal at Exxon Mobil,” Pensions & Investments, May 26, 2017.

Since the 2016 election ushered in the Businessman- in- Chief, America has witnessed just how far the rich and powerful are willing to go to protect their interests at the expense of everyone else. The President thinks he is exempt from the clause in the Constitution which says he cannot receive foreign monies that could constitute bribes, and has refused calls for him to separate himself from his personal business dealings to ensure that he doesn’t profit from the presidency. By refusing to let go of his businesses he has shown the American people that he is willing to prioritize his own profits over the nation’s prosperity, security, and future.

Many Americans are finding it chilling to watch the President of the United States and certain members of Congress blatantly choose corporate interests over basic human ones. For example, the President and Republicans in Congress are pushing a healthcare bill that will benefit the insurance and drug companies while denying Americans with pre- existing conditions coverage. In America, the corporate motive to make profits can sometimes be in tension with the human motive to keep people safe, healthy, and able to pursue happiness in a functioning democracy. It’s difficult to dissect all the ways bad apples try to game the system to benefit their corporate bottom lines at one time, so this post explores just one of those ways and offers an opportunity for regular Americans to fight back.

This week, the insurance giant Travelers Companies is holding its annual shareholder meeting. For the last decade the company has spent between $2.7 million and $4 million annually on federal lobbying on issues like taxes, banking, insurance, and the federal budget. At the state level it’s much harder to know exactly how much the company spent because disclosure requirements at the state level are uneven and data is hard to digest. To alleviate that problem, the company should make this information readily available to its shareholders, which is what investors are asking for in the form of a shareholder resolution that is up for a vote at this year’s meeting.

Source: The Center for Responsive Politics. https://www.opensecrets.org/lobby/clientsum.php?id=D000021773

In the supporting statement for the proposal proponents also cite Travelers’ undisclosed involvement with trade associations, which lobby on behalf of their members. Some of these trade organizations are incredibly heavy hitters in Washington, D.C., roaming the halls of Congress pushing for fewer regulations and the rollback of public protections. The U.S. Chamber of Commerce is one of these heavy hitters, spending over $100 million on federal lobbying in 2016 alone. As a member of the Chamber, Travelers should disclose to shareholders exactly how much it pays the trade association to lobby on the company’s behalf as association with the Chamber can pose a risk to the company’s reputation. As a large property insurer, Travelers is exposed to the myriad risks associated with climate change, but the Chamber (funded by Travelers) sued to block the EPA Clean Power Plan, which was designed to curb the catastrophic effects of climate change.

If you own shares directly in Travelers you should vote in favor of shareholder proposal #6, which asks the company to prepare an annual report on its lobbying activity so that shareholders- the true owners of the company- can assess the associated risk.

If you don’t own stock directly in Travelers, (or any other company where these types of shareholder resolutions are filed this year), but are worried about the secret way corporations are attempting to influence our democracy, chances are you can have an impact through your 401(k) instead.

Vanguard, BlackRock, Fidelity and the other large mutual fund companies are in a position to move the needle on this issue. As the largest managers of retirement savings these mutual fund giants control significant voting shares in America’s most powerful companies. Vanguard, for example, controls over 20 million shares, or 7.36% of Travelers’ common stock. Yet, Vanguard consistently votes against shareholder proposals that attempt to bring corporate political activity into the light. A recent Public Citizen report illustrates just how detrimental the mutual fund companies’ decisions to support corporate executives on these issues are. In 2016, 64% of political spending disclosure shareholder resolutions at companies where mutual funds own more than 5% of common stock would have received majority support if those mutual funds had voted their shares in support of the resolutions. If you invest your retirement through Vanguard, tell the company to change the way it votes so that progress on disclosure can move forward.

The deck may appear to be stacked in favor of big corporate interests, but as Senator Elizabeth Warren said recently, we have been here before over a century ago and we fought back. “Teddy Roosevelt earned the title Trust Buster as he fought back against powerful monopolies that wielded huge influence over our government—and the reformers won,” said the Senator.

One way we will fight back and win is by bringing corporate lobbying out of the shadows and into the blazing sunlight, and we’ll start at Travelers.

At last week’s nomination hearing it was clear that Walter “Jay” Clayton, tapped to lead the Securities and Exchange Commission (SEC) by President Trump, is an unacceptable choice for the job. Mr. Clayton will likely have to recuse himself often from agency decisions based on his deep corporate background. These recusals coupled with his lack of familiarity with critical agency issues make him unfit to lead the SEC.

