An unlikely government agency, the Securities and Exchange Commission, may help to stem the tide of undisclosed money pumping through our political system in the wake of the U.S. Supreme Court's 2010 decision in Citizens United v. FEC. The SEC is not the first government agency that comes to mind when thinking of campaign finance regulations. The SEC is charged with protecting investors, maintaining markets and aiding in capital formation.
Citizens United has already become one of the best-known Supreme Court decisions, perhaps of all time. There is much to bemoan in the court's decision. In the main portion of the decision the court essentially came to three conclusions.
First, the court found that corporations must be treated the same as persons for purposes of analyzing restrictions on campaign spending. Second, the prevention of corruption, or the appearance of corruption, are the only reasons sufficient to uphold restrictions on campaign spending, according to the court. Then court narrowly defined corruption as simply quid pro quo, meaning "this for that."
Third, having narrowed the definition of corruption, the court held that expenditures made independent of candidates, meaning those not coordinated with candidates, had no potential to corrupt candidates.
Each of these three conclusions can and should be vigorously contested. The practical effect of the Citizens United decision has been a deluge of campaign spending, much of it essentially undisclosed.
Justice Anthony Kennedy, writing for the five-person majority, assumed that the relatively free flow of corporate money through our political system would not be problematic because we, the public, and more importantly the voters, would have information about the source of money spent to influence votes.
The court concluded that information about who provided the funding for campaign advertisements is the best way to prevent corruption or its appearance, and to arm the public with information. Further, Kennedy concluded that the best route to take for disgruntled shareholders who did not agree with their corporation's political spending would be the mechanisms of corporate democracy, through which shareholders can hold corporate officers accountable.
Kennedy's world view included thorough and complete campaign disclosure. That world view is far from our current reality. Kennedy likely did not anticipate the rise of super PACs and increases in spending by nonprofit organizations, many of whom need not disclose their donors. For so many reasons Kennedy's assumptions have proved incorrect. The era of "dark money" is upon us.
Many reform proposals have surfaced in the three years since the Citizens United decision. Reformers have suggested everything from more robust public campaign financing to a constitutional amendment to "overturn Citizens United." However, many of the more practical suggestions have centered upon increased campaign disclosure, specifically with respect to corporate political giving and spending.
Now the SEC may step in to help shed light on the dark money being poured into our political system. After a barrage of calls, emails and online comments, the SEC could propose a new rule requiring publicly traded corporations to tell their shareholders about the corporations' political donations. Approximately 500,000 people have commented on a petition asking the SEC to create such a rule.
In addition to providing shareholders with vital information allowing them to assess the performance of corporate officers, if the SEC does create a rule requiring publicly traded corporations to disclose information regarding political donations, such a rule would have a real impact on political campaigns in our country.
Nonprofit groups and trade associations have spent hundreds of millions of dollars to try to influence our votes. But other than the name of the organization, which could be as innocuous as Americans for a Better Tomorrow, we know nothing about the true source of those funds. If Americans for a Better Tomorrow received funds from publicly traded corporations, why would those corporations want to keep their identities secret? Well, in part because shareholders and customers might react negatively.
Publicly traded companies contribute large sums to trade associations and nonprofit corporations. Again, that money, up until now, has been largely undisclosed. The SEC now has the opportunity to pull back the curtain and shine the light on some of this money.
But a new rule by the SEC on this issue would hardly be a panacea. Action by the SEC would address only publicly traded companies, not political spending by individuals or privately held companies, both of whom contribute the lion's share of money to super PACs. A new rule is, however, a clear step toward providing the public with significant information about political spending.
House Republicans are doing their best to prevent the SEC from proposing a rule in favor of more transparency. Legislators are seeking to enact legislation that would prohibit such a rule. Many corporations and trade associations support these efforts. They prefer that the money they spend to influence our votes be kept in the shadows, where corporate officers can be insulated from criticism.
The SEC's ruling could come in the next few weeks. The SEC has the opportunity to move us closer to the world envisioned by Kennedy's decision in Citizens United, a world in which shareholders and members of the public can obtain the information necessary to hold corporate officers and political representatives accountable.
Jessica Levinson is a campaign finance and ethics expert at the Loyola Law School in Los Angeles.