Corporate Lobbying Transparency and Accountability Campaign
“Before Ohio derailment, Norfolk Southern lobbied against safety rules”
– Washington Post, 2/18/23
“Silicon Valley, Signature banks lobbied hard to loosen bank rules”
– The Hill, 3/14/23
“Uber broke laws, duped police and secretly lobbied governments, leak reveals”
– The Guardian, 7/11/22
Problem
Public companies spend billions of dollars lobbying government officials every year to influence public policy at the local, state, and national level. How much of that lobbying spending gets disclosed to a corporation’s shareholders? In most cases, none of it.
Lobbying disclosures are significant in a number of ways to an investor’s ability to make fully informed investment and shareholder voting decisions. When disaster strikes, sometimes investors don’t learn until it’s too late that the company they invested in was secretly lobbying to weaken safety rules or oversight. Evidence shows lobbying activity can also raise costs for investors when corporate managers who oversee lobbying divert corporate resources to lobbying that furthers their own ideological goals at the expense of shareholder wealth.
Other research has found that many companies lobby extensively to protect inflated executive compensation packages – with no discernable benefits for shareholders. In addition to federal lobbying, many public companies lobby at the state and local level where it doesn’t take as much money to influence policy, so they can have a big impact without spending a huge amount of money on lobbying. Today, even shareholders and prospective investors who look for it can’t find the lobbying data for most companies because there are no disclosure requirements – yet.
Objectives
Corporate lobbying affects all aspects of the economy. Lobbying can provide decision-makers with valuable insights and data, but it can also lead to undue influence, unfair competition, and regulatory capture. Lobbying may also channel companies’ funds and influence into highly controversial topics with the potential to cause reputational harm.
When investors make decisions about whether to invest their hard-earned money or retirement funds in a company, they should know: if the company is spending money paying lobbyists to influence federal, state, or local public policy; what the company’s lobbying strategy is; how much money the company is spending on lobbyists; and whether there are material risks that may arise from the company’s lobbying activities.
Solution
Increase sunlight for shareholders by encouraging the Securities Exchange Commission to enact a Corporate Lobbying Transparency and Accountability Rule.
The Corporate Lobbying Transparency and Accountability Rule will require corporations to include three types of lobbying disclosure in their shareholder reports:
1) The company’s lobbying strategy and the board’s role in managing and overseeing lobbying expenditures.
2) The amount spent on registered federal, state, and municipal lobbyists.
3) Any material risks related to or arising from the company’s lobbying strategy and/or lobbying spending.
Implementation
The Securities Exchange Commission (SEC) can enact the Corporate Lobbying Transparency and Accountability Rule pursuant to the statutory authority conferred by Section 13(a) of the Securities Exchange Act of 1934, which authorizes the SEC to require security issuers to file annual reports and documents “as necessary or appropriate for the proper protection of investors.” The proposal will update SEC Regulation S-K to require discussion of a company’s lobbying and any related risks. Companies will make these lobbying disclosures under the business description and risk factors sections of the SEC registration and annual statements they already file.
While, unfortunately, SEC action to finalize a political contribution disclosure rule remains blocked by a “poison pill” rider first inserted into a congressional appropriations bill in December 2015, the rider doesn’t address lobbying or prohibit the SEC from taking action on lobbying disclosure.
The burden of complying with the Corporate Lobbying Transparency and Accountability Rule will be negligible since the information companies will have to disclose is already required to be monitored for tax and financial statement purposes, leaving only the minimal additional drafting and printing costs associated with disclosure itself. Many companies already disclose lobbying information voluntarily. This suggests that the burden of preparing this information for disclosure is not cost-prohibitive.
Action
In November 2023, a group of influential U.S. Senators sent a letter to the Chair of the SEC urging the SEC “to use its existing authority to issue rules requiring disclosure of corporate lobbyist expenditures to shareholders.” The Senators’ letter stated that, “In the absence of strong lobbying disclosure rules, investors are largely kept in the dark regarding the policy campaigns they are indirectly funding. This raises concerns that investors may be funding lobbying activities that are counter to the stated missions of the companies they have invested in, that are counter to their own beliefs, or that may even erode the value of their investment.”