Mr. Clayton is a longtime corporate lawyer whose clients include Goldman Sachs, Bear Stearns, Barclays, Ally Financial, and other top financial companies. His corporate background raises numerous questions about his commitment to protect average investors and about how his significant conflicts of interest will impede his ability to perform his duties as head of the SEC.

Leading up to the hearing, groups concerned about Mr. Clayton’s corporate background held a rally outside the Capitol on Wednesday with Senator Elizabeth Warren, Senator Bernie Sanders, and other progressive leaders. The rally’s purpose was to call attention to the fact that Clayton’s nomination is yet another attempt by the Trump administration to stack the deck against hard- working Americans.

Senator Sanders opened by citing the hypocrisy of President Trump’s choice in Mr. Clayton. He pointed out that candidate Trump promised to “drain the swamp,” but President Trump chose a financial industry insider to keep an eye on Wall Street. “We need somebody who is prepared to confront the system, not someone who is part of the system,” Senator Sanders said.  

Senator Elizabeth Warren echoed Senator Sanders in calling for an SEC chair who would stick up for Main Street America. “We remember what… [the financial crisis] did to our communities, ” she said. “We want a government- we want an SEC- that doesn’t work for Wall Street. We want one that works for the American people.”

Additional rally speakers included:

• Jeff Weaver, president of  Our Revolution and former campaign manager for Bernie Sanders for President
• Robert Weissman, president of Public Citizen
• Anthony Thomas, a food service worker in the Dirksen Senate Office Building
• Alba Morales, a cashier and food service worker in the Dirksen Senate Office Building
• Kurt Walters, campaign director of Demand Progress
• Dan Mauer, legislative representative for Communications Workers of America
• Morris Pearl, board chair of Patriotic Millionaires

All of the speakers highlighted the critical importance of having an unbiased authority as the head of the SEC who will enforce the rules.  Watch the full line-up of speeches here.

At Mr. Clayton’s hearing the following day, Senate Banking Committee Democrats pressed him on his seeming unfamiliarity with enforcement issues and questioned whether he would be able to hold Wall Street truly accountable.

In his opening statement, Senator Sherrod Brown said,

You’ve spent your career protecting some of the biggest names on Wall Street, and those relationships pose a host of conflicts for this position. I’m concerned that you may need to recuse yourself too often at a time when we need a strong, independent SEC chair on the frontline of enforcement, not watching from the sideline.

Senator Warren picked up the conflicts of interest baton from Senator Brown and ran with it, emphasizing the significant problem Mr. Clayton’s conflicts present for the agency’s capacity to function properly. She pointed out,

Under the President’s Executive Order for ethics the first two years of your tenure as SEC chairman you would have to recuse yourself from participating in any enforcement matter involving any former client of yours. Now, that’s about half of your term as chair. So based on your personal client disclosure then for half of your tenure as SEC chair you would not be allowed to vote to enforce the law against several big banks including Goldman Sachs, Deutsche Bank, Barclays, and UBS.

Mr. Clayton confirmed that this was an accurate portrayal of his conflicts.

Senator Warren went on, “if President Trump wanted to make sure that the SEC would have a hard time in going after his Wall Street friends it seems to me you would be the perfect SEC chair.”

Mr. Clayton would also have to recuse himself from any enforcement case in which his former law firm, Sullivan and Cromwell, serves as the company’s representation. Senator Warren pointed out that any company worth its salt and looking to avoid a harsh judgement would simply hire Sullivan and Cromwell to represent the company in front of the agency. In this scenario, with Mr. Clayton recused, the Commission would likely split along party lines as it typically has in recent years on enforcement issues and the result would be a deadlock.

Throughout the hearing Mr. Clayton’s answers to Senators’ questions were lackluster and noncommittal. He showed a lack of familiarity with a number of issues, expressing a need to think about or learn more about them, including:

• Ending forced arbitration clauses;
• Whether the law needs to change to hold corporate executives strictly liable for criminal activity that occurs under their watch whether they have direct knowledge of it or not;
• Whether corporate political spending disclosure is material to investors; and
•  Implementing the remaining provisions of Dodd Frank, the law passed to protect Americans from another financial crisis.

When asked directly by Senator Warren why he was a good fit for the job he stumbled over an answer, trying instead to refute the well- warranted characterization that the Commission’s Democratic and Republican members often disagree on the severity of enforcement determinations.  

Considering the volume of his recusals and his lack of familiarity with critical issues within the SEC’s purview it would seem that Mr. Clayton is out of his league. Senators should reject President Trump’s attempt to fill the swamp with more Wall Street insiders and demand a head of the SEC who will commit to putting the interests of investors and Main Street Americans first.

Watch the full hearing online here. The Senate Banking Committee is expected to vote on Clayton’s nomination on Tuesday, April 4th, at 10am ET.

Last week shareholders raised their voices at Disney’s annual meeting in Denver and asked the company to be upfront about its lobbying activity, including its trade association memberships and payments.

Led by Zevin Asset Management, shareholders moved a proposal during the meeting that called upon the company to create a detailed report of all of the company’s state and federal lobbying as well is any memberships in or payments to trade associations.

A complete picture of Disney’s lobbying activity is not currently available to shareholders, but what is discernable suggests that the company has been busy pushing its policy priorities.

Disney spent a combined $7.57 million in 2015 and 2016 on federal lobbying and has been linked to efforts by the National Restaurant Association and California Chamber of Commerce to push back on raising the minimum wage, to stop implementation of paid sick leave, and to criticize parental leave laws.

Zevin Asset Management’s Pat Tomaino’s op ed in the Denver Post has more on Disney’s lobbying activity.

Additionally, shareholders expressed concern over CEO Bob Iger’s participation in President Trump’s closed- door business council. Several shareholders asked Iger to step down during the meeting to which Iger responded that he had no plans to leave the council. Citing the song “The Room Where It Happens” from the smash- hit musical Hamilton, Iger defended his remaining on the council saying “I think it’s a privileged opportunity to be in the room.”

Iger seemed to miss the point of the Hamilton number which highlights how only three men were in the room when major decisions about the future of the United States were made and the public only has their word for what happened. Similarly, the policy forum that President Trump set up skirts the requirements of Federal Advisory Committee Act, the 1972 law designed to limit back- room deals.

During the meeting, Corporate Reform Coalition partners took to Twitter to call on Disney to be more honest and generated almost 4 million impressions using #DisneyDisclosure. Check out the Storify to see a sample of the tweets, graphics, and even song parodies created by participants.

This year’s lobbying disclosure shareholder resolution received 36.8% support, despite the board’s recommendation that shareholders vote against it. This is up 4.9% from 31.9% support last year. Disney should heed the growing chorus of shareholders and customers calling on the company to be more honest about its attempts to influence policy. If it’s truly looking out for its shareholders’ best interest then what does it have to hide?

It’s a tale as old as time: corporations vying for influence in the halls of power. While it is reasonable for companies to look out for their business interests in the policy arena many do not share their lobbying activity with their shareholders or implement oversight policies that ensure that their lobbying activities do not put shareholders at risk.

With the 2016 election ushering the Businessman- in- Chief, Americans are witnessing the devastating effects of unchecked corporate privilege. The President does not think he needs to abide by the clause in the Constitution which calls for him to separate himself from his personal business dealings so as to ensure that he puts the interests of all Americans over his business interests. He has shown the American people that he will defend his profits over their rights, safety, and security.

Shareholders have been calling for corporate transparency around political and lobbying activities for more than a decade, and in this Presidential climate where CEOs are given cabinet positions and corporations are expecting to have their political backs scratched at every turn that transparency has never been more important.

Today, shareholders are asking the Walt Disney Company to dig a little deeper and be upfront with shareholders and the public by disclosing all of its state and federal lobbying and its memberships in and payments to trade associations.

Finding all of Disney’s lobbying is not easy based on inconsistent reporting requirements in the states.  However, we do know that it’s been busy pushing its policy priorities by spending a combined $7.57 million in 2015 and 2016 on federal lobbying. What we know about Disney’s lobbying at the state level is that the company has as many as 40 lobbyists registered in the state of Florida and its operation there has been described as “the 800-pound mouse protecting its cheese in the backrooms of city hall and state government.”

The fact that Disney does not disclose its membership in trade associations that lobby on behalf their members raises even more flags. Disney is a member of the National Restaurant Association (NRA) according to the NRA’s website, and, evidently, it is a member of the U.S. Chamber of Commerce having joined in 1922 and not disclosed any information indicating that it has left since. Apparently, the company also sits on the boards of both the Florida and California Chambers of Commerce.

Disney has been linked to efforts by the National Restaurant Association and California Chamber to push back on raising the minimum wage, to stop implementation of paid sick leave, and to criticize parental leave laws. The U.S. Chamber of Commerce has questioned climate science and attacks energy policies that would safeguard public health and the environment.  As the largest lobbying force in the country, the Chamber spent more than $103 million on lobbying in 2016. Disney should make clear whether it is fully supporting these policy priorities with membership dues or payments to these trade associations used for lobbying.

Shareholder support for disclose resolutions is growing every year as more and more people call for companies to be transparent about their political engagements. Even the Business Roundtable, a trade association for the nation’s leading CEOs, has softened its stance. As one of the most powerful lobbying forces in the country, the Business Roundtable went from staunchly opposing disclosure of corporate political and lobbying activities to recommending that its members choose for themselves whether to disclose.

Transparency and accountability measures are not just critical for creating checks on corporate political activity they are also in companies’ best interests as well.

President Trump has recklessly targeted specific companies in public comments and corporations are anxious to avoid being the target of one of the President’s tweets. The recent incident with Under Armor is an example of how a company’s public entanglements with the new Administration can pose a risk to shareholders. The athletic apparel company’s CEO Kevin Plank said in a CNBC interview that the President is a “a real asset for this country,” which sparked public backlash from some of the company’s celebrity brand ambassadors including Misty Copeland, Stephen Curry, and Dwayne “The Rock” Johnson.  The celebrity criticism caused a Susquehanna Financial analyst to downgrade Under Armor’s stock to “negative” citing “reputational risk.”

In the case of Disney, the company’s CEO Bob Iger sits on Trump’s closed- door business council to offer advice on behalf of Disney and the wider entertainment industry. The council meets in an unofficial capacity so as to skirt requirements that make it possible for the public to know what happens in the meetings. After strong customer backlash for being associated with Trump’s travel- ban executive order Uber’s CEO Travis Kalanick dropped his involvement in the council.

Shareholders should be concerned about Disney’s opaque lobbying activities and the risk that comes with Iger’s continued association with the Trump administration policies. At the very least, Disney should let shareholders be its guest to its lobbying information and CEO Bob Iger should consider whether he wants to be the hero or the villain of this fairytale.

By: Bartlett Naylor
Financial Policy Advocate at Public Citizen

The Education Secretary appears uneducated about public education. The Office of Management and Budget nominee didn’t notice his full-time nanny in the house when it came time to account for household employees on his taxes, and doesn’t believe in funding government programs. The Treasury Secretary found treasure in the misfortunes of those he foreclosed upon as a banker. Next to this, the Trump administration may figure it can slip by nominee Walter “Jay” Clayton to chair the Securities and Exchange Commission Chair while the public is rubber necking more controversial nominees.

What there is to see with Clayton isn’t comforting. He works for Sullivan & Cromwell, one of the clutch of K Street law firms who argue that Washington should go easy on Wall Street. Goldman Sachs is one of Clayton’s major clients; and Clayton’s spouse works for Goldman Sachs. He’s also represented several major financial firms guilty of mortgage securitization fraud. As a Goldman attorney, he helps stack the deck of Goldman alumni, (which is starting to look like it should be renamed Government Sachs), joining National Economic Council Director Gary Cohn, Treasury Secretary Mnuchin, senior advisor Steve Bannon, and others.

A rational Senate would ideally advise the Trump administration that it could do better if it truly wants to “drain the swamp.” It could nominate an enforcement veteran or an investor advocate.

What’s tough to see in the Clayton nomination is also discomforting. Why him? Sullivan & Cromwell boasts many notable banking attorney such as H. Rodgin Cohen; was Clayton recommended as a reliable agent? Clayton has published roughly zero articles exclusively under his name. (He has co-authored a few.) Why the lack of interest in public discourse? Does he think an opinion could antagonize a potential client? Given his relative youth, (he’s a 1988 University of Pennsylvania graduate) will he spin back through the revolving door to a better office at the firm?

What’s seen and unseen makes the Clayton confirmation hearing important. Senator should insist on clear affirmations of key policy goals. Dismissing questions because he needs to study the issue should disqualify him, as the nation can’t afford on-the-job training. Deflections to “work with the committee” on the issues should also disqualify.

Here are some of the key areas senators can ask to decide whether a Clayton-chaired SEC will serve the American investor and hold Wall Street accountable.

DISCLOSURE

Burden

Under the previous chair, the SEC embarked on a review of what corporations must disclose to investors, predicated on the concept that investors were burdened by too much information. Yet the only expressions of this burden came from issuers, not investors. In fact, more than 1.2 million investors have sought more information about political contributions by corporations. Some other investors seek information about the environment, the workforce, corporate tax loophole participation and more. Moreover, search engines along with the emergence of Big Data show the power of analysis to uncover important, revealing trends and information. Scandals abound because of non-disclosure. Will you continue the SEC’s effort to reduce disclosure?

Political spending disclosure

Regarding the 1.2 million investors who have petitioned the SEC to draft rules requiring firms to disclose all their political spending, what are your views? Do you think shareholders should be able to know how their investments in corporations are deployed on political issues?

Materiality

Disclosure turns on what’s material. The Financial Accounting Standards Board proposes a radical change to the definition of materiality. Under their definition, instead of information that “could” affect an investor’s view being deemed material, materiality will now mean information that “would” definitely affect investor decision making. Further, FASB recommends the standard be a legal, not an accounting, determination. That means the firms’ counsel will referee whether or not a firm should disclose information, not the firm’s independent auditor. In short, this new definition will allow companies to reduce disclosure if they choose to. Do you support FASB’s new concept of materiality?

Buybacks

Instead of increasing investment, corporate America has used more than $3 trillion dollars in the ten years ending in 2013 to purchase their own stock. Studies show that these buybacks may serve to increase the share price just as senior executives exercise their stock options. Do you believe the SEC should collect data on the timing of option exercises and buybacks to ensure that CEOs aren’t undermining basic decisions such as corporate investment so as to gain more compensation?

ENFORCEMENT

Waivers

Waivers from mandatory penalties following findings of misconduct have become the norm. Do you believe that consideration of waivers for mandatory penalties are part of the SEC’s enforcement arsenal that can deter bad behavior? If so, do you think waivers should be the exception, or the rule?

Too Big To Jail

Sullivan & Cromwell defended major banks, such as HSBC, that committed massive misconduct. When defending HSBC, your firm helped convince the Department of Justice, in consultation with the Federal Reserve and Treasury, that indictment of this mega-bank would lead to contagion throughout the financial sector. After Attorney General Eric Holder used similar thinking in testimony, this became known as the “too big to jail” theory. Do you think some banks are too big to jail? Will you weigh the size of a bank when you consider penalties the SEC applies after findings of such misconduct?

Individual accountability

The SEC fines companies as its main enforcement penalty. But companies don’t commit misdeeds; individuals do. And penalties aren’t paid by culpable executives at these wayward firms; their shareholders who certainly didn’t conspire in the conduct do pay. What is your philosophy of enforcement as it relates to individuals?

Bribery

You’ve written about the Foreign Corrupt Practices Act, focusing on the compliance burden. The Chair of the SEC, however, will need every tool including the FCPA to combat serious conflict of interest problems. For example, the SEC found serious bribery problems in China by JP Morgan. Do you favor lightening currently required compliance with this foreign bribery statute?

MISC RULEMAKING

FSOC

President Trump signed another Executive Order directing the Treasury Secretary, as chair of the Financial Stability Oversight Council, to identify Dodd-Frank rules that should be rolled back. He cited the law’s impact on loan-making, despite the rise in loan-making reported by the FDIC. In your purview, the Dow has recently hit record highs, signifying some health on Wall Street. FSOC members currently are largely Obama appointees. You would be one of the few Trump appointees. Can you name some Dodd Frank rules that should be eliminated, why, and why elimination would help protect investors?

CEO Pay Ratio

The simplest of Dodd Frank’s rules calls for publicly traded companies to disclose the CEO’s pay as a ratio of the firm’s median-paid worker. It will help investors “unit-price” shop CEO pay to easily check if one firm is wasting money on a CEO relative to a peer. Naturally, CEOs would rather not face that investor scrutiny and the political contest leading to final rule-making spanned many years. In fact, it’s not over, as acting Chair Piwowar opened an informal comment period in February, apparently presaging his intent to nullify the rule. Do you think investor understanding of CEO pay is important? Do you think the SEC should re-open a finalized regulation mandated by Congress?

Conflicts Of Interest

Sullivan & Cromwell’s clients are America’s individual elites along with giant corporations. The firm doesn’t represent seniors evicted from their homes owing to reverse mortgage scams; it represents the reverse mortgage firms. It doesn’t represent shareholders filing resolutions; it represents the issuers contesting them. Your client list means that you have been in constant conversation with an insular demographic of massive banks over the course of your career. The Chair of the SEC requires that the chair understand and represents the interests of average American investors. Trump advisor Gary Cohn recently noted that personnel is policy, a view that many in Washington share. How will you make sure the interests of average investors is central to your decision-making?

Despite an unusual presidential race, the 2016 election proved to continue the trend since the Supreme Court’s 2010 Citizens United decision of dramatically increased campaign spending. Particularly, spending from outside organizations like super PACs and “dark money” nonprofit organizations like 501(c)(4) social welfare organizations and trade associations hit an all- time high. Citizens United and subsequent decisions ended the long-standing $5,000 limit on donations to PACs that make independent expenditures, thus earning them the new name of “super PACs.” These court decisions also allow electioneering nonprofit organizations to receive unlimited donations, and since nonprofits need not disclose their donors, they provide new avenues for corporations to funnel secret money into our elections and skirt the responsibility to their investors and the public for how they choose to spend in politics.

Even though president-elect Trump disdained normal fundraising strategies and received unprecedented free media coverage, it would be incorrect to say that corporate influence and outside spending did not have a big presence in the 2016 cycle. Each of the major presidential candidates established their own super PACs so that once donors maxed out to the candidate campaigns, they could continue making unlimited donations in support of the campaigns to their super PACs. Spending by these outside groups reached record levels and heavily contributed to the most expensive election in American history. What is even more worrisome is the fact that almost half of this unprecedented spending by super PACs came from just 50 families – the very wealthiest of America’s elite class.

Key points about outside spending in 2016

This was the most expensive election in history.  Early estimates identify that a whopping $6.9 billion was spent in the 2016 federal election cycle, making it the most expensive in history. Despite Donald Trump’s erratic fundraising strategy, big donors didn’t shy away from this election.

Outside spending hit a new record. Super PACs and 501(c) organizations not formally affiliated with any candidates hit new records of spending with a total of $1.4 billion in the 2016 cycle– up from $1 billion in 2012 and $338 million in 2008. “Dark money” groups, which are a subset of outside spenders comprised of political nonprofits that do not disclose their donors, spent just over $204 million in 2016. While “dark money” is a problem that should alarm every citizen, just as problematic is the level of coordination between candidates and super PACs. This coordination allows candidates to sidestep the $2,700 per election contribution limit. As soon as a wealthy donor maxes out to the campaign, he or she can simply turn to the candidate’s super PAC where no limits apply. Nearly half of all super PACs spend all their resources in support of one single candidate – the candidate responsible for setting up the super PAC.

Conservative groups continued to dominate outside spending. Conservative groups comprised 55% of the total outside spending in the 2016 election cycle compared to liberal groups’ 39%.

Outside spending groups spent heavily down ballot– with a lot of success. Outside spenders focused $595 million on Senate and House races. Three- fourths of this spending was targeted at races where Republicans were trying to hang onto their majority. The Pennsylvania Senate race was the most expensive race coming in at a total cost of more than $170 million, over $124 million of which came from outside spending. Outside groups outspent the candidates in many of these races, and in the end Republicans succeeded in maintaining their majority in both chambers.

Corporate influence flooded ballot initiative fights. Corporations spent over $335 million to protect their interests in ballot initiative campaigns in the states. Corporate interests won 62% of the fights where they focused their resources and outspent their opposition by an average of 33-to-1.

Corporations funneled untraceable funds through the Chamber of Commerce. In the 2016 election, the Chamber of Commerce spent the second-largest amount among groups not required to disclose their donors, second only to the NRA Institute for Legislative Action. Despite the Chamber’s claims to represent all businesses, in actuality the source of the majority its political spending comes from Big Business and very deep-pocketed corporate interests. This suggests that the over $29 million the Chamber spent on elections in 2016 was not focused on looking out for the average American business.

The 2016 election continued the trend of secret corporate influence taking advantage of lose regulations and unlimited spending capabilities to protect Big Business interests. It is more important than ever that Congress and the incoming administration not hamper the SEC from requiring publicly-traded companies to disclose their political spending. The inappropriate budget rider forbidding the SEC from finalizing this rulemaking should be removed in order to hold companies accountable to their shareholders and to the American people. Additionally, before leaving, the Obama administration should issue an executive order requiring all government contractors to disclose their political spending.

This week, the Corporate Reform Coalition released a video interview with Vanguard Group’s founder, John C. “Jack” Bogle, about his vision in 1975 to set up a different kind of mutual fund company and how he thinks companies should best serve their shareholders.

Watch Vanguard’s founder Jack Bogle talk about a shareholders right to information like a company’s political spending.

Bogle, who founded Vanguard over 40 years ago based on a novel principle at the time- that a mutual fund company should be owned by the shareholders of its funds and not just by management- remains committed to that vision today. He fosters that commitment by speaking out on broader investor issues, for example, corporate political spending disclosure.

Bogle has submitted public comment to the U.S. Securities and Exchange Commission (SEC) on the securities law professor’s petition calling for the SEC to put forth a rulemaking that would require publicly- held companies to disclose how they spend money in politics. When asked why he commented on the petition Bogle replied, “It’s the shareholder’s right to know what we are all doing,” referring to corporate activities.

Bogle’s remarks come at a significant time. Investor advocates are reaching a tipping point in their push for the SEC to issue a rule requiring companies to disclose how they spend money in politics.

As of October 21, outside spending in the 2016 election alone has totaled over $1 billion, much of which is coming from dark money groups that do not have to disclose their donors. This makes it impossible to track secret corporate influence. Americans know that more dark money in our politics is not good for the health of our democracy, but when faced with adversaries such as giant corporations it’s hard to see an easy way to make change.

One way to combat secret corporate influence is to bring it into the light, which this disclosure rulemaking would do. Unfortunately, the SEC has been dragging its feet on the rulemaking and Congressional Republicans have helped the stagnation by inserting an inappropriate policy rider into the federal budget forbidding the SEC from finalizing (though not from working on) the rule.

For the last decade, investors have been filing shareholder resolutions at individual companies and seeing promising responses from many who are interested in increasing their transparency. Without a uniform rulemaking, though, others are allowed to continue to keep shareholders and the public in the dark about how they spend in politics. Even those who do disclose may not do it the same way as other corporations, making it hard for investors to actually use the information to make corporate comparisons.

How do mutual funds fit into this picture? The major ones, like Vanguard and BlackRock, have incredible power in corporate elections; power accumulated from the millions of retirement savings accounts they manage. With the volume of shares they control, the major mutual funds can and should support shareholder resolutions calling for political spending disclosure. Instead, Vanguard, specifically, either votes against or abstains from voting for these resolutions at the companies where its clients’ savings are invested. The weight of the major mutual fund vote means that many times resolutions fail to get majority support without it.

All shareholders, whether the traditional kind or those who own shares through their mutual fund investments, “are entitled to the information they want, they’re owners,” says Bogle in the interview. Therefore, if shareholders are calling for information about how companies spend money in politics so that they can weigh the reputational risk of this activity, companies should listen and increase their transparency.

The gravity Jack Bogle continues to hold within the investment community is immense, and we should heed his words about shareholder rights. The SEC should make strides on the political spending disclosure rule and Congress should not stand in its way. Until the rule is finalized, though, mutual funds should not hamper the efforts of shareholders calling for disclosure at individual companies.

Bogle seems optimistic that the tide is turning in shareholders’ favor. “When shareholders aren’t served first the world will change,” he says. “And it is changing.”

In a letter to President Obama, Senator Elizabeth Warren calls for him to remove Mary Jo White, the head of the SEC, over her failure to move forward with the corporate political spending disclosure rule and her lack of commitment to increased disclosure for investors.

The move comes just weeks before Congress returns to Washington for final negotiations on the omnibus spending deal to fund the government in 2017. Warren and fellow Congressional Democrats have committed to removing the rider attached to the budget bill that prevents the SEC from finalizing a rule that would require public companies to disclose their political spending.

With Friday’s letter, Senator Warren is continuing her commitment to fighting for the over 1 million Americans who have commented on the disclosure rule-making petition calling for increased transparency around corporate political activity.

Read Senator Warren’s letter to Obama here.